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Business News/ Mutual Funds / News/  AMC seeks overseas investment limit hike
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AMC seeks overseas investment limit hike

If granted, this would be the third hike in foreign investment limits in the past year

The Sebi limit applies to the remittance amount and not AUM.Premium
The Sebi limit applies to the remittance amount and not AUM.

Motilal Oswal Asset Management Company has requested Sebi to increase the USD 1 billion limit (around 7,400) crore given to fund houses for international investment, two persons with knowledge of the matter independently confirmed to Mint. Motilal Oswal Mutual Fund has an Exchange Traded Fund (ETF) and a Fund of Funds (FoF) tracking the NASDAQ Index and an index fund tracking the S&P 500 index. The Motilal Oswal NASDAQ ETF has assets under management (AUM) of 5,704 crore and the Motilal Oswal S&P 500 Index Fund has assets of 2,398 crores (as of October 2021). Launched in March 2011, the NASDAQ ETF has delivered 26.2% CAGR over the past 10 years, sharply beating the domestic Indian equity market. The S&P BSE 500, a proxy for the Indian stock market, has given a CAGR of 16.5% over the past 10 years. Motilal Oswal S&P 500 Index Fund launched in April 2020 has delivered 33.7% since inception.  

The combined total of 8,102 crore exceeds the maximum threshold. However the Sebi limit applies to the remittance amount and not AUM. The latter also includes a rise in value on account of the fund’s returns and not just inflows. It is unclear how much leeway the AMC has in terms of remittance amount. Motilal Oswal AMC has also launched a new fund tracking the MSCI EAFE Index which focuses on developed markets outside the USA such as Europe and Japan. It also plans to launch a scheme investing in emerging markets. 

Mutual Fund investors have ploughed significant amounts of money into international funds in recent years. The AUM of fund-of-funds investing overseas which captures part of this investment has grown from 1,764 crores in October 2018 to 23,013 crore in October 2021, a 13 times jump in 3 years. In November 2020, Sebi raised the foreign investment limit per fund house from 300 million USD to 600 million USD and in June 2021, the regulator further upped this limit to USD 1 billion per fund house. However a mutual fund industry wide limit of USD 7 billion, set by a 2008 circular has remained in place. “Given India’s comfortable forex reserves of around USD 640 billion, I’m very confident that Sebi and RBI will increase the mutual fund industry limit for foreign investment," said a senior mutual fund industry executive on condition of anonymity.

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ABOUT THE AUTHOR
Neil Borate
Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
Catch all the Mutual Fund news and updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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Published: 24 Nov 2021, 09:22 PM IST
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