Overseas Investments by Mutual Funds
Summary
This SEBI circular establishes a US $5 billion aggregate ceiling for overseas investments by mutual funds, capped at US $300 million per fund. It defines permissible investment instruments including ADRs/GDRs, foreign equities, debt securities, and ETFs, subject to specific credit ratings and hedging restrictions. The document mandates the appointment of dedicated fund managers, rigorous due diligence, enhanced disclosure requirements, and adherence to prudential norms under the SEBI (Mutual Funds) Regulations, 1996.
Text
The aggregate ceiling for overseas investments is US $ 5 billion, with a maximum of US $300 million per mutual fund.
Mutual Funds can invest in ADRs/GDRs, listed equity, public offerings, rated debt/money market instruments, repos, government securities, derivatives for hedging, short-term deposits, and units of overseas mutual funds/REITs.
The overall ceiling for investment in overseas ETFs is US $ 1 billion subject to a maximum of US $ 50 million per mutual fund.
The Mutual Fund shall appoint a Dedicated Fund Manager for making overseas investments stipulated under para 2 (i)–(ix).
Boards of AMCs and Trustees shall exercise due diligence, analyze risks and returns, ensure liquidity, and verify expertise of service providers.
Intention to invest, risk factors, returns, and alignment with investment objectives must be disclosed in offer documents in comprehensible language.
Mutual funds shall disclose the name of the Dedicated Fund Manager for making overseas investments.
Mutual funds shall disclose exposure limits, i.e., the percentage of assets invested in foreign securities/ETFs.
Investments in foreign securities/overseas ETFs shall be disclosed separately in half-yearly portfolios with scheme-wise percentages as a footnote.
Existing schemes may invest if offer documents allow it or via addendum/notification; new schemes require prior communication to unitholders and newspaper advertisement.
AMCs shall send detailed periodical reports to Trustees including performance and any breach of exposure limits.
Boards of AMCs and Trustees shall review the performance of schemes using appropriate benchmarks disclosed in offer documents.
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Source: SecMarx — Overseas Investments by Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.