The Hindu Business Line : Global equities one step closer!

DO you dream of owning a Rolls Royce? Whether you can buy that expensive set of wheels or not, you may soon be able to invest in funds that own a part of the company that makes them.

Indian investors, who can currently invest in only about 47 foreign companies through the mutual fund route, can now expect this list to be expanded significantly.

SEBI, in consultation with the RBI, is looking at allowing Indian mutual funds to invest in foreign indices.

SEBI is currently reviewing UTI Mutual Fund's offer document for a fund that would invest in the Dow Jones Global Titans 50 Index.

This fund would passively track the index and invest in companies such as DaimlerChrysler, Coca-Cola, General Electric, Intel, Microsoft, Nokia, Pfizer, among others.

According to Mr A.K. Sridhar, Executive Director, UTI AMC, the fund house is also soon to file the offer document for a fund that would invest in companies that are part of the global sustainability index.

The index includes companies that integrate long-term economic, environmental and social aspects in their business strategies while maintaining global competitiveness and brand reputation.

This index is currently composed of over 300 global companies across categories including advertising, oil drilling, water utilities, retail, etc.

Companies such as BMW, Caterpillar Inc, EDS, HSBC, Nike, Time Warner Inc, among others, compose this index. And Rolls Royce is part of this index.

While the Global Titans 50 fund will be a passively managed fund with components in exactly the same ratio as they are in the index, the second fund is likely to be an actively managed one, said Mr Sridhar.

Currently, Indian mutual funds can invest up to $1 billion in stocks of global companies that have a listed entity in India, where the parent holds at least 10 per cent in the Indian subsidiary.

The capital market regulator is now studying the offer documents and UTI Mutual Fund is understood to be lobbying very hard to get this approved.

Though SEBI might not allow Indian fund houses to invest in global stocks of their choice without any restrictions, indications suggest that the regulation might be modified to allow mutual funds to invest in global indices.

In this case, companies that constitute the indices would not have to qualify under the current prescribed limitations of SEBI.

"These funds require a change to be made in the investment matrix; we are hopeful that SEBI would approve these," said Mr Ashutosh Bishnoi, Chief Marketing Officer, UTI AMC. The fund house has also approached the RBI to explain the product and the foreign exchange implications of the fund.