GIFT City Draws India’s Asset Managers Seeking Global Equities Amid Weak Domestic Returns
India’s asset managers are relocating functions to GIFT City to tap a rising appetite for global equities, citing relaxed overseas investment limits and disappointing returns at home.
Asset managers move to GIFT City
GIFT City in Gujarat has emerged as a destination for Indian fund houses looking to offer clients broader access to international stocks. Several top asset management firms have set up units or shifted operations there to circumvent domestic constraints and take advantage of a more flexible regulatory environment.
Fund executives say the move is driven by investor demand for foreign exposure after long spells of muted returns in Indian large-cap and mid-cap segments. Managers are using the enclave to list products, route overseas fund flows and expand distribution to high-net-worth and retail clients seeking diversification.
Regulatory perks and relaxed overseas limits
One of the key attractions at GIFT City is the absence of caps on cumulative overseas investments for certain pooled investment vehicles, which contrasts with tighter limits on similar funds domiciled onshore. Regulators and policymakers have designed incentives for international activity inside the special economic zone, including tax and compliance concessions meant to speed fund operations.
These relaxed rules allow mutual funds and alternative managers greater latitude to aggregate overseas positions and manage currency and liquidity more efficiently. Industry lawyers and compliance officers note that operational simplicity and treaty advantages available in the finance city can lower costs and expand product choice for Indian savers.
Market backdrop: weak domestic returns spur demand
The shift comes as many domestic investors have grown impatient with lacklustre equity performance at home, particularly in cyclical sectors that underperformed broader benchmarks. Lower real returns, coupled with rising interest in technology and overseas growth stories, have pushed asset managers to seek new channels for international equity exposure.
Portfolio managers describe a clear client preference for global diversification after recent market cycles exposed concentrated risks. Wealth advisers and retail platforms report increasing inquiries about US, European and Southeast Asian equity funds, reflecting a broader trend toward cross-border allocations.
Implications for fund flows and market structure
The relocation of product manufacturing and distribution to GIFT City could re-route some capital away from traditional onshore fund vehicles, altering the landscape of fund flows in India. If a sizable portion of incremental overseas allocations is executed via the finance hub, domestic fund houses may see shifts in fee income and custody relationships.
However, industry analysts caution that the net effect on Indian markets will depend on scale and investor adoption. While some outflows to foreign assets are expected, experts say the overall impact on domestic liquidity will be gradual as managers balance global exposure with mandated local holdings and investor home-bias preferences.
Operational and reputational hurdles remain
Despite regulatory incentives, managers face operational challenges including staffing, local infrastructure linkages and client education requirements. Setting up cross-border distribution and custody arrangements involves legal structuring and ongoing dialogue with both Indian and international regulators.
Reputational considerations also matter: fund houses must ensure transparency and investor protection in offshore products to maintain trust. Market participants highlight the need for robust disclosure, conflict-of-interest policies and clear communication on tax implications to prevent misunderstandings among retail investors.
Outlook for GIFT City and India’s fund industry
GIFT City’s appeal will hinge on its ability to scale services, attract global custodians and host fintech and compliance vendors that support cross-border asset management. If successful, the finance hub could become a complementary platform to Singapore and Hong Kong for Indian managers seeking international reach.
Policymakers and industry groups are watching closely to calibrate rules that balance investor choice with systemic safeguards. For now, the trend toward using GIFT City underscores a pragmatic response from asset managers to client demand for global equities amid a prolonged period of uneven domestic performance.
Longer term, the development may accelerate product innovation and deepen capital markets infrastructure, but outcomes will depend on regulatory alignment, investor education and the pace at which global allocations expand. The immediate effect is a tangible shift in where Indian fund manufacturing is being done and how savers access overseas equities.
