Sebi enhances overseas investment limit for mutual fund, ETF

By: |
November 5, 2020 10:29 PM

Markets regulator Sebi on Thursday enhanced foreign investment limit for individual fund houses to USD 600 million from USD 300 million at present.

According to data available with markets regulator Sebi, companies listed on BSE and NSE garnered total Rs 4.42 lakh crore during April-October 2020-21.According to data available with markets regulator Sebi, companies listed on BSE and NSE garnered total Rs 4.42 lakh crore during April-October 2020-21.

Markets regulator Sebi on Thursday enhanced foreign investment limit for individual fund houses to USD 600 million from USD 300 million at present. The watchdog also increased domestic mutual funds’ foreign investment limit in the overseas exchange-traded fund (ETF) to USD 200 million. Currently, it is capped at USD 50 million. The aggregate ceiling remains at USD 7 billion for overseas mutual fund investment and USD 1 billion for overseas ETFs.

Laying down the allocation methodology, Sebi said USD 50 million has to be reserved for each mutual fund individually in case of overseas investments, within the overall industry limit of USD 7 billion. The mutual funds launching new schemes that intend to invest in overseas securities or ETFs have to ensure that the scheme documents disclose the intended amount they plan to invest in such instruments.

The limits disclosed in the scheme documents will be valid for 6 months from the date of closure of new fund offers (NFO).
“Thereafter the unutilized limit, if any, shall not be available to the mutual fund for investment in overseas securities /overseas ETFs and shall be available towards the unutilized industry wide limits. Further investments should follow the norms for ongoing schemes,” the regulator said.

For all ongoing schemes, an investment headroom of 20 per cent of the average asset under management in overseas securities/ ETFs of the previous three calendar months would be available to a mutual fund for that month to invest in these instruments subject to the newly enhanced maximum limits, it added.

Besides, mutual funds need to report the utilisation of overseas investment limits on a monthly basis within 10 days from the end of each month in a format specified by the regulator. “The circular shall come into force with immediate effect,” Sebi said.

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