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MFDs can distribute mutual fund schemes offered by AMCs from the International Financial Services Centre (IFSC) situated in Gujarat International Finance Tec (GIFT) City in Gandhinagar.
Products and services offered in GIFT City are exempted from domestic laws; instead, GIFT City follows international practices. Simply put, investors need not pay any tax in India; however, they will have to pay taxes in their respective geographies.
If you have clients from Dubai and Singapore, they will not be required to pay any taxes on these investments.
Another key benefit to investing through GIFT city is dealing with a single regulator for all financial products. All financial products in IFSC – mutual funds, stocks, PMS, AIFs, insurance and pension are regulated by a single regulator – International Financial Services Centres Authority (IFSCA).
Onboarding
There is no need to do stringent KYC of clients. IDs like passports and utility bills are adequate. Also, there is no need to invest through NRI or NRO accounts. All transactions can be executed through any foreign bank account. However, transactions have to be done in dollar.
While a few fund houses offer digital onboarding process, there is a requirement to send physical copies of documents.
Once your clients key in their details digitally, the system will generate a form which needs to be signed and has to be sent within 15-20 days through post or courier.
In any case, there is no need to be physically present in GIFT City to invest money.
Who can invest?
NRIs and foreign nationals can invest in inbound funds i.e. funds which invest in Indian markets through direct stocks or mutual funds.
Resident Indians can also invest through IFSC provided the fund should have outbound structure i.e. funds investing in other geographies.
Minimum ticket size
Investors will have to invest a minimum of USD 1.50 lakh or Rs.1.25 crore (in today’s term). Moreover, investors have an option to invest in tranches of six months or 1 year.
Commission income
Fund houses can offer upfront commission along with trail commission in IFSC. They offer two year upfront commission of up to 2.70% in most cases.
Also, MFDs can opt for an all trail commission model, which could be around 1.35%.
Which are fund houses operating in IFSC?
Currently, many fund houses are offering AIFs in GIFT city - Aditya Birla Sun Life, DSP, HDFC, IIFL, ITI, Kotak, Mirae Asset, Motilal Oswal and Nippon India.
Distributor empanelment
MFDs can distribute AIFs available in GIFT city by empanelling with these fund houses. Please note that they will have to do a different empanelment for GIFT city.
TER
Fund houses can charge management fees of up to 1.50%. If we include other expenses, the expense ratio can go up to 2%
