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June 12, 2024
Indian individuals can now invest in offshore investment funds setup as companies or partnerships, which though unregulated themselves are managed by a regulated investment manager as per the RBI circular dated June 07, 2024
Earlier, individuals could only invest in ‘units’ (of a trust) under the OPI route, disentitling Indian individuals to invest in offshore funds that are usually setup as companies or limited partnerships (trusts are seldom used as investment vehicles abroad)
Indian individuals are not permitted to invest in financial services under the ODI route; only OPI route permitted
Earlier, RBI master directions required the fund vehicle to be regulated – rather misaligned since in most jurisdictions, manager, and not the fund vehicle is registered / regulated
Permitting OPI in funds beyond trusts provides the much-needed clarity since offshore funds are seldom setup as trusts
Offshore GPs likely to see enhanced interest from Indian HNIs – though overall limit continues to be capped at USD 250k per person per year
For investments beyond USD 250k, Indian investors could consider ODI route (up to 4x of net worth) through a company/ LLP; however investment must only be in ‘equity capital’ – investment in redeemable units of a trust may not be permitted
Similarly, regulated offshore GPs raising capital in unregulated funds should also get some respite