SEBI Proposes Framework for Domestic MFs to Invest in Overseas Funds with Limited India Exposure
The Securities and Exchange Board of India (SEBI) is seeking public comment on a proposal to allow domestic Mutual Funds (MFs) to invest in overseas counterparts (Unit Trusts or UTs) that hold a limited portion of Indian securities. This framework aims to:
Attract foreign investment: SEBI recognizes the attractiveness of Indian securities and wants to encourage international funds to invest.
Enhance domestic diversification: Currently, Indian MFs use feeder funds to invest overseas. SEBI's proposal would offer an alternative diversification option.
Key Proposals:
Limited Exposure: Overseas instruments can have a maximum of 20% exposure to Indian securities.
Pooled Investments & Transparency: Investments from all domestic MFs will be pooled and overseas portfolios will be publicly disclosed.
Independent Management: The overseas instrument's manager must make investment decisions autonomously.
No Advisory Agreements: SEBI prohibits advisory agreements to avoid conflicts of interest.
Challenges:
RBI Investment Limits: The current limit for overseas investment by MFs may restrict the proposal's immediate impact.
Overall, SEBI's framework aims to balance promoting foreign investment in India while allowing domestic MFs to diversify their portfolios through overseas instruments with limited Indian exposure.
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