There are certain limitations in the Indian Mutual Funds that are not applicable to the Global Funds. Below are certain limitations:

Limitations of Indian Mutual Funds to Invest in Global Equity

Currently, Indian Mutual Funds have certain limitations when it comes to Global Investing resulting in low number of options and opportunities for retail investors to diversify their portfolio. Global Funds enable investors to diversify by overcoming the below mentioned limitations:

1. Industry-wide limit for overseas investments — USD 7 billion

SEBI has set a combined industry cap of USD 7 billion for all mutual funds investing in overseas securities (including global equities, foreign funds, ADRs, GDRs, etc.).

2. Industry-wide limit for international ETFs — USD 1 billion

A separate sub-limit of USD 1 billion applies collectively to investments in overseas Exchange Traded Funds (ETFs).

3. Per-AMC limit — USD 1 billion per fund house

Each Asset Management Company (AMC) is individually restricted to a maximum of USD 1 billion in total overseas investments across all its schemes.

4. Suspension of fresh investments when limits are reached

Once the industry-wide or AMC-specific limits are fully utilised, AMCs must stop accepting fresh inflows into international mutual fund schemes and “fund of funds” that invest overseas.

6. Resulting impact for investors

Because the limits are currently saturated:

• Many international MF schemes cannot accept new investments.

• Some AMCs have fully exhausted their individual USD 1B limits.

• ETF-based global schemes remain restricted until limits are enhanced or reset.

References

For official references of the above facts in point 1, 2, and 3, please refer to https://www.sebi.gov.in/legal/circulars/nov-2020/circular-on-enhancement-of-overseas-investment-limits-for-mutual-funds_48090.html