MF overseas assets jump 3.7x to $2.8 bn in FY21, shows RBI data

Foreign liabilities rise by 50% to $14.5 bn; increase follows a sharp rally in global stocks and growing preference among domestic investors to park in foreign assets

Foreign assets of domestic mutual funds (MF) surged 3.7 times to $2.85 billion year-on-year in 2020-21 (FY21), shows data published by the Reserve Bank of India (RBI). This is largely the overseas equity holdings of domestic MFs. The increase is on the back of a sharp rally in global stocks and growing preference among domestic investors to park in foreign assets, as a portfolio diversification strategy.

The assets under management (AUM) of overseas fund of funds has risen nearly 8 fold to Rs 21,440 crore ($2.9 billion) this August compared to March 2020 levels, shows data provided by industry body Association of Mutual Funds in India (AMFI).

Over the last few months, domestic MFs have launched several new funds offers (NFOs) in the international fund category—most of whom have been well-received by investors.

International funds have on average given returns of 26 per cent in the last one year, with top returns generated by US-focused international funds.

“Overseas equity investments of MF companies were largely concentrated in the USA 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 are mainly MF units issued to non-residents.

The United Arab Emirates, UK, US and Singapore jointly accounted for nearly 45 per cent of the 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 (FDI) Japan and the United Kingdom were the leaders in FY21.  Japan invested Rs 15,606 crore, while FDI from the United Kingdom stood at Rs 14,748 crore during the last financial year.