SEBI increases overseas investment limits for mutual funds

The market regulator, Securities & Exchange Board of India (SEBI) has increased the limits of overseas investment per fund house. This limit was enhanced from the existing USD 300 million to USD 600 million. Whereas, the overall limit of the mutual fund industry would stand at USD 7 billion.

Further, limits for making investments in the overseas exchange-traded funds (ETFs) have raised to USD 200 million per fund house from the earlier limit of USD 50 million per fund house, while the limit set for the overall industry would be USD 1 billion.

If mutual funds launch new schemes, which propose to invest in securities or ETFs overseas, it needs to ensure that they disclose the intended amount of investment in scheme documents. Also, such disclosure of the limits shall remain valid for a period of six months from the date of closure of the new fund offerings, said SEBI on Thursday.

SEBI has made clear that if in case there is any unutilised limit, the same shall not be available for mutual funds for investment in overseas securities or ETFs. Rather, the same would be available towards the unutilised industry wide limits.

For all the ongoing schemes that are allowed to invest in overseas securities or ETFs, a room of 20 per cent of average asset under management (AAUM) of the previous three calendar months would be available to mutual funds. Nevertheless, asset management companies (AMC) need to report the utilisation of overseas investment limits on a monthly basis.