In a bid to reduce the number of schemes in mutual funds, SEBI has come out with uniform definitions for fund categories. Simply put, the market regulator has defined various categories of mutual fund schemes to reduce confusion among investors and expedite scheme consolidation.
In a circular issued today, SEBI said, “It is desirable that different schemes launched by a mutual fund are clearly distinct in terms of asset allocation, investment strategy etc. Further, there is a need to bring in uniformity in the characteristics of similar type of schemes launched by different mutual funds. This would ensure that an investor of mutual funds is able to evaluate the different options available, before taking an informed decision to invest in a scheme.”
The market regulator has broadly divided mutual funds into five categories – equity funds, debt funds, hybrid funds and solution oriented funds and other funds.
To start with, equity funds will have 10 offerings – Multi cap fund (at least 65% exposure across market capitalization), large cap fund (having at least 80% exposure to large cap stocks), large and mid cap fund (at least 35% exposure to large cap and 35% to mid cap), mid cap fund (65% exposure to mid cap stocks), small cap fund (65% exposure to small cap stocks), dividend yield fund (65% exposure to dividend yielding stocks), value fund and contra fund (65% stocks in value theme or contra strategy, respectively), focussed fund (65% on focussed strategies), sectoral/thematic fund (80% exposure in a particular sector and thematic sector) and ELSS (80% on equity instruments).
Large cap stocks are the 1st to 100th companies in terms of full market capitalization. While mid cap stocks comprise 101st to 250th companies, small cap stocks consist of beyond 250th companies in terms of full market capitalization. AMFI will have to rank these stocks based on their market capitalization.
The market regulator has asked fund houses to give an exit option to investors without charging exit loads arising due to scheme consolidation.
The circular is applicable only to open ended funds.
SEBI has asked fund houses to adhere to these guidelines within two months in letter and spirit.
Here is the complete list of the categories
|
Equity funds |
Portfolio construction |
|
Multi cap fund |
At least 65% exposure across market capitalization |
|
Large cap fund |
Having at least 80% exposure to large cap stocks |
|
Large and mid cap fund |
At least 35% exposure to large cap and 35% to mid cap |
|
Mid cap fund |
65% exposure to mid cap stocks |
|
Small cap fund |
65% exposure to small cap stocks |
|
Dividend yield fund |
65% exposure to dividend yielding stocks |
|
Value fund and contra fund |
65% stocks in value theme or contra strategy, respectively |
|
Focussed fund |
65% on focussed strategies |
|
Sectoral/thematic fund |
80% exposure in a particular sector and thematic sector |
|
ELSS |
80% on equity instruments |
|
Debt funds |
Portfolio construction |
|
Overnight fund |
Having exposure to papers with maturity of 1 day |
|
Liquid fund |
Maturity of up 91 days |
|
Ultra short term fund |
Maturity between 3 and 6 months |
|
Low duration fund |
Between 6 and 12 months |
|
Money market fund |
Having maturity of up to 1 years (mixed portfolio) |
|
Short duration fund |
Between 1 and 3 years |
|
Medium to long duration fund |
4 - 7 years |
|
Dynamic bond |
Investment across duration |
|
Corporate bond fund |
80% in high rated instruments |
|
Credit risk fund |
65% assets in low rated instruments |
|
Banking and PSU fund |
80% in instruments issued by banks, PSUs and PFIs |
|
Gilt fund |
80% in G secs across maturity |
|
Gilt fund with 10 year constant duration |
80% in G secs with average maturity of 10 years |
|
Floater fund |
65% in floating rate instruments |
|
Hybrid fund |
Portfolio construction |
|
Conservative hybrid fund |
Equity - 10 to 25% and debt - 75% to 90% |
|
Balanced hybrid fund |
Equity - 40 to 60% and debt - 40% to 60% |
|
Aggressive fund |
Equity - 65 to 80% and debt - 20% to 35% |
|
Dynamic asset allocation |
Equity/debt - dynamic allocation |
|
Multi asset allocation |
At least three asset classes - minimum 10% in each |
|
Arbitrage fund |
65% in arbitrage opportunities |
|
Equity savings |
Equity-65% debt -10% and rest in hedged and unhedged instruments |
|
Solution oriented |
Portfolio construction |
|
Retirement fund |
Schemes having lock-in for at least 5 years or till retirement age whichever is earlier |
|
Children fund |
Schemes having lock-in for at least 5 years or till the child attains 18 whichever is earlier |
|
Other schemes |
Portfolio construction |
|
Index funds/ETFs |
95% in securities of a particular index |
|
FOFs overseas/domestic |
95% in the underlying fund |
