Sebi increases in another country investment cap for individual MFs to $1 bn

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The Securities and Exchange Board of India (Sebi) on Thursday revised the in another country investment limit for mutual funds (MFs). The market regulator stated in a circular that MFs can make in another country investments up to $1 billion each and every, inside the overall industry limit of $7 billion.

MFs had made representations to the regulator to increase the investment limit. Final November, Sebi had enhanced the in another country investment limit from $300 million per mutual fund to $600 million.



Industry participants say this announcement was once the need of the hour as several MF schemes that were international focused were attracting immense inflows. Sebi in its circular stated, “MFs can make investments in in another country exchange-traded funds (ETFs) subject to a maximum of $300 million per mutual fund, inside the overall industry limit of US $1 billion.” Earlier the limit was once $200 million per mutual fund.

Indian fund houses have launched more than a few international-focused fund of funds (FoF) in the previous couple of months as such products offer investors the option of diversifying with global equities.

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Making an investment in global markets allows investors to capture disruptive growth through more than a few themes, many of which don’t seem to be to be had on the listed markets in India.

Global making an investment, due to this fact, diversifies the investment portfolio and has the potential to fortify their risk adjusted returns.

“The theme of international diversification has been held for a long time and the assets were going at a rapid pace. Again, the foreign exchange reserve has been healthy for India, so there’s no issue on that front, I think this is a wonderful and much-awaited move,” Rajeev Thakkar, CIO, PPFAS MF.

In the final six months, there was net inflows of over Rs 5,600 crore in FoF investment in another country, and the assets have increased from Rs 7,642 crore final November to almost Rs 14,000 crore in April 2021.

In April, Mirae Asset Investment Managers India had announced the launch of India’s first FANG+ based products, ‘Mirae Asset NYSE FANG+ ETF’, an open-ended scheme replicating/tracking NYSEFANG+ Complete Return Index and ‘Mirae Asset NYSE FANG + ETF Fund of Fund’, an open-ended FoF scheme predominantly making an investment in Mirae Asset NYSE FANG+ ETF.

FoF is a MF scheme that invests in other such schemes. In these schemes, fund managers hold a portfolio of other mutual funds, instead of directly making an investment in stocks or debt instruments. Since the start of the present calendar year, around six FOFs have been launched by different fund houses.

Other fund houses like Axis MF had launched Axis Greater China Fairness FoF, HSBC MF came out with HSBC Global Fairness Climate Change FoF.

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