Mirae Asset Mutual Fund has cautioned investors trading in its exchange traded funds investing overseas as there could be deviation in the indicative intra-day NAV and trading price on the exchange.
Market regulator SEBI has directed mutual funds to stop accepting fresh investment in their overseas ETFs as the overall limit of the industry is inching closer to the $1-billion mark set by the banking regulator RBI.
Following this, all fund houses including Mirae Asset MF stopped accepting fresh investment though the ETFs continue to trade on the exchange platforms.
Mirae Asset three overseas-focused ETFs — Mirae Asset NYSE FANG+ ETE, S&P 500 Top 50 ETF and Hang Seng Tech ETF — being traded on the exchanges.
In order to comply with the regulatory limit, the creation of units of overseas ETFs by market makers has been limited, said the fund house on Monday.
The limitation to create ETFs will have an impact on the liquidity and trading price of these ETFs on the exchanges. The trading price of the overseas ETFs on the exchange may deviate from its indicative intra-day value (i-NAV) and as a result ETFs may trade at premium or discount, it said.
Investors are advised to take precaution while buying the ETFs on the exchange and also to put ‘limit order’ while buying and selling the overseas ETFs after referring to the i-NAV published on the AMC’s website, said Mirae Asset MF.
The limit on overseas investments impacts the creation of units of overseas ETFs but not the redemption of units. “Our market makers will continue to provide liquidity to purchase units from the investors at i-NAV,” it added.