Major Categories of Mutual Funds prescribed by SEBI

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Major Categories of Mutual Funds prescribed by SEBI

To eliminate the confusion of investors and provide greater clarity to them, SEBI has taken a major step to re-categorize mutual fund schemes into five broader categories and 36 sub-categories. This step was needed as more than 2,000 mutual fund schemes are offered by 40 fund houses. Also, each scheme has regular and direct plans.

Equity Schemes - 10 Categories Equity Mutual Fund majorly invests in equity and equity-related instruments. In order to ensure uniformity in respect of the investment universe for equity schemes, the following are defined as large-, mid- and small-cap stocks in which the equity mutual fund schemes can invest depending upon the scheme mandate or category.

Some equity mutual funds align their investments in particular sectors, example, banking, FMCG, pharma, technology, infrastructure, automobile or entertainment, and so on. Such types of mutual funds are known as sectoral/ thematic funds.

Debt Schemes - 16 Categories Debt funds invest in money market securities and/ or debt market securities as their underlying investments. Money market securities include Commercial Papers (CPs), Certificates of Deposits (CDs), Treasury Bills (TBs), etc. Debt market securities include Government Securities (G-Secs), PSU bonds, Non-convertible Debentures (NCDs), etc. Debt funds can be further categorized into sub-categories depending on the nature of the investment and their respective maturity period.

Hybrid Schemes - 6 Categories Hybrid schemes are a combination of Equity and Debt. Equity Allocation decides the nature of hybrid schemes, i.e. Aggressive Hybrid Funds or debt-oriented hybrid funds also known as Conservative Hybrid Funds. Equity-oriented funds have at least 65% exposure to equities and balance-to-debt securities; whereas debt-oriented hybrid funds have at least 75% exposure to debt instruments.

Solutions-Oriented Schemes - 2 Categories There are two sub-categories of schemes, viz., 1) Retirement Fund 2) Children’s Fund. Schemes will be open-ended with a minimum lock-in period of 5 years or till the retirement age, whichever is earlier (in case of Retirement Funds) and/ or till the child attains the age of majority, whichever is earlier (in case of Children’s Fund).

Other Schemes - 2 Categories There are two sub-categories of schemes – 1) Index Funds/ ETFs, which invest 95% in securities of a particular index and 2) Fund of Funds (FoFs), which invest minimum 95% of total assets in underlying funds. There are two types of FoFs – Domestic and Overseas.

Category of Schemes Scheme Features
  • Large-cap Fund
  • Invest 80% of total assets in equity and its related securities of large-cap firms
  • Mid-cap Fund
  • Invest 65% of total assets in equity and its related securities of mid-cap firms
  • Small-cap Fund
  • Invest 65% of total assets in equity and its related securities of small-cap firms
  • Multi-cap Fund
  • Invest 65% of total assets in equity and its related securities
  • Large- & Mid-cap Fund
  • Invest 35% of total assets in equity and its related securities of large-cap firms and 35% of total assets in equity and its related securities of mid-cap firms
  • Flexi Cap Fund
  • Invests in equity and its related securities across all market capitalizations
  • Dividend Yield Fund
  • Invest majorly in dividend-yielding stocks and at least 65% of total assets in equity
  • Value Fund
  • Should follow a value investment strategy and invest 65% of total assets in equity and its related securities
  • Contra Fund
  • Should follow a contrarian investment strategy and invest 65% of total assets in equity and its related securities
  • Sectoral/Thematic Fund
  • Invest at least 80% of total assets in equity and its related securities of a particular theme or sector
  • Focused Fund
  • Invest 65% of total assets in equity and its related securities. Should focus on the number of stocks (a maximum of 30 stocks)
  • ELSS
  • Invest 80% of total assets in equity and its related securities
Category of Schemes Scheme Features
  • Balanced Hybrid Fund
  • Invest between 40% and 60% of total assets in equity and its related securities; should invest between 40% and 60% of total assets in debt securities. No arbitrage will be allowed
  • Aggressive Hybrid Fund
  • Invest between 65% and 80% of total assets in equity and its related securities; should invest between 20% and 35% of total assets in debt securities
  • Conservative Hybrid Fund
  • Invest between 10% and 25% of total assets in equity and its related securities; should invest between 75% and 90% of total assets in debt securities
  • Dynamic Asset Allocation or Balanced Advantage Fund
  • Invest in dynamically-managed equity or debt securities
  • Multi-Asset Allocation Fund
  • Invest in a minimum of three asset classes with a minimum allocation of 10% in each asset class
  • Equity Savings
  • Invest at least 65% of the total assets in equity and its related securities and at least 10% of total assets in debt securities
  • Arbitrage Fund
  • Should follow arbitrage strategy and invest at least 65% of total assets in equity and its related securities
Category of Schemes Scheme Features
  • Low-duration Fund
  • Invest in debt and money market securities so that the Macaulay duration of the portfolio is between 6 months and 12 months
  • Ultra-short Duration Fund
  • Invest in debt and money market securities so that the Macaulay duration of the portfolio is between 3 months and 6 months
  • Liquid Fund
  • Invest in debt and money market securities having a maturity of up to 91 days only
  • Overnight Fund
  • Invest in overnight securities with a maturity of 1 day
  • Short-duration Fund
  • Invest in debt and money market securities so that the Macaulay duration of the portfolio is between 1 year and 3 years
  • Medium Duration Fund
  • Invest in debt and money market securities so that the Macaulay duration of the portfolio is between 3 years and 4 years
  • Money Market Fund
  • Invest in money market securities with maturity of up to 1 year
  • Medium- to Long-duration Fund
  • Invest in debt and money market securities so that the Macaulay duration of the portfolio is between 4 years and 7 years
  • Long-duration Fund
  • Invest in debt and money market securities so that the Macaulay duration of the portfolio is more than 7 years
  • Corporate Bond Fund
  • Invest 80% of total assets in highest rated corporate bonds
  • Dynamic Bond Fund
  • Invest across duration
  • Banking & PSU Fund
  • Invest 80% of total assets in debt securities of banks, public sector undertakings, and public financial institutions
  • Credit Risk Fund
  • Invest 65% of total assets in the below highest-rated corporate bonds
  • Floater Fund
  • Invest 65% of total assets in floating rate instruments
  • Gilt Fund
  • Invest 80% of total assets in government securities
  • Gilt Fund with 10-year Constant Duration
  • Invest 80% of total assets in government securities so that the portfolio’s Macaulay duration is 10 years
Category of Schemes Scheme Features
  • Children’s Fund
  • Lock-in period for at least 5 years or till the child attains majority age, whichever is earlier
  • Retirement Fund
  • Lock-in period of at least 5 years or till retirement age, whichever is earlier
Category of Schemes Scheme Features
  • Index Funds/ETFs
  • Tracks returns of underlying market index
  • Fund of Funds (Overseas or Domestic)
  • Invest at least 95% of total assets in the underlying fund