Retail Outbound Funds Surge in GIFT City Amid High Demand for Global Exposure

Retail Outbound Funds Surge in GIFT City Amid High Demand for Global Exposure​

GIFT City’s retail outbound fund market is showing definite traction, with assets under management crossing approximately $3.84 billion across four available schemes. This development signifies a growing investor appetite for international exposure via Indian domiciled structures. However, the trajectory remains constrained by limited awareness and ongoing operational hurdles surrounding product depth and client onboarding.

Growing Investor Demand Drives Focus on Global Assets​

The surge in interest is largely fueled by the structural constraints faced by traditional domestic mutual funds. After overseas investment limits were exhausted for domestic funds in 2022, alternative structures like those provided by GIFT City became a necessity for investors seeking international exposure.

Currently, only four retail outbound funds are available to resident Indian investors through GIFT City. These offerings include two passive index funds from PPFAS tracking the Nasdaq 100 and S&P 500, DSP’s actively managed global equity fund, and Edelweiss’ Greater China Fund, which is structured as a fund-of-funds (FoF). The pipeline for expansion is set to grow with new launches, such as Marcellus Investment Managers' Global Equities Fund.

Distributors confirm that demand is visibly emerging across various global strategies, including US technology, China, and emerging markets. There has been particularly strong traction in the Nasdaq and S&P 500-linked offerings, driven by interest in tech and AI plays through funds like PPFAS’s Nasdaq offering and Edelweiss’ Great China FoF.

Persistent Hurdles Impede Broader Adoption​

Despite the rising demand, systemic friction points are tempering the market's growth potential. Distributors have pointed to high minimum investment requirements and complex operational procedures as major deterrents for investors.

Ravi Kumar TV, Director at Gaining Ground Investment Services, noted that while access to global markets through a regulated framework is positive, the ground reality shows uneven experiences. He highlighted that high minimum investments and operational issues related to documentation and remittance processes continue to be roadblocks.

Nitin Dongare, Director and CEO of Anand Rathi International Ventures (IFSC) Pvt. Ltd - GIFT City, stressed that awareness remains a significant concern for the retail segment. He stated that while demand is steadily rising, even High Net Worth Individuals (HNIs) are often unaware of GIFT City's specialized retail funds.

The $5,000 minimum investment requirement, which approximates ₹4–5 lakh, serves as a key entry barrier. Furthermore, systematic investment plans (SIPs) are not available at the initial stage in these offerings, adding to the operational complexity for new investors.

Onboarding and Operational Efficiencies Lagging Behind Market Needs​

The execution process remains inconsistent across the market. Many onboarding procedures are still physical or rely on email correspondence rather than being fully digitized.

Investors currently lack a consolidated digital dashboard necessary for real-time tracking of Net Asset Values (NAVs), portfolio performance, and returns, often relying instead on periodic statements. This operational lag is compounded by complexities such as currency conversion costs, banking charges, and the tax collected at source under the Liberalised Remittance Scheme, according to distributors.

Niranjan Avasthi, President and Head - Product, Marketing and Digital at Edelweiss MF, acknowledged these constraints but remained optimistic. He stated that his firm is actively addressing this by having created its own online platform for GIFT City investments, which allows investors to transact seamlessly.

Distribution Landscape Shows Promise​

Distribution in the retail outbound fund market is still nascent. While every distributor can distribute these products, the number of dedicated intermediaries remains limited due to high setup and compliance costs.

Nitin Dongare noted that licensing requirements have restricted the number of entities officially registered as IFSC-registered distributors. However, a positive solution lies within the Associated Distributor framework, which enables registered distributors to bring in multiple partners and thus expand their last-mile reach.

Edelweiss MF’s Avasthi reported seeing healthy demand from both direct investors and distributor channels, stating that the latter channel is particularly strong as distributors can actively manage asset allocation for clients. He confirmed that demand is currently split fairly evenly between these two avenues.

Fund Houses Express Long-Term Optimism​

Despite current constraints, fund houses maintain a highly positive outlook on the long-term viability of GIFT City products. Niranjan Avasthi stated they are receiving thousands of investors across their US Tech, China, and Emerging Markets funds, confirming strong market interest in global investing.

Santosh Joseph, founder at Germinate Investor Services, cautioned that the ultimate test for these products will occur over the next six months to a year. He noted that these offerings are still in infancy, as investors had other means to achieve international diversification previously.

Joseph added that demand for greater product breadth is inevitable, noting that just as investing categories have expanded over two decades (from general diversified funds to thematic and mid-cap), global investing via GIFT City will evolve similarly. Edelweiss MF also plans to launch more feeder funds across various strategies in the coming period.