SEBI PERMITS MF INVESTMENTS IN OVERSEAS FUNDS WITH INDIAN EXPOSURE

Published on Nov 05, 2024 13:03

The Securities and Exchange Board of India (SEBI) has taken a significant step to bolster the investment options available to Indian mutual fund investors. In a recent circular, SEBI has permitted Indian mutual fund schemes to invest in overseas mutual funds or unit trusts (MF/UTs) with a limited exposure to Indian securities. This move is expected to broaden the investment horizon for Indian investors and provide them with access to global investment opportunities.

To ensure transparency and investor protection, SEBI has imposed certain conditions on these investments. Firstly, the overseas MF/UTs must have a pooled investment structure, meaning all investor contributions are combined into a single fund. Secondly, these funds must be managed by independent investment managers who make investment decisions autonomously. Additionally, the overseas funds are required to disclose their portfolios periodically to maintain transparency.

In order to mitigate risks associated with potential changes in the underlying investment portfolio, SEBI has introduced a 6-month observation period. If the Indian securities exposure of an overseas fund exceeds the 25% limit during this period, the Indian mutual fund scheme must either rebalance its investment or liquidate its position within the next 6 months.

SEBI`s move is expected to have a positive impact on the Indian mutual fund industry. By allowing investments in overseas MF/UTs, Indian fund houses can diversify their portfolios, reduce risk, and potentially enhance returns for their investors.