Categorization and Rationalization of Mutual Fund Schemes

 Categorization and Rationalization of Mutual Fund Schemes

From SEBI Report

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.

In order to bring the desired uniformity in the practice, across Mutual Funds and to standardize the scheme categories and characteristics of each category, the issue was discussed in Mutual Fund Advisory Committee (MFAC). Accordingly, it has been decided to categorize the MF schemes as given below:

Categories of Schemes, Scheme Characteristics and Type of Scheme (Uniform Description of Schemes):

 The Schemes would be broadly classified in the following groups:

a. Equity Schemes

b. Debt Schemes

c. Hybrid Schemes

d. Solution Oriented Schemes

e. Other Schemes

The details of the scheme categories under each of the aforesaid groups along with their characteristics and uniform description are given in the Annexure.

 As per the annexure, the existing ‘type of scheme’ (presently mentioned below the scheme name in the offer documents/ advertisements/ marketing material/etc) would be replaced with the type of scheme (given in the third column of the tables in the Annexure) as applicable to each category of scheme. This will enhance the existing disclosure. Hence, for the purpose of alignment of the existing schemes with

the provisions of this circular, change in “type of scheme” alone, would not be considered as a change in fundamental attribute.

In case of Solution oriented schemes, there will be specified period of lock in as stated in the Annexure.

However, the said lock- in period would not be applicable to any existing investment by an investor, registered SIPs and incoming STPs in the existing solution oriented schemes as on the date on which such scheme is getting realigned with the provisions of this circular.

The investment objective, investment strategy and benchmark of each scheme shall be suitably modified (wherever applicable) to bring it in line with the categories of schemes listed above.

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