The mutual fund (MF) industry is taking advantage of the regulatory changes in their overseas investment limit. Now, more and more fund houses have lined up to launch such funds and are in the process of seeking regulators’ permission to offer offshore funds.
After the launch of ICICI Prudential Indo Asia equity fund last week, Fidelity Asset Management Company has filed an application to launch Fidelity world range fund.
Another major player Standard & Chartered mutual fund also plans to introduce Asian prosperity fund and HDFC mutual fund has filed offer document to float Indo Asia opportunity fund.
The fund houses generally invest 65% of the corpus of the scheme in the domestic market and 35% in the overseas market.
Commenting on the prospectus of the offshore funds, Nilesh Shah, deputy managing director, ICICI Prudential mutual fund said that the retail investors can participate in the global market through offshore funds. Indo Asia equity fund provides an opportunity to the investors to gain from the growing markets in India and Asia. One of the main reasons for the growing number of applications for offering offshore funds is the change in the regulatory framework.
Sebi had issued a circular in May this year, according to which the fund houses can invest in ADRs, GDRs, foreign securities and overseas exchange traded funds (ETFs) within the overall limit of $4 billion.
This limit will be with a sub-ceiling for individual mutual funds, which should not exceed 10% of the net assets managed by them as on March 31 of each relevant year and subject to a maximum of $200 million per mutual fund.
According to another fund manager, the fund houses are filing applications to offer offshore funds because the scheme gives an opportunity to invest in the overseas market. The offshore fund makes sense in present volatile domestic market when the average intra-day volatility of the Sensex has been more than 300 points in the last couple of months.