News: SEBI norms for MF overseas investment

(BL 04/08/2006) Mumbai - Only Indian mutual funds, which are in existence for a minimum period of 10 years, would be eligible for investing in Exchange Traded Funds (ETFs) abroad. This is part of the SEBI guidelines on investments by mutual funds overseas issued on Thursday.

The Government had allowed investment of $ 2 billion by Indian mutual funds in various instruments overseas. Of which, $ 1 billion can be in ETF.

According to SEBI, mutual funds investing in ETF should be in existence for a minimum period of 10 years as on December 31, 2006 and have experience in investing in foreign securities.

They should also follow a sub-ceiling for investing in ETFs, which prohibits them from investing more than 10 per cent of the net assets managed by them as on March 31 of each relevant year, subject to a maximum of $50 million per mutual fund.

As per the guidelines, mutual funds can make investments in ADRs/GDRs issued by Indian companies; equity of overseas companies listed on recognised stock exchanges overseas, foreign debt securities in the countries with fully convertible currencies, short-term and long-term instruments with highest rating. Investment will also be allowed in government securities of countries rated AAA and in units/securities issued by overseas MF or unit trusts, which invest in aforesaid securities or are rated and registered with overseas regulators.

The investment should be within the $ 2-billion limit and individual mutual funds cannot invest more than 10 per cent of the net assets managed by them as on March 31 of each relevant year.