Mutual funds can now invest globally

HELLO FRIENDS

Indian investors can now invest into global markets by buying foreign funds through their domestic portfolio. The Reserve Bank of India is simplifying its guidelines for investing abroad through local mutual funds.

Mutual funds will now be able to invest in existing international funds as RBI's latest circular has paved way for launching feeder funds, which will raise money in India and invest in existing mutual funds abroad. HSBC mutual fund is planning to launch a feeder fund in next few months while Kotak mutual fund has tied up with T.Rowe price to launch feeder funds. Other fund houses too are gearing up for the opportunity.

“We have chosen one of our Asian fund which is managed by Prudential which is a fairly well performing fund and we could complement our investors portfolio. So we have filed and received approval from SEBI for an Indo-Asian equity fund,” said Nilesh Shah CIO, ICICI Pru MF.

Recently RBI has allowed Mutual Funds to invest in international mutual funds that invest up to 10 per cent of their assets in unlisted securities. Earlier funds were allowed to invest only in listed securities abroad.

Currently the 3 funds that offer International equity in their portfolio have invested about $350 mn abroad.

However among these only Principal Global equity Fund has invested upto 98 per cent of its portfolio in equities overseas. Templeton Equity Income Fund and Fidelity International Opportunities fund can invest only upto 35 per cent in international equity.

The new guidelines will be particularly advantageous to funds with foreign operations

“We think international investing is important for Indian investor because it offers diversification. We think Fidelity has a pre-eminent position as an international provider so we would like to see innovation in international investing,” said Richard Wastcoat MD, Fidelity Investment Intl.

Currently MF overseas investment limit stands at $4 billion. Individual fund houses can invest up to $200 million or 10 per cent of their assets broad. Mutual Funds are hoping that with years this limit would be enhanced and they will be able to play the international markets with good volume.