SEBI doubles overseas investment limit for individual mutual fund to $600 Million

The Securities and Exchange Board of India (SEBI) has doubled the overseas investment limit for individual mutual funds from $300 million to $600 Million.

SEBI announced the same in a circular issued on November 5, 2020, which stated that each fund house can make a maximum of $600 million in overseas investments within the overall industry limit of $7 billion.

Rajeev Thakkar, Chief Investment Officer (CIO) at PPFAS Mutual Fund stated that if the limits had not been increased, some of the larger funds could have hit the upper limit in the coming days.

Key Highlights 

•The Securities and Exchange Board of India (SEBI) has laid down guidelines on how schemes will be allowed to use the new limits.

•In the case of existing schemes, 20 percent of the last three months’ average assets held in overseas investments (ETFs or equities) will be allowed, subject to limits. 

•On new fund offers (NFOs), a scheme would need to utilise the available limit within six months from the closure of the NFO otherwise the limits will become available for unutilised industry-wide limits.

•Besides this, SEBI has also reserved $50 million for each fund house, regardless of whether it has an international scheme offering or not.

•The limits for mutual funds were last changed 12 years back when the Reserve Bank of India (RBI) had increased the overall industry limit to $7 billion from then $5 billion.

Significance

There has been a major pick-up in the number of new schemes offered by mutual fund houses, which give investors ample exposure to international equities and investors have shown interest for such funds, as they give geographical diversification to their investment portfolio.