Fund houses plan retail-focused schemes at Gift City for overseas play

Tax perks, relaxed norms, and global appetite drive retail shift

At least five mutual fund (MF) houses, including Mirae Asset Investment Managers (India) and Tata Asset Management, are planning to launch retail schemes in the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC) to tap into non-resident Indians (NRIs) and local individuals seeking overseas exposure.

 

These would be the first retail schemes from the financial hub, which has so far attracted interest mainly from alternative investment funds.

 

While two fund houses have firmed up their plans and are expected to launch schemes in the coming months, sources said three more have approached the International Financial Services Centres Authority (IFSCA), the unified regulator for IFSC.

 

Mirae Asset plans to launch within a few months, while Tata Asset has filed for approval from IFSCA. The approvals may take 30–45 days as the regulator carries out additional due diligence for retail schemes, an executive said.

 

“Over 8,000–9,000 NRI retail accounts have been opened in the banking units in GIFT City so far. At present, they can only invest in fixed deposits. However, these investors can be directed towards equity investments,” explained an executive.

 

In addition to NRI investors, fund houses also see opportunities from resident Indians seeking global exposure. Investors will be able to use their annual Liberalised Remittance Scheme (LRS) limit of $250,000 to invest through these schemes.

 

Vaibhav Shah, head of products, business strategy, and international business at Mirae Asset Investment Managers (India), said their fund may focus on themes not currently available to Indian investors, such as semiconductors and artificial intelligence.

 

“The ticket size we are targeting is either $5,000 or $10,000. This is because there are LRS transfer costs involved. If the ticket size is too low, the currency conversion cost as a percentage of the investment becomes large, which could eat into investors’ returns,” Shah added. 

 

Experts say the IFSC route may also draw investor interest as domestic MFs have already reached the $7 billion investment cap for global equities. Though the first set of GIFT City mutual fund regulations came in 2022, tax and legal experts say activity is picking up after clarity on taxation and revised fund management rules from the IFSCA.

 

“One of the most significant changes is the reduction in the minimum corpus requirement for retail schemes from $5 million to $3 million. This lowered entry barrier makes it financially more viable for a wider range of asset management companies to establish a presence and test the waters with their retail offerings in GIFT City,” said Rohit Jain, managing partner at Singhania & Co.

 

He added that the ability to offer India-focused funds to a global audience, denominated in foreign currency, presents an exciting opportunity for the Indian MF industry.

 

In last year’s Budget, the government announced tax exemptions for retail schemes and exchange-traded funds set up in the GIFT IFSC. Legal experts say the funds will benefit from a concessional 10 per cent tax rate on interest and dividend income, and capital gains exemptions on various securities.

 

Harsh Kothari, partner at IC Universal Legal, said retail funds in GIFT City bring global investing within reach for Indian investors.

 

“For outbound retail funds, the foreign exchange regulatory regime allows Indian resident individuals to invest via the LRS route and permits Indian listed/unlisted entities to invest through the Overseas Portfolio Investment route. Notably, Indian unlisted entities are not permitted to invest in investment funds based in jurisdictions other than the IFSC,” Kothari explained.

 

Go global, think retail

 

·         Mirae Asset Investment Managers and Tata AMC set to launch retail schemes from GIFT City

 

·         Three more fund houses in talks with IFSCA

 

·         Retail push gains traction after tax clarity, relaxed fund norms

 

·         Target audience: NRIs and Indian residents eyeing overseas assets

 

·         About 9,000 NRI accounts already opened in GIFT City banking units