The regulator has relaxed rules related to appointment of a separate fund manager, replication of portfolio and the minimum requirement of having 20 investors for managing offshore funds.
In a move that will help fund houses attract foreign investors, SEBI has eased norms for managing offshore funds for fund houses. The market regulator has relaxed the restriction of appointing a separate fund manager, the requirement to replicate portfolio and the criteria of minimum 20 investors (with no single investor holding more than 25 percent).
The decision was taken at a board meeting held in New Delhi.
The decision is expected to boost the inflows in domestic funds. “Offshore funds are meant for foreign investors. Typically, fund houses garner foreign assets by advising foreign investors through PMS or by launching an offshore funds based out of Mauritius, Singapore etc. Foreign investors can also put money in domestic schemes; however, they don’t prefer investing in such schemes due to unavailability of star fund managers. As of now, senior fund managers are not eligible to manage offshore funds due to stringent norms. Foreign investors wants CIOs or star fund managers to manage their investments. The new regulation on offshore funds will enable star fund managers or CIOs to manage foreign assets through domestic schemes. I expect that the industry may receive inflows of US$ 3-5 billion within a year in equity funds,” said Manoj Nagpal of Outlook Asia Capital.
Jimmy Patel, CEO, Quantum Mutual Fund also expects that the domestic fund houses will garner healthy assets in the coming months.
“As per extant requirements a fund manager who is managing a domestic scheme is allowed to manage an offshore fund only if (i) the investment objective and asset allocation of the domestic scheme and the offshore fund are same (ii) at least seventy percent of the portfolio is replicated across both the domestic scheme and the offshore fund and (iii) the offshore fund should be broad based i.e. there should be at least 20 investors with no single investor holding more than 25 percent of corpus of the fund, etc. Otherwise, a separate fund manager is required to be appointed for managing an offshore fund. SEBI Board after deliberations decided to remove the above restrictions for managing offshore funds, belonging to Category I FPIs and appropriately regulated broad based Category II FPIs, by local fund manager who is managing a domestic scheme,” stated a SEBI press release.
SEBI said that the relaxed norms would enable local fund managers to manage offshore funds effectively and also garner more offshore business in future.
Earlier, AMFI had appraised SEBI of the challenges and constraints in managing offshore funds. Also, Mutual Fund Advisory Committee (MFAC) had discussed this issue with SEBI in December.
