Can Mutual Fund Invest its Funds in Unlisted Companies?

Well, I don’t know about the exact guidelines but as far as I know, Mutual Funds can Invest in Unlisted Companies. Of course, Mutual Funds are not allowed to invest more than 5% of it’s Total Assets into Unlisted Companies.

Many years ago, I read in the news paper that, ICICI Mutual Fund has invested its money in the Subhiksha Retail Chains Business which was a unlisted Company. Later on it was found that Subhiksha was not a profitable Business.

It is depending on the mutual fund manager that how much assets to invest in which unlisted companies. But It is sure that Mutual Funds can invest in unlisted companies.

The reason for investing in unlisted companies is higher growth. This is because unlisted companies probably go public in near to medium future and at the time of its going public, the fund manager can sell its shares at 20-25 times higher and thus ultimately boost the over all return of the mutual fund portfolio.

This is the main logic behind investing in unlisted companies by mutual funds.