As of 1st June 2018, SEBI has de-cluttered mutual funds by laying down clear guidelines on their re-categorization. To know how it impacts you as an investor, here are the details.
SEBI has defined 5 clear groups to classify all the schemes. They are :
Equity Schemes –These will have 10 categories and will invest in equity and equity related instruments.
Debt Schemes –These will have 16 categories and will invest in debt instruments.
Hybrid Schemes – These will have 6 categories and will invest in a mix of equity, debt and other assets related instruments.
Solution Oriented Schemes – Thesewill have schemes like retirement schemes or children savings scheme and there will be a 5 year lock-in period for them.
Other Schemes –These will have index funds, sectoral funds, fund-of-funds and ETFs
And the best part is that a fund house is allowed to have only 1 type of scheme in each sub-category.
Only exceptions that are allowed are in case of:
Index Funds – can have as many schemes as there are indices.
Fund-of-Funds
Sectoral/Thematic funds– can have as many schemes as there are sectors.
EQUITY SCHEMES SUB CATEGORIES
Large Caps– to invest at least 80% in large caps
Large & Mid Caps– at least 35% each in large caps and mid caps
Mid Caps– at least 65% in mid caps
Small Caps– at least 65% in small caps
Multi Caps– at least 65% in equities & no market-cap wise restriction
Dividend Yield– at least 65% in equities but in dividend yielding stocks
Value/Contra– at least 65% in equities & a fund house can either offer a value fund or a contra fund but not both
Focused– at least 65% in equities and can only have a maximum of 30 stocks
Sectoral/Thematic– at least 80% in chosen sector stocks
ELSS (Equity Linked Savings Scheme)
Note :
Large Cap: 1st -100th company in terms of full market capitalization
Mid Cap: 101st -250th company in terms of full market capitalization
Small Cap: 251st company onwards in terms of full market capitalization
DEBT SCHEMES SUB CATEGORIES
Overnight Funds –holding portfolio with maturity of up to 1 day
Liquid Funds –holding portfolio with maturity of up to 91 days
Ultra-Short Duration –holding portfolio with maturity of 3-6 months
Low Duration –holding portfolio with maturity of 6-12 months
Money Market –holding portfolio of money market instruments with maturity of up to 1 year
Short Duration –holding portfolio with maturity of 1-3 years
Medium Duration –holding portfolio with maturity of 3-4 years
Medium to Long Duration –holding portfolio with maturity of 4-7 years
Long Duration –holding portfolio with maturity of more than 7 years
Dynamic Bond –can invest across durations
Corporate Bond –at least 80% in corporate bonds (AA+ & above)
Credit Risk Fund –at least 65% in corporate bonds below AA
Banking and PSU –at least 80% in instruments issued by banks, PSU undertakings, municipal corporations, etc.
Gilt –at least 80% in instruments issued by government across periods
Gilt with 10-year Constant Duration –at least 80% in instruments issued by government across periods such that the average maturity is 10 years
Floater –at least 65% in floating rate instruments
HYBRID SCHEMES SUB CATEGORIES
Conservative Hybrid Funds– 10 to 25% equity allocation
Balanced Hybrid Funds – 40 to 65% equity allocation
Aggressive Hybrid Funds– 65 to 80% equity allocation
Dynamic Asset Allocation – can vary without restrictions
Multi-Asset Funds – invest in at least 3 assets with a minimum of 10% in each
Arbitrage Funds – arbitrage strategy with a minimum 65% equity allocation
Equity Savings – a minimum of 65% in equity and 10% in debt
HOW DOES IT BENFIT YOU AS AN INVESTOR
Choosing between mutual funds is easier than ever as they are clearly categorised.
You can now choose from a much smaller number of schemes as they are de-cluttered.
Comparing schemes can be done in a better manner.
You need not worry about change in the mandate of the fund in the future since the categories and sub-categories are now clearly
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