Geographical Classification of Mutual Funds :
Nations' boundaries provide territorial restrictions on the sale and purchase of mutual fund units or shares as is the case in commodity trade or services. In view of this, Mutual Funds which operate within the nations' boundaries are different from those which are meant for subscription of foreigners or the country's nationals living away from its shores. This classification is broadly of two types namely,
- Domestic Mutual Funds.
- Offshore Mutual Funds.
DOMESTIC MUTUAL FUNDS
Domestic Mutual Funds are the saving schemes which are opened for mobilizing savings of the nationals within the country. These schemes may be of different types as discussed above under the portfolio classification and functional classification. The existing Mutual Funds namely, UTI, GIC Mutual Fund, LIC Mutual Fund, SBI Mutual Fund, Canbank Mutual Fund, BOI Mutual Fund, PNB Mutual Fund and Indbank Mutual Fund are all domestic schemes.
OFFSHORE MUTUAL FUNDS
The basic objective of opening an offshore mutual fund scheme is to attract foreign capital for investment purposes in the country of the issuing company. Offshore Mutual Funds, thus facilitate cross-border fund flow which is a direct route for getting foreign currency without political strings or domination on the issuer country. From investment point of view too, offshore Mutual Funds open up domestic capital markets to the international investors and global portfolio investments.
The major point of difference between the offshore Mutual Funds and domestic Mutual Funds is the currency and country risk for the global investors as the source of fund is from abroad. Due to the high risk, higher return in the invested funds can be expected.
Like domestic Mutual Funds, the offshore Mutual Funds could also be functionally classified into close-ended or open-ended funds.
The major offshore Mutual Funds opened so far comprised close-ended schemes providing redemption of the units for individual investors only at the end of the specified period of the scheme. UTI's India Fund 1986, India Growth Fund, SBI's India Magnum 1989, Canbank's Indo-Swiz Himalayan Fund 1990 and Commonwealth Equity Fund were all close-ended offshore funds.