SEBI hikes Mutual Fund’s Foreign Investment Limit to $600 Million
In its latest circular issued on 5 November 2020, the Securities & Exchange Board of India (SEBI) has increased the overseas investment limit of each fund house to $600 million with immediate effect, which is twice the earlier limit of $300 million. However, the overall industry limit remains unchanged at $7 billion.
The move comes after fund houses sent a representation to SEBI to increase the limits wherever possible, SEBI said in the circular. Also, there has been a recent surge in investor interest in overseas securities.
The circular says that mutual funds can now make investments in foreign Exchange Traded Funds (ETFs) subject to a maximum $200 million per mutual fund from $50 million earlier and within the overall industry limit of $1 billion.
SEBI said that the mutual funds launching New Fund Offers (NFOs) intending to invest in overseas securities / ETFs have to ensure that the scheme documents disclose the intended amount that they plan to invest in overseas securities. Such limits disclosed in scheme documents shall be valid for a period of six months from the date of closure of NFO.
For ongoing schemes, the regulator has allowed an investment headroom of 20% of average AUM in foreign securities/ETFs of the previous 3 calendar months subject to a maximum limit of $600 million.
MFs need to report the utilization of overseas investment limits every month, within 10 days from the end of each month.