Categorization and Rationalization of Mutual Fund Schemes
Summary
This circular supersedes previous directions to establish a new framework for the categorization and rationalization of mutual fund schemes. It broadly classifies schemes into Equity, Debt, Hybrid, Life Cycle, and Other categories with specific investment mandates. The document details uniform descriptions and minimum investment requirements for various equity scheme types. Paragraph 2.6.3.8 outlines a three-year glide path for mutual funds to realign portfolio overlaps, reducing excess overlap by 35% in the first two years and the remaining 30% in the third year. Paragraph 2.6.3.9 mandates that mutual funds launch sectoral or thematic funds based on lists published by AMFI in consultation with SEBI. The document then defines sixteen specific categories of debt schemes, detailing their investment characteristics, Macaulay duration limits, and minimum asset allocation requirements. This section mandates specific operational and disclosure requirements for Liquid, Overnight, Medium Term, and Sectoral Debt Funds. It defines the structural characteristics and investment limits for various Hybrid, Life Cycle, and Other Scheme categories. Additionally, it outlines the discontinuation of
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Clause 2.6 of Chapter 2 of the Master Circular stands superseded as under: Categories of Schemes, Scheme Characteristics and Type of Scheme (Uniform Description of Schemes)
The Schemes are broadly classified as under: A. Equity Scheme; B. Debt Scheme; C. Hybrid Scheme; D. Life Cycle Funds; E. Other Schemes
‘Residual portion’ mentioned in the circular refers to the part of a scheme’s corpus not invested in its main, core asset classes as provided in the scheme characteristics
Minimum investment in equity & equity related instruments - 75% of total assets in the following manner: a) Large cap - 25%; b) Mid cap - 25%; c) Small cap - 25%
Minimum investment in equity & equity related instruments of large cap companies- 80% of total assets
Minimum investment in equity & equity related instruments of large cap companies- 35% of total assets; Minimum investment in equity & equity related instruments of mid cap stocks- 35% of total assets
Minimum investment in equity & equity related instruments of mid cap companies - 65% of total assets
Minimum investment in equity & equity related instruments of small cap companies- 65% of total assets
Minimum Investment in equity & equity related instruments – 65% of total assets
Scheme should predominantly invest in dividend yielding stocks. Minimum investment in equity & equity related instruments - 80% of total assets
Scheme should follow a value investment strategy. Minimum investment in equity & equity related instruments - 80% of total assets
Scheme should follow a contrarian investment strategy. Minimum investment in equity & equity related instruments - 80% of total assets
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Source: SecMarx — Categorization and Rationalization of Mutual Fund Schemes. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.