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GIFT IFSC funds see retail rush amid outperforming global markets
Developing
In Short: As Indian markets underperform, more retail investors are turning to international markets through GIFT City, a financial hub in Gujarat.
The number of investors in GIFT City's retail-oriented IFSC funds surged to 8,467 in the April-June quarter, up from 3,483 in the previous quarter, marking the first time retail investors controlled the largest share of the fund management ecosystem.
Fund houses like PPFAS, DSP, Tata Mutual Fund, and Edelweiss have launched retail-focused IFSC funds this year, capitalizing on the growing demand. Meanwhile, alternative investment funds saw their share drop to 52% of the total investors, down from nearly 64% in the previous quarter.
GIFT City, an IFSC hub in Gujarat, offers tax benefits and reduced regulatory compliance, making it an attractive option for high-net-worth individuals, NRIs, and retail audiences to invest in foreign markets through IFSC funds.
What's confirmed
What's still developing
- As Indian markets have increasingly been outpaced by their global peers, more Indians are now investing in international markets through the Gujarat International Finance Tec-City (GIFT City), data from the International Financial Services Centres Authority (IFSCA) showed.
- “Global markets have done exceedingly well compared to Indian markets, and Indian investors have understood the importance of global diversification, and hence participation from retail investors has increased,” said Vaibhav Shah, head of products, business strategy, and international business at Mirae Asset Mutual Fund.
- “Of course, when the domestic stock market is underperforming, many in the retail section who have the money will also chase growth in other markets. So this pent-up demand is materialising through GIFT City as access improves and funds launch new IFSC funds,” a fund manager at a domestic fund house said.
- “Investors can view GIFT IFSC as one of the ways to gain international exposure. However, they should remember that allocation decisions should be based on long-term strategy, rather than recent performance,” noted Rajani of Anand Rathi.
- IFSC funds are regulated by the IFCA, unlike overseas fund of funds (FOFs) that are regulated by SEBI.
- While overseas FOFs do not have individual investment limits, SEBI imposes a $7 billion annual investment cap on the entire mutual funds industry while investing in such firms and a $1 billion cap on individual asset management companies.
- Meanwhile, IFSC funds are bound by the $250,000 limit under the liberalised remittance scheme (LRS).
- Thus, these fund houses cannot accept fresh subscriptions in such schemes despite demand remaining high as most major global markets continue to outpace India.
Sources
- The Indian Expresslink