DSP MF breaks new ground with India’s first retail offshore fund from GIFT City

DSP Mutual Fund’s new Global Equity Fund, launched on 2 June, allows Indian residents to invest as little as $5,000 in a diversified basket of global stocks—without relying on offshore brokerages, feeder funds, or cumbersome tax filings. It’s the first open-ended mutual fund targeting retail investors to debut under GIFT City’s updated 2025 framework, and a litmus test of whether the finance hub can truly broaden access beyond institutions and high-net-worth individuals.

Mirae Asset Mutual Fund has also received similar approval from the International Financial Services Centres Authority (IFSCA) to launch retail-focused offshore funds, though it has yet to announce a specific product.

More than just a regulatory first, DSP’s new fund could help Indian asset managers reclaim outbound flows long dominated by foreign platforms. It offers a cleaner, tax-friendly alternative within India’s regulatory perimeter.

The DSP Global Equity Fund, currently in its New Fund Offer (NFO) phase, will accept inflows for up to six months, but is likely to close in 30–40 days. It can continue accepting investments even after the NFO closes. The fund will invest in 30–50 global companies across markets such as the US, Europe, Japan, South Korea, China, and Canada.

Sebi cap workaround

Unlike traditional mutual funds in India, DSP’s fund is not constrained by the Securities and Exchange Board of India’s (Sebi) $7 billion overseas investment cap, which has led to repeated inflow suspensions across global feeder schemes.

Instead, the GIFT City-based fund uses the investor’s own $250,000 annual quota under the Liberalised Remittance Scheme (LRS), a more resilient route for global exposure.

Because it is domiciled at GIFT, the fund remains outside the Sebi ceiling and can continue accepting money even when the broader mutual fund industry is capped.

The fund signals a shift in outbound capital flows, with domestic asset management companies (AMCs) attempting to reclaim ground long dominated by offshore platforms.

“This structure gives Indian investors a practical route to access global equities at a time when most domestic mutual funds are unable to invest abroad,” said Abhishek Kumar, co-founder of SahajMoney and a Sebi-registered investment advisor. “That said, since the fund has just launched and has no track record yet, it may be prudent to watch its performance for a while before committing capital.”

How it works—and who it’s for

The fund’s stock selection is grounded in the principle of “what will not change over the next 10 years.” It will favour businesses demonstrating incremental innovation over dramatic disruption, prioritising firms with pricing power, durability, and high shelf life over rapid growth.

DSP describes this as a focus on resilience over volatility.

The portfolio will be managed by Natraj Shankarnarayanan, formerly of Quantum AMC, and Jayesh Jain, previously a long-short portfolio manager at Edelweiss AMC.

“The DSP Global Equity Fund enables both retail and high-net-worth individuals to invest in high-quality global businesses via the LRS route,” said Kalpen Parekh, managing director and chief executive of DSP Mutual Fund. “We are proud to be the first AMC to launch a retail fund on this route at GIFT City. This offering allows Indian investors to access companies with strong ROE, robust cash flows and attractive valuations globally—while staying aligned with the ‘Make in India’ vision by building this capability domestically.”

DSP already manages nearly $1 billion in assets at GIFT City, largely for offshore clients. This marks its first global product aimed squarely at Indian investors, positioned as a long-term vehicle for goals like children’s overseas education or international travel.

The fund is available in both Regular and Direct plans, with expense ratios ranging from 1.25% to 2.5% depending on investment size and distribution channel.

Eligibility and onboarding

Any Indian resident can invest in the fund under the Liberalised Remittance Scheme (LRS), subject to the $250,000 annual limit. NRIs are not eligible. Note: remittances above ₹10 lakh in a financial year will attract tax collected at source (TCS).

The onboarding process is currently hybrid—investors must fill out a physical or emailed application form and submit KYC documents, either directly or through a distributor. These are processed by CAMS at GIFT City, which handles due diligence, AML checks, FATCA compliance, and customer verification.

Once verified, the investor receives confirmation and units are allotted. A fully digital route is in development, but currently marked “in process.”

Who can distribute

Any mutual fund distributor registered with the Association of Mutual Funds in India (Amfi) can sell the fund. No additional registration with GIFT City’s regulator IFSCA is required.

Fee structure

The fund offers four share classes:

Retail investors

A1 (Regular plan): 2.5% expense ratio

B1 (Direct plan): 1.5%

Institutional investors (min. $100,000)

A2 (Regular): 2.25%

B2 (Direct): 1.25%

The structure rewards higher investments and direct participation with lower fees.

Taxation

One of the fund’s main draws is its investor-level tax simplicity.

Unlike traditional Indian mutual funds, capital gains are taxed at the fund level, not in the hands of the investor. If you redeem units within two years, the fund deducts tax at 42% (the highest marginal rate under the old regime). After two years, the fund applies a 12.5% long-term capital gains tax.

There’s no additional tax filing or declaration required from the investor. However, the fund itself pays tax on any internal churn: if it rebalances its portfolio within two years, the gains from that segment are taxed at 42%; gains on assets held longer are taxed at 12.5%.

While retail participation is just beginning, GIFT City’s offshore fund ecosystem is expanding rapidly. As of March 2025, funds based in GIFT’s IFSC had invested $8.08 billion. That includes $4.52 billion from Category I and II AIFs, $3.52 billion from Category III AIFs, and $42.77 million from venture capital schemes. Commitments raised have surged 87% year-on-year, from $8.41 billion in March 2024 to $15.74 billion in March 2025, according to IFSCA data.

If it succeeds, DSP’s new fund could mark a turning point—not just for offshore investing, but for GIFT City’s ambitions to become a gateway for global capital.