While most Indian Mutual Funds invest only in India, there are quite a few schemes that invest in overseas securities.
All Mutual Fund schemes need to get Securities and Exchange Board of India (SEBI) approval before offering units to investors in India.
SEBI gives an approval after scrutinising the Scheme Information Document (SID), which clearly spells out the scheme’s investment objectives, type of securities to be invested in, countries & regions, and risks unique to each security.
There are in fact two ways for a scheme to get such exposure to foreign securities.
📌Schemes may either buy such securities listed or traded in overseas exchanges, or they may invest in other overseas Mutual Fund schemes that have such securities in their portfolio after obtaining separate SEBI approval for investment in foreign securities. Either way, the scheme has foreign flavour in the portfolio.
📌Even after investment in overseas securities, Indian Mutual Funds have to provide daily Net Asset Values, ensure portfolio disclosure, provide liquidity, etc.
📌In short they have to comply with all SEBI regulations. Such schemes should have a dedicated separate fund manager for the investments in foreign securities component only.