NEW DELHI (CU)_In November last year, the Securities and Exchange Board of India (SEBI) doubled its foreign investment limit for a mutual fund house from $300 million to $600 million, thereby enabling mutual funds to allocate a larger share for foreign securities. On Thursday (3 June), the securities and commodity market regulator announced that it has decided to enhance the overseas investment limit further, following several requests from the industry.
Accordingly, the foreign investment limit per mutual fund house will be $1 billion, while the limit for the overall mutual fund industry is capped at $7 billion. “Mutual funds can make overseas investments subject to a maximum of $1 billion per mutual fund, within the overall industry limit of $7 billion,” the SEBI said in a circular.
Moreover, the limit on investments in overseas Exchange Traded Fund (ETFs) per mutual fund has also been enhanced from $200 million to $300 million, which is required to be within the overall industry limit of $1 billion. The circular also revealed that the foreign investment limit by domestic mutual funds in overseas ETFs has also been increased to $200 million from the previous limit of $50 million.
The SEBI noted that these new limits will come into effect immediately.
According to the watchdog, in the case of investment limits that are required to be disclosed on new schemes that are being offered, they are to be considered as soft limits for the purpose of mutual funds’ reporting. These limits disclosed in the scheme documents are valid for a period of six months from the date the new fund offers (NFO) closes. If the new schemes intends to invest in overseas ETFs or securities, the funds are required to disclose the amount they plan on investing in such instruments in the scheme documents, the SEBI said.
