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Sebi enhances overseas investment limit for individual fund houses to $1 bn

Sebi in November 2020 had enhanced the foreign investment limit per fund house from $300 million to $600 million, while for ETFs it was increased from $50 million to $200 million.Premium
Sebi in November 2020 had enhanced the foreign investment limit per fund house from $300 million to $600 million, while for ETFs it was increased from $50 million to $200 million.

  • Fund houses have been allowed to make a maximum investment of $300 million per mutual fund in overseas exchange traded funds, which is higher than the current limit of $200 million

Markets regulator the Securities and Exchange Board of India (Sebi) on Thursday enhanced the overseas investment limit for an individual mutual fund house to $1 billion, up from $600 million, at present. The industry-wide cap for investing abroad remained unchanged at $7 billion.

Moreover, fund houses have bee allowed to make a maximum investment of $300 million per mutual fund in overseas exchange traded funds (ETFs), which is higher than the current limit of $200 million. The overall industry limit stayed at $1 billion.

The Sebi’s move came after many fund houses approached the markets regulator to raise the limit as Indian investors develop a heightened appetite for global portfolio diversification.

Surge of interest in international investing pushed some AMCs close to the previous foreign investment limit of $600 million.

In the fund of funds (FoF) category, average net assets under management for April 2021 stood at 13,441 crore, according to data from the Association of Mutual Funds in India (Amfi). This figure does not include funds that primarily buy local stocks, but also invest part of their corpus abroad.

Sebi in November 2020 had enhanced the foreign investment limit per fund house from $300 million to $600 million, while for ETFs it was increased from $50 million to $200 million.

“It is a wonderful move in a sense that the earlier limit which was $600 million was set at a time when the industry wasn’t quite fast compared to what it is currently. This need for international diversification has been felt for a very long time. The BSE Sensex is also growing at a very rapid clip and the foreign exchange reserve has been very healthy for India. This move was long awaited and much needed," said Rajeev Thakkar, chief investment officer, PPFAS Mutual Fund.

Earlier, amid rising focus on overseas markets by Indian investors, the markets regulator had last month, increased overseas investment limit for alternative investment funds (AIFs) and venture capital funds (VCFs) to $1,500 million from $750 million.

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