SEBI has issued clarification on Investments in Overseas Mutual Funds/ Unit Trusts by Indian Mutual Funds. It is clarified that Indian Mutual Fund schemes may also invest in overseas MF/UTs that have exposure to Indian securities, provided that the total exposure to Indian securities by these overseas MF/UTs shall not be more than 25% of their assets.
While investing in overseas MF/UTs that have exposure to Indian securities, the Indian Mutual Fund schemes shall ensure the following:
- Pooling: Contribution of all investors of the overseas MF/UT is pooled into a single investment vehicle, with no side-vehicles including segregated portfolios, sub-funds or protected calls, etc.
- Pari-passuand Pro-rata: Corpus of the overseas MF/UT is a blind pool (i.e. common portfolio) with no segregated portfolios. All investors in the overseas MF/UT have pari-passu and pro-rata rights in the fund, i.e. they receive a share of returns/gains from the fund in proportion to their contribution and have pari-passu rights.
- Independent investment manager/fund manager: Overseas MF/UT is managed by an independent investment manager/fund manager who is actively involved in making all investment decisions for the fund. This ensures that the investments are made autonomously by the investment manager/fund manager without influence, directly or indirectly, from any of the investors or from any other entity.
- Public disclosure: Such overseas MF/UTs disclose their portfolios at least on a quarterly intervals to the public to maintain transparency.
- No advisory agreement: There shall not be any advisory agreements between Indian Mutual Funds and underlying overseas MF/UTs, to prevent conflict of interest and avoid any undue advantage to either of the parties.
