In accordance with the regulator, the solution-oriented class stands discontinued from the date of the round, and current schemes below this section will cease accepting recent subscriptions with rapid impact. These schemes can be merged with different schemes having comparable asset allocation and danger profiles, topic to prior approval from Sebi.
As of January 31, 2026 there are 15 schemes within the kids’s fund class and 29 schemes within the retirement fund class.
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In July 2025, when Sebi proposed to assessment the categorisation of mutual fund schemes to enhance readability, introduce new schemes and to deal with the problem of overlap in portfolios of schemes, the market regulator mentioned that within the case of resolution oriented funds, mutual funds ought to be allowed to supply various kinds of schemes within the resolution oriented class providing a distinct mixture of fairness and debt portion and the asset allocation acknowledged ought to be acceptable for the answer oriented class scheme.
Sebi in July 2025 additional mentioned that they need to even be allowed to speculate the residual portion of their resolution class schemes in REITs and InvITs aside from the Retirement Fund – Hybrid and Kids’s Fund – Hybrid, topic to regulatory limits for this asset class.
In accordance with the newest round on February 26, 2026, the market regulator has launched new classes resembling contra funds and sectoral debt funds, including goal-based life cycle funds and ordering asset managers to align current schemes inside six months and talked about limits to launch FoFs.
Fairness Funds
In accordance with the round, mutual funds might make investments residual parts in fairness, cash market devices, and different liquid devices, gold and silver devices as permitted by SEBI and in InvITs, topic to the ceilings specified by MF laws with respect to the respective asset class.
The residual portion talked about right here refers back to the a part of a scheme’s corpus not invested in its fundamental, core asset courses as supplied within the scheme traits.
Mutual funds shall be permitted to supply each Worth and Contra funds, topic to the situation that the scheme portfolio overlap between the 2 schemes shall not be greater than 50%. Additional, for any scheme providing within the sectoral/thematic fairness class, mutual funds shall make sure that not more than 50% of the schemes portfolios would overlap with different fairness schemes within the sectoral/thematic class and different fairness schemes classes aside from largecap schemes.
In an effort to realign the portfolio by way of the boundaries talked about for sectoral and thematic funds, mutual funds should realign 35% of the surplus overlap within the first 12 months, an extra 35% in 12 months two, and remaining 30% in 12 months three.
The overlap situation shall be computed on a quarterly foundation utilizing the every day portfolio overlap values i.e. the common of every day portfolio overlap values over 1 / 4, in accordance with the methodology given for calculating the overlap.
The prevailing sectoral/thematic schemes shall guarantee compliance with regard to portfolio overlap limits inside three years from the date of this round. Any schemes unable to fulfill the portfolio overlap standards after three years shall be mandatorily merged with different schemes as per relevant provisions.
Mutual Funds shall launch sectoral/thematic funds as per the listing of sectors/themes as revealed and up to date by AMFI in session with SEBI on half yearly foundation.
Debt Funds
With respect to the medium time period fund and medium to long run fund, the traits of the scheme shall stay the identical below regular circumstances. Nonetheless, the fund supervisor, within the curiosity of buyers, might scale back the portfolio length of the aforementioned schemes as much as one 12 months, in case he has a view on rate of interest actions in gentle of an anticipated hostile state of affairs
The round additional mentioned that each time the portfolio length is lowered under the desired flooring of three years and 4 years in respect of medium time period fund and medium to long run fund, the AMC shall be required to file the explanations for a similar with ample justification and preserve the identical for inspection.
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For this, the written justifications shall be positioned earlier than the Trustees within the subsequent Trustee assembly. Additional, the Trustees shall additionally assessment the portfolio and report the identical of their Half-Yearly Trustee Report back to SEBI.
The sectoral debt scheme shall be provided after making certain that there’s ample availability of investment-grade paper out there for the sectors wherein the sectoral debt fund is obtainable by the respective AMC.
Mutual funds might make investments the residual portion of debt class schemes in InvITs aside from in a single day fund, liquid fund, ultra-short length fund, low length fund and cash market fund, topic to the ceilings specified by MF laws.
Hybrid Funds
Within the hybrid class schemes, mutual funds might make investments residual parts in InvITs (aside from arbitrage funds), ETCDs, Gold ETFs and Silver ETFs, topic to the ceilings specified by MF laws w.r.t the respective asset class.
Life Cycle Funds
Life Cycle Fund can be an open-ended fund with attributes of predetermined maturity and glide path for goal-based investing. The scheme following glide path technique based mostly investing throughout varied asset courses i.e. Fairness, Debt, InvITs, ETCDs, Gold & Silver ETF.
Mutual funds might launch Life Cycle Funds with a minimal tenure of 5 years and a most tenure of 30 years. Such a fund could also be launched for tenures in a number of of 5 years and a most of 6 funds by a Mutual Fund will be energetic for subscription at any given time limit.
Moreover, as every fund reaches lower than 1 12 months to maturity, such fund could also be merged with the closest maturity Life Cycle Fund with the consent from the unitholders.
For years to maturity lower than 5 years, all Life Cycle Funds might take fairness arbitrage publicity upto 50% along with the funding vary specified for fairness whereas making certain that complete funding in fairness and equity-related devices stays inside 65%- 75% in such schemes.
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Additional, so as to inculcate monetary self-discipline, in life cycle funds, an exit load of three% could be chargeable on any exit by an investor inside one 12 months of funding; an exit load of two% inside the first two years of funding, and 1% within the first three years of funding.
The Life Cycle Funds shall comply with the benchmark framework as prescribed for Multi Asset Allocation Fund. Life Cycle Funds shall embrace the maturity date within the nomenclature of the scheme, for e.g. Life Cycle Fund 2055, Life Cycle Fund 2045, and many others.
Different schemes
For simple identification by buyers, so as to convey uniformity in names of schemes for a selected class throughout Mutual Funds and to make sure that schemes stay “true to label”, the scheme title shall be the identical because the scheme class. Phrases/ phrases that spotlight/ emphasize solely the return facet of the scheme shall not be used within the title of the scheme.
Such modifications shall not be thought of as a basic attribute change. Present schemes shall adjust to the provisions of this round inside 6 months from its date of issuance.
Mutual funds shall disclose category-wise portfolio overlap ranges i.e., fairness scheme vs different fairness schemes, debt scheme vs different debt schemes and hybrid vs different hybrid schemes. Such disclosure shall be revealed on the AMC web site for investor communication on a month-to-month foundation.
The AMC might launch schemes in every of the above talked about classes, resembling energetic possibility, passive possibility, and energetic and passive possibility. The round had numerous FoF schemes permitted to the mutual funds. If the variety of current FoF schemes of a Mutual fund below any specific class is greater than the variety of FoFs permitted below the actual sub-category of FoF, such FoFs can be grandfathered.
Nikunj Saraf, CEO at Selection Wealth mentioned SEBI’s new mutual fund classification guidelines are a significant step in the direction of simplifying an trade that had develop into more and more complicated for retail buyers. From an investor’s perspective, that is about readability and belief. Traders will now be capable of evaluate like-for-like merchandise as a substitute of navigating via a number of schemes with comparable names however totally different mandates.
For AMCs, it means sharper product definition and disciplined alignment with acknowledged targets. In the long term, this transfer strengthens investor confidence and promotes extra accountable portfolio development throughout the trade, Saraf additional mentioned.
(Disclaimer: Suggestions, recommendations, views and opinions given by the consultants are their very own. These don’t symbolize the views of The Financial Occasions)
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