Types of Mutual Funds | Latest Categorization of Mutual Funds by SEBI
Mutual funds are investment vehicles for investing in stocks and bonds. There are various mutual funds available for investment and selecting a mutual fund scheme for investment is a difficult task for the investor. Moreover, there are multiple mutual fund schemes from the same mutual fund house in the same category.
All mutual funds are
registered with SEBI (Securities and Exchange Board of India). SEBI formulates
policies and regulates the mutual funds to protect the interests of the
investors. To overcome the above-stated
problem, SEBI has recently issued a circular to categorize and rationalize
mutual funds schemes. As per the circular one mutual fund house can have only
one mutual fund scheme under each category. This way SEBI wants to reduce
confusion for investors while selecting mutual funds for investment.
Types of Mutual Funds - Latest Categorization of Mutual Funds
As per latest circular by
SEBI the mutual fund schemes would be broadly classified into the following groups:
1. Equity Schemes
2. Debt Schemes
3. Hybrid Schemes
4. Solution Oriented Schemes
5. Other SchemesEquity Schemes
As per latest categorization,
there are ten categories under Equity Schemes that a mutual fund company can
have. In order to ensure uniformity in respect of the investment universe for
equity schemes, SEBI also defined large cap, mid cap, and small cap as follows:
1. Large Cap: 1 st -100 th company in terms of full market capitalization
2. Mid Cap: 101 st -250 th
company in terms of full market capitalization
3. Small Cap: 251st company
onwards in terms of full market capitalization
Scheme characteristic and description of each scheme is given in the table
Sr. No.
|
Category of Schemes
|
Scheme Characteristics
|
Type of scheme
|
1
|
Multi Cap Fund
|
Minimum investment in equity & equity related instruments- 65% of
total assets
|
Multi Cap Fund- An open ended equity scheme investing across large
cap, mid cap, small cap stocks
|
2
|
Large Cap Fund
|
Minimum investment in equity & equity related instruments of large
cap companies- 80% of total assets
|
Large Cap Fund- An open ended equity scheme predominantly investing in
large cap stocks
|
3
|
Large & Mid Cap Fund
|
Minimum investment in equity & equity related instruments of large
cap companies- 35% of total assets Minimum investment in equity & equity
related instruments of mid cap stocks- 35% of total assets
|
Large & Mid Cap Fund- An open ended equity scheme investing in
both large cap and mid cap stocks
|
4
|
Mid Cap Fund
|
Minimum investment in equity & equity related instruments of mid
cap companies- 65% of total assets
|
Mid Cap Fund- An open ended equity scheme predominantly investing in
mid cap stocks
|
5
|
Small cap Fund
|
Minimum investment in equity & equity related instruments of small
cap companies- 65% of total assets
|
Small Cap Fund- An open ended equity scheme predominantly investing in
small cap stocks
|
6
|
Dividend Yield Fund
|
Scheme should predominantly invest in dividend yielding stocks.
Minimum investment in equity- 65% of total assets
|
An open ended equity scheme predominantly investing in dividend
yielding stocks
|
7
|
Value Fund*
|
Scheme should follow a value investment strategy. Minimum investment
in equity & equity related instruments - 65% of total assets
|
An open ended equity scheme following a value investment strategy
|
Contra Fund*
|
Scheme should follow a contrarian investment strategy. Minimum
investment in equity & equity related instruments - 65% of total assets
|
An open ended equity scheme following contrarian investment strategy
|
|
8
|
Focused Fund
|
A scheme focused on the number of stocks (maximum 30) Minimum
investment in equity & equity related instruments - 65% of total assets
|
An open ended equity scheme investing in maximum 30 stocks (mention
where the scheme intends to focus, viz., multi cap, large cap, mid cap,
small cap) |
9
|
Sectoral/ Thematic
|
Minimum investment in equity & equity related instruments of a
particular sector/ particular theme- 80% of total assets
|
An open ended equity scheme investing in __ sector (mention the
sector)/ An open ended equity scheme following __ theme (mention the theme)
|
10
|
Minimum investment in equity & equity related instruments - 80% of
total assets (in accordance with Equity Linked Saving Scheme, 2005 notified
by Ministry of Finance)
|
An open ended equity linked saving scheme with a statutory lock in of
3 years and tax benefit
|
* Mutual Funds will be permitted to offer either Value
fund or Contra fund.
Debt Schemes
There are 16 categories
under Debt Schemes that a mutual fund company can have. Scheme characteristic
and description of each scheme is given in the table
Sr. No.
|
Category of Schemes
|
Scheme Characteristics
|
Type of scheme
|
1
|
Overnight Fund
|
Investment in overnight securities having maturity of 1 day
|
An open ended debt scheme investing in overnight securities
|
2
|
Liquid Fund
|
Investment in Debt and money market securities with maturity of upto
91 days only
|
An open ended liquid scheme
|
3
|
Ultra Short Duration Fund
|
Investment in Debt & Money Market instruments such that the
Macaulay duration of the portfolio is between 3 months - 6 months
|
An open ended ultra-short term debt scheme investing in instruments
with Macaulay duration between 3 months and 6 months
|
4
|
Low Duration Fund
|
Investment in Debt & Money Market instruments such that the Macaulay
duration of the portfolio is between 6 months- 12 months
|
An open ended low duration debt scheme investing in instruments with
Macaulay duration between 6 months and 12 months
|
5
|
Money Market Fund
|
Investment in Money Market instruments having maturity upto 1 year
|
An open ended debt scheme investing in money market instruments
|
6
|
Short Duration Fund
|
Investment in Debt & Money Market instruments such that the
Macaulay duration of the portfolio is between 1 year – 3 years
|
An open ended short term debt scheme investing in instruments with
Macaulay duration between 1 year and 3 years
|
7
|
Medium Duration Fund
|
Investment in Debt & Money Market instruments such that the
Macaulay duration of the portfolio is between
3 years – 4 years |
An open ended medium term debt scheme investing in instruments with
Macaulay duration between 3 years and 4 years
|
8
|
Medium to Long Duration Fund
|
Investment in Debt & Money Market instruments such that the
Macaulay duration of the portfolio is between 4 – 7 years
|
An open ended medium term debt scheme investing in instruments with
Macaulay duration between 4 years and 7 years
|
9
|
Long Duration Fund
|
Investment in Debt & Money Market Instruments such that the
Macaulay duration of the portfolio is greater than 7 years
|
An open ended debt scheme investing in instruments with Macaulay
duration greater than 7 years
|
10
|
Dynamic Bond
|
Investment across duration
|
An open ended dynamic debt scheme investing across duration
|
11
|
Corporate Bond Fund
|
Minimum investment in corporate bonds- 80% of total assets (only in
highest rated instruments)
|
An open ended debt scheme predominantly investing in highest rated
corporate bonds
|
12
|
Credit Risk Fund
|
Minimum investment in corporate bonds- 65% of total assets (investment
in below highest rated instruments)
|
An open ended debt scheme investing in below highest rated corporate
bonds
|
13
|
Banking and PSU Fund
|
Minimum investment in Debt instruments of banks, Public Sector
Undertakings, Public Financial Institutions- 80% of total assets
|
An open ended debt scheme predominantly investing in Debt instruments
of banks, Public Sector Undertakings, Public Financial Institutions
|
14
|
Gilt Fund
|
Minimum investment in Gsecs- 80% of total assets (across maturity)
|
An open ended debt scheme investing in government securities across
maturity
|
15
|
Gilt Fund with 10 year constant duration
|
Minimum investment in Gsecs- 80% of total assets such that the
Macaulay duration of the portfolio is equal to 10 years
|
An open ended debt scheme investing in government securities having a
constant maturity of 10 years
|
16
|
Floater Fund
|
Minimum investment in floating rate instruments- 65% of total assets
|
An open ended debt scheme predominantly investing in floating rate
instruments
|
Hybrid Schemes
As per latest categorization,
there are six categories under Hybrid Schemes that a mutual fund company can
have. Scheme characteristic and description of each scheme is given in the table
Sr. No.
|
Category of Schemes
|
Scheme Characteristics
|
Type of scheme
|
1
|
Conservative Hybrid Fund
|
Investment in equity & equity related instruments- between 10% and
25% of total assets; Investment in Debt instrumentsbetween 75% and 90% of
total assets
|
An open ended hybrid scheme investing predominantly in debt
instruments
|
2
|
Balanced Hybrid Fund @
|
Equity & Equity related instrumentsbetween 40% and 60% of total
assets; Debt instruments- between 40% and 60% of total assets No Arbitrage
would be permitted in this scheme
|
An open ended balanced scheme investing in equity and debt instruments
|
Aggressive Hybrid Fund @
|
Equity & Equity related instrumentsbetween 65% and 80% of total
assets; Debt instruments- between 20% 35% of total assets
|
An open ended hybrid scheme investing predominantly in equity and
equity related instruments
|
|
3
|
Dynamic Asset Allocation or Balanced Advantage
|
Investment in equity/ debt that is managed dynamically
|
An open ended dynamic asset allocation fund
|
4
|
Multi Asset Allocation ##
|
Invests in at least three asset classes with a minimum allocation of
at least 10% each in all three asset classes
|
An open ended scheme investing in asset classes
|
5
|
Arbitrage Fund
|
Scheme following arbitrage strategy. Minimum investment in equity
& equity related instruments- 65% of total assets
|
An open ended scheme investing in arbitrage opportunities
|
6
|
Equity Savings
|
Minimum investment in equity & equity related instruments- 65% of
total assets and minimum investment in debt- 10% of total assets Minimum
hedged & unhedged to be stated in the SID. Asset Allocation under
defensive
considerations may also be stated in the Offer Document |
An open ended scheme investing in equity, arbitrage and debt
|
@
Mutual Funds will be permitted to offer either an Aggressive Hybrid fund or
Balanced fund
##
Foreign securities will not be treated as a separate asset classSolution Oriented Schemes
There are two fund categories
under Solution Oriented Schemes. Scheme characteristic and description of each
scheme is given in the table
Sr. No.
|
Category of Schemes
|
Scheme Characteristics
|
Type of scheme
|
1
|
Retirement Fund
|
Scheme having a lock-in for at least 5 years or till retirement age
whichever is earlier
|
An open ended retirement solution oriented scheme having a lock-in of
5 years or till retirement age (whichever is earlier)
|
2
|
Children’s Fund
|
Scheme having a lock-in for at least 5 years or till the child attains
age of majority whichever is earlier
|
An open ended fund for investment for children having a lock-in for at
least 5 years or till the child attains age of majority (whichever is
earlier)
|
Other Schemes
There are two categories
under Other Schemes. Scheme characteristic and description of each scheme is
given in the table
Sr. No.
|
Category of Schemes
|
Scheme Characteristics
|
Type of scheme
|
1
|
Index Funds/ ETFs
|
Minimum investment in securities of a particular index (which is being
replicated/ tracked)- 95% of total assets
|
An open ended scheme replicating/ tracking index
|
2
|
FoFs (Overseas/ Domestic)
|
Minimum investment in the underlying fund- 95% of total assets
|
An open ended fund of fund scheme investing in fund
|
Applicability of this circular
1. All existing open ended schemes of all Mutual Funds.
2. All such open ended schemes where SEBI has issued final
observations but have not yet been launched.
3. All open ended schemes in respect of which draft
scheme documents have been filed with SEBI as on date.
4 All open ended schemes for which a mutual fund
would file draft scheme document.
Impact on Mutual Funds Investors
1. Some mutual fund schemes
might get merged with others once rationalization/merger of mutual funds happens.
2. The number of mutual
funds schemes might reduce due to merger or elimination.
3. Comparison between the
mutual funds would be easy after this categorization.
4. It might bring
standardization in mutual fund scheme categories.
Hope the above article will
help you in understanding the latest
categorization and rationalization of mutual fund schemes.
Also read: What are mutual funds? Benefits on investing in mutual funds.
Also read: What is SIP (Systematic Investment Plan)?
Also read: How to invest in mutual funds online?
Also read: ELSS (Equity Linked Saving Scheme)
If you liked this article, share it with your friends and colleagues through social media. Your opinion matters, please share your comments.
Also read: What is SIP (Systematic Investment Plan)?
Also read: How to invest in mutual funds online?
Also read: ELSS (Equity Linked Saving Scheme)
If you liked this article, share it with your friends and colleagues through social media. Your opinion matters, please share your comments.
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