Sebi raises overseas exposure limit for mutual fund houses to USD 1 bn

Capital markets regulator Sebi on Thursday enhanced the overseas investment limit for a mutual fund house to USD 1 billion from the existing USD 600 million. The overall mutual fund industry limit is capped at USD 7 billion, the Securities and Exchange Board of India (Sebi) said in a circular.

The increase in the limit would allow mutual funds to allocate a higher share of their corpus for foreign securities.

The move comes following requests from the mutual fund industry to enhance the foreign investment limit.

“Mutual funds can make overseas investments subject to a maximum of USD 1 billion per mutual fund, within the overall industry limit of USD 7 billion,” Sebi said.

Further, mutual funds can make investments in overseas Exchange Traded Fund (ETFs) subject to a maximum of USD 300 million per mutual fund, within the overall industry limit of USD 1 billion. Earlier, the investment limit was USD 200 million per fund house.

The new investment limit would come into force with immediate effect, Sebi said.

In respect of investment limits to be disclosed in the scheme documents at the time of new fund offer (NFO) and the investment limits on ongoing schemes, Sebi said such limits would henceforth be soft limits for the purpose of reporting by mutual funds only on monthly basis in a prescribed format.

The mutual funds launching new schemes that intend to invest in overseas securities or ETFs are required to ensure that the scheme documents disclose the intended amount they plan to invest in such instruments.

The limits disclosed in the scheme documents are valid for six months from the date of closure of new fund offers (NFO).

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In November 2020, Sebi had doubled the foreign investment limit per mutual fund house to USD 600 million from the USD 300 million.

The watchdog had also increased domestic mutual funds’ foreign investment limit in overseas ETFs to USD 200 million from USD 50 million.


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