AMC seeks overseas investment limit hike
PremiumIf granted, this would be the third hike in foreign investment limits in the past year
Motilal Oswal Asset Management Company has requested Sebi to increase the USD 1 billion limit (around ₹7,400) crore given to fund houses for international investment, two persons with knowledge of the matter independently confirmed to Mint. Motilal Oswal Mutual Fund has an Exchange Traded Fund (ETF) and a Fund of Funds (FoF) tracking the NASDAQ Index and an index fund tracking the S&P 500 index. The Motilal Oswal NASDAQ ETF has assets under management (AUM) of ₹5,704 crore and the Motilal Oswal S&P 500 Index Fund has assets of ₹2,398 crores (as of October 2021). Launched in March 2011, the NASDAQ ETF has delivered 26.2% CAGR over the past 10 years, sharply beating the domestic Indian equity market. The S&P BSE 500, a proxy for the Indian stock market, has given a CAGR of 16.5% over the past 10 years. Motilal Oswal S&P 500 Index Fund launched in April 2020 has delivered 33.7% since inception.
The combined total of ₹8,102 crore exceeds the maximum threshold. However the Sebi limit applies to the remittance amount and not AUM. The latter also includes a rise in value on account of the fund’s returns and not just inflows. It is unclear how much leeway the AMC has in terms of remittance amount. Motilal Oswal AMC has also launched a new fund tracking the MSCI EAFE Index which focuses on developed markets outside the USA such as Europe and Japan. It also plans to launch a scheme investing in emerging markets.
Mutual Fund investors have ploughed significant amounts of money into international funds in recent years. The AUM of fund-of-funds investing overseas which captures part of this investment has grown from ₹1,764 crores in October 2018 to ₹23,013 crore in October 2021, a 13 times jump in 3 years. In November 2020, Sebi raised the foreign investment limit per fund house from 300 million USD to 600 million USD and in June 2021, the regulator further upped this limit to USD 1 billion per fund house. However a mutual fund industry wide limit of USD 7 billion, set by a 2008 circular has remained in place. “Given India’s comfortable forex reserves of around USD 640 billion, I’m very confident that Sebi and RBI will increase the mutual fund industry limit for foreign investment," said a senior mutual fund industry executive on condition of anonymity.
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