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Mutuals root for feeder funds

Calcutta, Aug. 21: A new avenue may soon open up for retail investors, who have the freedom to remit $ 25000 annually abroad, if the mutual funds industry can successfully sell the idea of a ‘feeder fund’ to the capital market regulator.

The Association of Mutual Funds in India (Amfi) has already approached the Securities and Exchange Board of India (Sebi) and is awaiting a reply.

After the much-publicised global opportunities fund, this can be another scope for retail investors to get a flavour of the international stock market.

At present, Sebi allows each mutual fund to invest $50 million per fund abroad with an overall limit of $1 billion.

“But that has not worked well. Very small funds have been invested abroad and international mutual funds are hungry for more. We feel that the feeder fund will become a success,” Amfi chairman A. P. Kurien said today.

The mutual funds industry feels that the $ 50-million cap on individual funds is a deterrent and, in its proposal to Sebi on feeder fund, has sought a relaxation on this.

According to Kurien, the feeder fund will be “domiciled”. This means though the proposed fund will invest in mutual funds overseas, it will be subject to local rules and regulations.

“The government’s decision to allow individuals to invest $25,000 abroad has facilitated the process. We have recently submitted a proposal to Sebi asking the regulator to allow us to launch such a fund,” Kurien, who was here to attend the third national summit on ‘Wealth Creation with mutual funds’, said.

The Amfi chairman said some of the big names in the mutual funds industry like Birla Sun Life Mutual Fund, Templeton Mutual Fund and Principal Mutual Fund have already evinced interest in floating feeder funds.

On commodity mutual funds, Kurien said a committee is working on the design of the products. Once it is completed, the report will be forwarded to the Amfi board for further scrutiny.

Earlier, addressing the seminar, Kurien said though the mutual funds industry has gathered momentum in recent times, a lot needs to be done to make it popular among retail investors.

The total assets under management (AUM) of the mutual funds industry as of June this year stood at Rs 1,55,845 crore. The annual growth rate for the 12-month period ended June was quite high at 49 per cent.

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