Franklin Templeton Scales Back Overseas Fund Holdings to Meet New SEBI Caps

In a move that many saw coming, Franklin Templeton Investment Management Ltd. has started to reel in its overseas exposure. Effective May 18, the firm reduced its holdings in two of its offshore mutual‑fund vehicles, a step taken to stay inside the fresh ceiling that the Securities and Exchange Board of India (SEBI) has imposed.

SEBI’s latest amendment limits the proportion of a domestic mutual‑fund’s total assets that can be invested abroad to 10 % of its net assets‑under‑management (AUM). The regulator says the rule is meant to safeguard Indian investors from the heightened volatility that can come with foreign markets. For large players like Franklin Templeton, that meant revisiting portfolios that had, until now, been a little more generous with foreign allocations.

The two funds in question are the Franklin India Global Fund and the Franklin Emerging Markets Fund. Both have historically attracted Indian investors looking for diversification beyond the country’s borders. While the Global Fund focuses on a mix of developed‑market equities, the Emerging Markets Fund leans into higher‑growth economies such as Brazil, China and South Africa.

According to a filing with SEBI, the asset manager trimmed its stakes to just under the 10 % threshold – roughly ₹1.1 billion in total across the two schemes. That is a modest dip compared to its earlier exposure, which hovered around 12‑13 % of the overall AUM. Franklin Templeton says the adjustment “ensures compliance without compromising the long‑term value proposition for investors.”

Industry observers note that the change is more of a housekeeping exercise than a signal of distress. “Franklin Templeton has always been proactive about regulatory changes,” says financial analyst Priya Nair. “What we’re seeing is a disciplined shift to stay within the new guardrails while still offering the overseas flavor that many Indian savers appreciate.”

For investors, the immediate impact is expected to be minimal. The two funds will continue to operate, and their underlying portfolios remain unchanged. The only visible difference will be the slightly lower percentage of a mutual fund’s net assets that are tied up in foreign equities. Some market watchers, however, wonder whether the new cap will push more asset managers to launch India‑centric products instead of leaning on offshore options.

Franklin Templeton’s broader strategy still leans on a balanced mix of domestic and global opportunities. The firm’s domestic equity and hybrid schemes remain its flagship offerings, and the company is rolling out a few new thematic funds that target sectors like clean energy and technology within India.

In short, the asset manager has taken a measured step to align with SEBI’s tighter overseas‑investment rule, trimming its foreign footprint just enough to stay compliant while keeping the door open for investors who want a slice of the global market.