MF overseas assets up 3.7x to $2.8 bn in FY21

Foreign assets of domestic mutual funds (MFS) surged 3.7 times in a year to $2.85 billion in 2020-21 (FY21), shows the data published by the Reserve Bank of India (RBI). These are largely the overseas equity holdings of domestic MFS.

This comes on the back of a sharp rally in global stocks, coupled with a growing preference among domestic investors to invest in overseas assets, a portfolio diversification strategy.

The assets under management (AUM) of overseas fund of funds had jumped nearly 8 times to ~21,440 crore ($2.9 billion) in August 2021, compared to March 2020 levels, shows the data provided by industry body Association of Mutual Funds in India (AMFI).

Over the past few months, domestic MFS have launched several new funds offers (NFOS) in the international fund category — most of which have been wellreceived by investors.

International funds on average have given returns of 26 per cent over the past year, with top returns generated by Us-focused international funds.

“Overseas equity investments of MF companies were largely concentrated in the US and Luxembourg,” the RBI said in its survey of foreign liabilities and assets of mutual fund companies-2020-21.

Meanwhile, MF foreign liabilities rose 50 per cent to $14.45 billion in FY21, from $9.62 billion at the end of FY20. These were mainly MF units issued to non-residents.

The UAE, UK, US, and Singapore together accounted for nearly 45 per cent of total MF units held by non-residents.

The survey covered 44 Indian MF companies and their asset management companies (AMCS) which acquired foreign assets and liabilities during 2020-21.

In terms of foreign direct investments, Japan and the UK were the leaders in FY21. Japan invested ~15,606 crore, while FDI from the UK stood at ~14,748 crore during last financial year.