SEBI permits Mutual Funds to invest in overseas MFs and Unit Trusts with Indian Securities Exposure
The Securities and Exchange Board of India (SEBI), the market regulator has now permitted mutual fund houses to invest in foreign or overseas mutual funds and unit trusts which invest some portion of their assets in Indian Securities.
“Indian mutual fund schemes can now also invest in foreign MF or UTs that are deemed to have exposure to Indian securities. It is provided that the Indian securities’s total exposure by these overseas MF or UTs are upto 25% of their assets not more than that”, SEBI said in a circular issued.
At the time of making both new or subsequent investments, Indian Mutual Funds schemes are required to ensure that the overseas MF/UTs that are underlying have no more than 25% exposure to Indian stocks or securities.
The move of SEBI aims to make the investment in overseas MF/UTs easy, which brings more transparency in the investment process and allows MFs to diversify their investments overseas, the circular added. The new framework will take effect immediately, it noted.
These Mutual Fund Schemes must ensure that the contributions of all investors to foreign MF or UTs integrated into a single investment vehicle with no side vehicles.
SEBI further said that the corpus of foreign MF/UT shall be a blind pool with no segregated portfolios to ensure that all investors have equal and proportionate rights distributed in the fund.
To avoid conflicts of interest, the market regulator barred advisory arrangements between Indian mutual funds and the underlying overseas mutual funds.
Following the investment approval, if the exposure of Indian securities exceeds the threshold, Indian MF schemes will be given a six-month observation period that will start from the date of publicly accessible information of such breach to monitor any portfolio rebalancing activity by the underlying foreign MF/UT. And, during this observance period given, the Indian MF will not be allowed to undertake any kind of fresh investment in foreign MF/UTs.
