New Fund Classification by SEBI

The term “Mutual Funds” has so many variants. At times it becomes a hard task to understand and categorize these funds. So SEBI (Securities and Exchange Board), being the regulator for the Indian securities market, has created the Categorization and Rationalization of Mutual Funds through New Fund Classification. With the help of this initiative, now Mutual Funds are clearly distinct and maintain uniformity in their strategy, asset allocation etc.

• Equity Funds

SEBI has classified these funds based on market-cap segmentation or the investment strategy. They are meant for investors that have long term needs (minimum of 5 years) and want optimal returns. These funds range from both low risk to high risk funds and provide respective returns. Some of funds under Equity include: Multi-cap funds, Large-cap funds, Dividend Yield Funds, Value Funds, etc. Read more on “New Equity Fund Classification by SEBI.”

• Debt Funds

SEBI has classified these funds based on the investment strategy and duration of the funds. These funds include a wide range of securities that have varying maturity period from 1 day to 7 years and fixed interest rates. They primarily invest in treasury bills, corporate bonds, money market instruments and other government securities. Some funds under Debt include: Overnight Fund, /dynamic Bond, Gilt Fund, Floater Fund, etc. Read more on “New Debt Fund Classification by SEBI.” 

• Hybrid Funds

SEBI classifies these funds holding more than one asset class as Hybrid Funds. These funds are also called asset allocation funds and typically invest in a mix of stocks and bonds. These funds help you to avoid excessive risk and provide both income and capital appreciation. Some of the SEBI classified Hybrid funds include: Arbitrage Fund, Balanced, Conservative, and Aggressive Hybrid Funds, etc. Read more on “New Hybrid Fund Classification by SEBI.”

• Solution Oriented Schemes

SEBI has classified Solution Oriented Schemes for investors who want to invest for a specific goals such as retirement or children’s education, but have no or limited knowledge on mutual funds, investment portfolio and allocation. SEBI classifies Solution Oriented Schemes in two which are: Retirement Fund and Children’s Fund. Read more on “Solution Oriented Schemes – SEBI Classification.” 

• Other Schemes

Other Schemes classified by SEBI include Index Funds that invest in a particular Index and Fund of Funds that invest in underlying assets through diversified portfolio. Read more on “Other Schemes – SEBI Classification.”