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Tuesday, Jul 09, 2002

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Pru ICICI to launch foreign debt fund by September

Aparna Krishnan
Neha Kapoor

MUMBAI, July 8

PRUDENTIAL ICICI Mutual Fund plans to launch a new fund that provides investors an opportunity to invest in the foreign debt market by September-end 2002. The asset management company is expected to file the draft offer document with the Securities and Exchange Board of India (SEBI) shortly.

We are looking to float a separate fund that will allow investors to put their money in foreign commercial paper with AAA rating. "We will file the draft offer document with SEBI shortly," Mr Shailendra Bhandari, Managing Director, Prudential ICICI, told Business Line.

"The entire procedure, thereafter, should take a couple of months and we should be ready to launch the fund by the end of this quarter," said Mr Bhandari.

This move follows the Finance Minister's announcement in the Union Budget allowing mutual funds to invest in the overseas debt market with an investment cap of $50 million. Before that, funds were allowed to invest in ADR/GDR of Indian companies.

Since the announcement, there has been some apprehension in the industry over the investment parameters stipulated by SEBI. According to these stipulations, mutual funds can invest in foreign debt securities in countries with fully convertible currencies, short-term as well as long-term debt instruments with highest foreign currency credit rating i.e. Standard and Poor's AAA rating or Moody's P-1/AAA rating. Funds can also invest in government securities where countries are AAA rated such as US, UK, Singapore, Denmark, France among others.

"Although there are some concerns in the industry over the limitations, they are outweighed by the benefits of such a fund as it allows you to invest across 14 countries that issue almost 98 per cent of the world's commercial paper," said Mr Bhandari.

"The fund provides a wider investment spread for investors, however, there is a need to educate customers and increase awareness about the benefits of such a fund," Mr Bhandari said.

So far, Sun F&C Mutual Fund has launched an open-ended Fixed Income scheme with an option to invest in the foreign debt market.

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