Uniformity in Mutual Fund Schemes Definition as SEBI Categorizes 5 Mutual Funds
Last Updated : Oct. 9, 2017, 12:31 p.m.
In a bid to fair play for bringing uniformity across Mutual Fund schemes so as to breakthrough with all the MF clutter going on since past years have already instilled a lot of confusion among distributors and investors while investing in their mutual fund schemes. To kick-out such confusion and for ensuring transparency in the entire mutual fund industry, the market regulator i.e. Securities and Exchange Board of India(SEBI) has released a circular which brief up about the categories of MF schemes, their characteristics and uniform description for each category. It has also firmly placed five broad categories of mutual fund schemes . As per the circular issued by SEBI, the clear-cut definitions has been set for every scheme categories.
In order to bring forward the standardized practice across mutual funds, SEBI has widely categorized the mutual funds into the following groups:
- Equity Funds
- Debt Funds
- Hybrid Fund
- Solution Oriented
- Other Schemes
Let’s check out each of the above schemes and their respective portfolio allocation:
Equity Funds Category
| Equity funds | Portfolio Allocation |
|---|---|
| Multi cap fund | Exposure of atleast 65% across market capitalization |
| Large cap fund | Exposure of atleast 80% in large cap stocks |
| Large and mid cap fund | Exposure of alteast 35% in large cap and 35% in mid-cap |
| Mid cap fund | Exposure of 65% in mid-cap stocks |
| Small cap fund | Exposure of 65% in small-cap stocks |
| Dividend yield fund | Exposure of 65% in dividend yielding stocks |
| Value fund and contra fund | Exposure of 65% stocks in value theme or contra strategy respectively |
| Focussed fund | Exposure of 65% on focussed strategies |
| Sectoral/thematic fund | Exposure of 80% in a particular sector and thematic sector |
| ELSS | Exposure of 80% on equity instruments |
Debt Funds Category
| Debt funds | Portfolio Allocation |
|---|---|
| Overnight fund | Exposure in commercial papers with maturity of 1 day |
| Liquid Fund | Upto 91 days of maturity |
| Ultra short term fund | Between 3 months and 6 months of maturity |
| Low duration fund | Between 6 months and 12 months of maturity |
| Money market fund | Up to 1 years of maturity (mixed portfolio) |
| Short duration fund | Between 1 and 3 years of maturity |
| Medium to long duration fund | 4-7 years of maturity |
| Dynamic bond | Investment across tenure |
| Corporate bond fund | 80% in high rated securities |
| Credit risk fund | 65% assets in low rated securities |
| Banking and PSU fund | 80% in securities issued by banks, PSUs and PFIs |
| Gilt fund | upto 80% in G-secs across maturity |
| Gilt fund with 10 year constant duration | uto 80% in G secs with average maturity of 10 years |
| Floater fund | upto 65% in floating rate securities |
Hybrid Funds Category
| Debt funds | Portfolio Allocation |
|---|---|
| Overnight fund | Exposure in commercial papers with maturity of 1 day |
| Liquid Fund | Upto 91 days of maturity |
| Ultra short term fund | Between 3 months and 6 months of maturity |
| Low duration fund | Between 6 months and 12 months of maturity |
| Money market fund | Up to 1 years of maturity (mixed portfolio) |
| Short duration fund | Between 1 and 3 years of maturity |
| Medium to long duration fund | 4-7 years of maturity |
| Dynamic bond | Investment across tenure |
| Corporate bond fund | 80% in high rated securities |
| Credit risk fund | 65% assets in low rated securities |
| Banking and PSU fund | 80% in securities issued by banks, PSUs and PFIs |
| Gilt fund | upto 80% in G-secs across maturity |
| Gilt fund with 10 year constant duration | uto 80% in G secs with average maturity of 10 years |
| Floater fund | upto 65% in floating rate securities |
Solution Oriented Category
| Solution Oriented | Portfolio Allocation |
|---|---|
| Retirement fund | The scheme composition having atleast 5 years of lock-in period till retirement age whichever is earlier |
| Children fund | The scheme composition having atleast 5 years or until the child reaches 18 years of age whichever is earlier |
Other Schemes Category
| Other schemes | Portfolio Allocation |
|---|---|
| Index funds/ETFs | 95% in securities of a sepcific index |
| FOFs overseas/domestic | 95% in the underlying scheme |
Definition of Large Cap, Mid-Cap and Small Cap in India
SEBI has defined large cap, mid cap and small cap in the following ways:
- 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
In accordance with the circular released by SEBI, mutual funds would have to follow the list of stocks prepared by AMFI(Association of Mutual Funds in India) within this respect and AMFI would need to follow the below-mentioned points while preparing the list:
- If a stock is listed on more than one well-recognized stock exchange, the calculation shall be undertaken based on the average of full market capitalization of the stock on all such exchanges.
- If the listing of a stock happens to be only on one of the recognized stock exchanges, the consideration shall be taken on the basis of the full market capitalization of that stock on such an exchange.
- The uploading of the list shall be undertaken on the AMFI website and the same shall be updated every six months depending on the data as on the end of June and December of each year. The availability of data shall persist on the AMFI website within 5 calendar days from the end of the 6 months time period.
Relative to any updation in the list, the rebalancing of mutual fund portfolios(if required) should be in accordance with the updated list, within a time frame of one month.
To sum up, mutual funds have clearly been distinguished in terms of asset allocation, investment strategy etc. which conveniently going to be helpful for every investor for making well-informed decisions about investing in a particular scheme.