Sebi asks DSP Global Innovation FoF to limit overseas investments to ETFs

“Sebi advised us that DSP Global Innovation Fund of Fund should initially invest only in overseas ETFs until the limit of $7 billion is increased in consultation with RBI,” said a note by DSP MF to investors. The fund house is hopeful that the regulator will increase the limits soon, and it will be able to invest in line with its original design.

DSP Global Innovation Fund of Fund, where the NFO is currently open, was to invest in a mix of global active funds and ETFs that in turn invest in innovation and technology-driven companies. About 30% of its corpus was to be invested in two ETFs namely, iShares NASDAQ 100 UCITS ETF and iShares PHLX Semiconductor ETF, with the balance 70% in four actively managed funds – BGF World Tech Fund D2 USD, Nikko AM ARK Disruptive Innovation Fund, Morgan Stanley US Insight Fund and Bluebox Global Technology Fund.

Last week, Motilal Oswal Mutual suspended lump sum investments and switch-in of money into three of its international funds, namely Motilal Oswal S&P 500 Index Fund, Motilal Oswal Nasdaq 100 Fund of Fund (FoF) and Motilal Oswal MSCI EAFE Top 100 Select Index Fund.

Sebi has specified an industry level limit of $7 billion for mutual funds to invest in overseas securities and mutual funds, and a separate limit of $1 billion for investment in overseas exchange-traded funds (ETFs). While the overseas ETF limit is still some distance away, some other international strategies have seen healthy flows and the limit of $7 billion for investments in overseas securities/mutual funds could get exhausted soon.