Securities and Exchange Board of India
CIRCULAR
SEBI/HO/IMD/DF3/CIR/P/2017/114 October 6, 2017
All Mutual Funds/Asset Management Companies (AMCs)/ Trustee Companies/Boards of Trustees of Mutual Funds/ AMFI
Sir/ Madam,
Subject: Categorization and Rationalization of Mutual Fund Schemes
- 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.
#Definition of Large Cap, Mid Cap and Small Cap:
- In order to ensure uniformity in respect of the investment universe for equity schemes, it has been decided to define large cap, mid cap and small cap as follows:
- 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
- Mutual Funds would be required to adopt the list of stocks prepared by AMFI in this regard and AMFI would adhere to the following points while preparing the list:
a. If a stock is listed on more than one recognized stock exchange, an average of full market capitalization of the stock on all such stock exchanges, will be computed;
b.In case a stock is listed on only one of the recognized stock exchanges, the full market capitalization of that stock on such an exchange will be considered.
c. This list would be uploaded on the AMFI website and the same would be updated every six months based on the data as on the end of June and December of each year. The data shall be available on the AMFI website within 5 calendar days from the end of the 6 months period.
- Subsequent to any updation in the list, Mutual Funds would have to rebalance their portfolios (if required) in line with updated list, within a period of one month.
- Process to be followed for categorization and rationalization of schemes:
a.Only one scheme per category would be permitted, except:
.Index Funds/ ETFs replicating/ tracking different indices;
.Fund of Funds having different underlying schemes; and
.Sectoral/ thematic funds investing in different sectors/ themes
b. Mutual Funds would be required to analyze each of their existing schemes in light of the list of categories stated herein and submit their proposals to SEBI after obtaining due approvals from their Trustees as early as possible but not later than 2 months from the date of this circular.
c.The aforesaid proposals of the Mutual Funds would also include the proposed course of action (viz., winding up, merger, fundamental attribute change etc.) in respect of the existing similar schemes as well as those that are not in alignment to the categories stated herein.
d.Subsequent to the observations issued by SEBI on the proposals, Mutual Funds would have to carry out the necessary changes in all respects within a maximum period of 3 months from the date of such observation.
e. Where there is a merger of schemes/change of fundamental attribute(s) of a scheme (as laid down under SEBI Circular No. IIMARP/MF/CIR/01/294/98 dated February 4, 1998), the AMCs would be required to comply with Regulation 18 (15A) of SEBI (Mutual Funds Regulation, 1996).
f. Mutual Funds are advised to strictly adhere to the scheme characteristics stated herein as well as to the spirit of this circular. Mutual Funds must ensure that the schemes so devised should not result in duplication/minor modifications of other schemes offered by them. The decision of SEBI in this regard shall be binding on all the mutual funds.
#Applicability of this circular:
a. All existing open ended schemes of all Mutual Funds
b.All such open ended schemes where SEBI has issued final observations but have not yet been launched.
c.All open ended schemes in respect of which draft scheme documents have been filed with SEBI as on date
d.All open ended schemes for which a mutual fund would file draft scheme document.
This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provision of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Yours faithfully,
RAJESH GUJJAR
Deputy General Manager
Tel no.: 022-26449232
Email:
Annexure:
- Equity Schemes:
Sr. |
Category |
of |
Scheme Characteristics |
Type |
of |
scheme |
(uniform |
|||
No. |
Schemes |
|
|
description of scheme) |
|
|||||
|
|
|
|
|||||||
1 |
Multi Cap Fund |
Minimum investment in equity & |
Multi Cap Fund- An open |
|||||||
|
|
|
equity related instruments- 65% of |
ended equity scheme investing |
||||||
|
|
|
total assets |
across large cap, mid cap, |
||||||
|
|
|
|
small cap stocks |
|
|
|
|||
|
|
|
|
|||||||
2 |
Large Cap Fund |
Minimum investment in equity & |
Large Cap Fund- An open |
|||||||
|
|
|
equity related instruments of large |
ended |
|
equity |
|
scheme |
||
|
|
|
cap companies- 80% of total assets |
predominantly |
investing |
in |
||||
|
|
|
|
large cap stocks |
|
|
|
|||
|
|
|
|
|||||||
3 |
Large & Mid Cap |
Minimum investment in equity & |
Large & Mid Cap Fund- An |
|||||||
|
Fund |
|
equity related instruments of large |
open |
ended equity |
scheme |
||||
|
|
|
cap companies- 35% of total assets |
investing in both large cap and |
||||||
|
|
|
Minimum investment in equity & |
mid cap stocks |
|
|
|
|
||
|
|
|
equity related instruments of mid |
|
|
|
|
|
|
|
|
|
|
cap stocks- 35% of total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||||
4 |
Mid Cap Fund |
Minimum investment in equity & |
Mid Cap Fund- An open ended |
|||||||
|
|
|
equity related instruments of mid |
equity |
scheme |
predominantly |
||||
|
|
|
cap companies- 65% of total assets |
investing in mid cap stocks |
|
|||||
|
|
|
|
|||||||
5 |
Small cap Fund |
Minimum investment in equity & |
Small Cap Fund- An open |
|||||||
|
|
|
equity related instruments of small |
ended |
|
equity |
|
scheme |
||
|
|
|
cap companies- 65% of total assets |
predominantly |
investing |
in |
||||
|
|
|
|
small cap stocks |
|
|
|
|||
|
|
|
|
|
||||||
6 |
Dividend |
Yield |
Scheme should predominantly |
An open ended equity scheme |
||||||
|
Fund |
|
invest in dividend yielding stocks. |
predominantly |
investing |
in |
||||
|
|
|
|
dividend yielding stocks |
|
|||||
|
|
|
Minimum investment in equity- 65% |
|
|
|
|
|
|
|
|
|
|
of total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||||
7 |
Value Fund* |
Scheme should follow a value |
An open ended equity scheme |
|||||||
|
|
|
investment strategy. |
following |
a value |
investment |
||||
|
|
|
Minimum investment in equity & |
strategy |
|
|
|
|
|
|
|
|
|
equity related instruments - 65% of |
|
|
|
|
|
|
|
|
|
|
total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Contra Fund* |
Scheme should follow a contrarian |
An open ended equity scheme |
|||||||
|
|
|
investment strategy. |
following contrarian investment |
||||||
|
|
|
Minimum investment in equity & |
strategy |
|
|
|
|
|
|
|
|
|
equity related instruments - 65% of |
|
|
|
|
|
|
|
|
|
|
total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||||
8 |
Focused Fund |
A scheme focused on the number of |
An open ended equity scheme |
|||||||
|
|
|
stocks (maximum 30) |
investing |
in |
maximum |
30 |
|||
|
|
|
Minimum investment in equity & |
stocks |
(mention |
where |
the |
|||
|
|
|
equity related instruments - 65% of |
scheme intends to focus, viz., |
||||||
|
|
|
total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities and Exchange Board of India
|
|
|
multi cap, large cap, mid cap, |
|
|
|
small cap) |
|
|
|
|
9 |
Sectoral/ |
Minimum investment in equity & |
An open ended equity scheme |
|
Thematic |
equity related instruments of a |
investing in __ sector (mention |
|
|
particular sector/ particular theme- |
the sector)/ |
|
|
80% of total assets |
An open ended equity scheme |
|
|
|
following __ theme (mention |
|
|
|
the theme) |
|
|
|
|
10 |
ELSS |
Minimum investment in equity & |
An open ended equity linked |
|
|
equity related instruments - 80% of |
saving scheme with a statutory |
|
|
total assets (in accordance with |
lock in of 3 years and tax |
|
|
Equity Linked Saving Scheme, 2005 |
benefit |
|
|
notified by Ministry of Finance) |
|
|
|
|
|
- Mutual Funds will be permitted to offer either Value fund or Contra fund.
- Debt Schemes
Sr. |
Category |
of |
Scheme Characteristics |
|
Type |
of |
scheme |
(uniform |
|||||
No. |
Schemes |
|
|
|
|
description of scheme) |
|
||||||
|
|
|
|
|
|||||||||
1 |
Overnight Fund** |
Investment |
in overnight securities |
An open ended debt scheme |
|||||||||
|
|
|
|
having maturity of 1 day |
|
investing in overnight securities |
|||||||
|
|
|
|
|
|
||||||||
2 |
Liquid Fund $ ** |
Investment |
in Debt and |
money |
An open ended liquid scheme |
||||||||
|
|
|
|
market securities with maturity of |
|
|
|
|
|
|
|
||
|
|
|
|
upto 91 days only |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
3 |
Ultra |
|
Short |
Investment in Debt & Money Market |
An open ended ultra-short term |
||||||||
|
Duration Fund |
instruments such that the Macaulay |
debt |
scheme |
investing |
in |
|||||||
|
|
|
|
duration of the portfolio is between |
instruments |
with |
Macaulay |
||||||
|
|
|
|
3 months - 6 months |
|
duration between 3 months and |
|||||||
|
|
|
|
|
|
|
6 months (please refer to page |
||||||
|
|
|
|
|
|
|
no.__)# |
|
|
|
|
|
|
4 |
Low |
Duration |
Investment in Debt & Money Market |
An open ended low duration |
|||||||||
|
Fund |
|
|
instruments such that the Macaulay |
debt |
scheme |
investing |
in |
|||||
|
|
|
|
duration of the portfolio is between |
instruments |
with |
Macaulay |
||||||
|
|
|
|
6 months- 12 months |
|
duration between 6 months and |
|||||||
|
|
|
|
|
|
|
12 months (please refer to |
||||||
|
|
|
|
|
|
|
page no.__)# |
|
|
|
|
||
5 |
Money |
|
Market |
Investment |
in Money |
Market |
An open ended debt scheme |
||||||
|
Fund |
|
|
instruments having maturity upto 1 |
investing |
in |
|
money market |
|||||
|
|
|
|
year |
|
|
instruments |
|
|
|
|
||
|
|
|
|
|
|||||||||
6 |
Short |
Duration |
Investment in Debt & Money Market |
An open ended short term debt |
|||||||||
|
Fund |
|
|
instruments such that the Macaulay |
scheme |
|
investing |
in |
|||||
|
|
|
|
duration of the portfolio is between |
instruments |
with |
Macaulay |
||||||
|
|
|
|
1 year – 3 years |
|
duration between 1 year and 3 |
|||||||
|
|
|
|
|
|
|
years (please refer to page |
||||||
|
|
|
|
|
|
|
no.__)# |
|
|
|
|
|
|
7 |
Medium Duration |
Investment in Debt & Money Market |
An open ended medium term |
||||||||||
|
Fund |
|
|
instruments such that the Macaulay |
debt |
scheme |
investing |
in |
|||||
|
|
|
|
|
|
|
instruments |
with |
Macaulay |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities and Exchange Board of India
|
|
|
duration of the portfolio is between |
duration between 3 years and 4 |
|||||||||
|
|
|
3 years – 4 years |
|
years (please refer to page |
||||||||
|
|
|
|
|
|
no.__)# |
|
|
|
|
|
|
|
8 |
Medium to Long |
Investment in Debt & Money Market |
An open ended medium term |
||||||||||
|
Duration Fund |
instruments such that the Macaulay |
debt |
scheme |
investing |
in |
|||||||
|
|
|
duration of the portfolio is between |
instruments |
with |
Macaulay |
|||||||
|
|
|
4 – 7 years |
|
duration between 4 years and 7 |
||||||||
|
|
|
|
|
|
years (please refer to page |
|||||||
|
|
|
|
|
|
no.__)# |
|
|
|
|
|
|
|
9 |
Long |
Duration |
Investment in Debt & Money Market |
An open ended |
debt scheme |
||||||||
|
Fund |
|
Instruments such that the Macaulay |
investing |
in |
instruments |
with |
||||||
|
|
|
duration of the portfolio is greater |
Macaulay duration greater than |
|||||||||
|
|
|
than 7 years |
|
7 years (please refer to page |
||||||||
|
|
|
|
|
|
no.__)# |
|
|
|
|
|
|
|
10 |
Dynamic Bond |
Investment across duration |
An open ended dynamic debt |
||||||||||
|
|
|
|
|
|
scheme |
investing |
|
across |
||||
|
|
|
|
|
|
duration |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
11 |
Corporate Bond |
Minimum |
investment in |
corporate |
An open ended debt scheme |
||||||||
|
Fund |
|
bonds- 80% of total assets (only in |
predominantly |
investing |
in |
|||||||
|
|
|
highest rated instruments) |
|
highest rated corporate bonds |
||||||||
|
|
|
|
|
|
|
|||||||
12 |
Credit |
Risk |
Minimum |
investment in |
corporate |
An open ended debt scheme |
|||||||
|
Fund^ |
|
bonds- 65% of total assets |
investing in below highest rated |
|||||||||
|
|
|
(investment in below highest rated |
corporate bonds |
|
|
|
|
|||||
|
|
|
instruments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
13 |
Banking |
and |
Minimum |
investment |
in Debt |
An open ended debt scheme |
|||||||
|
PSU Fund |
instruments of banks, Public Sector |
predominantly investing in Debt |
||||||||||
|
|
|
Undertakings, Public |
Financial |
instruments |
of |
banks, |
Public |
|||||
|
|
|
Institutions- 80% of total assets |
Sector |
Undertakings, |
Public |
|||||||
|
|
|
|
|
|
Financial Institutions |
|
|
|
||||
|
|
|
|
||||||||||
14 |
Gilt Fund |
Minimum investment in Gsecs- 80% |
An open ended debt scheme |
||||||||||
|
|
|
of total assets (across maturity) |
investing |
|
in |
government |
||||||
|
|
|
|
|
|
securities across maturity |
|
||||||
|
|
|
|
||||||||||
15 |
Gilt Fund with 10 |
Minimum investment in Gsecs- 80% |
An open ended debt scheme |
||||||||||
|
year |
constant |
of total assets such that the |
investing |
|
in |
government |
||||||
|
duration |
|
Macaulay duration of the portfolio is |
securities |
having a |
constant |
|||||||
|
|
|
equal to 10 years |
|
maturity of 10 years |
|
|
|
|||||
|
|
|
|
||||||||||
16 |
Floater Fund |
Minimum investment in floating rate |
An open ended debt scheme |
||||||||||
|
|
|
instruments- 65% of total assets |
predominantly |
investing |
in |
|||||||
|
|
|
|
|
|
floating rate instruments |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**Provisions of SEBI Circular No SEBI/IMD/DF/19/2010 dated November 26, 2010 shall be followed for Uniform cut-off timings for applicability of Net Asset Value in respect of Liquid Fund and Overnight Fund.
$ All provisions mentioned in SEBI circular SEBI/IMD/CIR No.13/150975/09 dated January 19, 2009 in respect of liquid schemes shall be applicable
Securities and Exchange Board of India
- Please refer to the page number of the Offer Document on which the concept of Macaulay’s Duration has been explained
- Words/ phrases that highlight/ emphasize only the return aspect of the scheme shall not be used in the name of the scheme (for instance Credit Opportunities Fund, High Yield Fund, Credit Advantage etc.)
- Hybrid Schemes
Sr. |
Category of |
Scheme Characteristics |
|
Type |
of |
scheme |
(uniform |
|||||
No. |
Schemes |
|
|
|
|
|
description of scheme) |
|||||
|
|
|
|
|||||||||
1 |
Conservative |
Investment in equity & equity related |
An open ended hybrid scheme |
|||||||||
|
Hybrid Fund |
instruments- between 10% and 25% |
investing predominantly in debt |
|||||||||
|
|
|
of total assets; |
|
|
instruments |
|
|
||||
|
|
|
Investment in Debt instruments- |
|
|
|
|
|
||||
|
|
|
between 75% and 90% of total |
|
|
|
|
|
||||
|
|
|
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2 |
Balanced Hybrid |
Equity & Equity related instruments- |
An |
open |
|
ended |
balanced |
|||||
|
Fund @ |
|
between 40% and 60% of total |
scheme investing in equity and |
||||||||
|
|
|
assets; |
|
|
|
|
debt instruments |
|
|||
|
|
|
Debt instruments- between 40% |
|
|
|
|
|
||||
|
|
|
and 60% of total assets |
|
|
|
|
|
|
|||
|
|
|
No Arbitrage would be permitted in |
|
|
|
|
|
||||
|
|
|
this scheme |
|
|
|
|
|
|
|
||
|
|
|
|
|
||||||||
|
Aggressive |
|
Equity & Equity related instruments- |
An open ended hybrid scheme |
||||||||
|
Hybrid Fund @ |
between 65% and 80% of total |
investing |
predominantly in |
||||||||
|
|
|
assets; |
|
|
|
|
equity and |
equity |
related |
||
|
|
|
Debt instruments- between 20% |
instruments |
|
|
||||||
|
|
|
35% of total assets |
|
|
|
|
|
|
|||
|
|
|
|
|
||||||||
3 |
Dynamic |
Asset |
Investment in equity/ debt that is |
An open ended dynamic asset |
||||||||
|
Allocation or |
managed dynamically |
|
allocation fund |
|
|||||||
|
Balanced |
|
|
|
|
|
|
|
|
|
|
|
|
Advantage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
4 |
Multi |
Asset |
Invests in at least three asset |
An |
open |
ended |
scheme |
|||||
|
Allocation ## |
classes with a minimum allocation |
investing in __, __, __ (mention |
|||||||||
|
|
|
of at least 10% each in all three |
the |
three |
different asset |
||||||
|
|
|
asset classes |
|
|
classes) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
||||
5 |
Arbitrage Fund |
Scheme |
following |
arbitrage |
An |
open |
ended |
scheme |
||||
|
|
|
strategy. |
Minimum investment in |
investing |
|
in |
arbitrage |
||||
|
|
|
equity & equity related instruments- |
opportunities |
|
|
||||||
|
|
|
65% of total assets |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
||||||
6 |
Equity Savings |
Minimum investment in equity & |
An |
open |
ended |
scheme |
||||||
|
|
|
equity related instruments- 65% of |
investing |
in |
equity, |
arbitrage |
|||||
|
|
|
total |
assets |
and |
minimum |
and debt |
|
|
|
||
|
|
|
investment in debt- 10% of total |
|
|
|
|
|
||||
|
|
|
assets |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum hedged & unhedged to be |
|
|
|
|
|
||||
|
|
|
stated in the SID. |
|
|
|
|
|
|
|
Securities and Exchange Board of India
Asset Allocation under defensive
considerations may also be stated
in the Offer Document
- Mutual Funds will be permitted to offer either an Aggressive Hybrid fund or Balanced fund
## Foreign securities will not be treated as a separate asset class
- Solution Oriented Schemes:
|
Sr. |
Category |
of |
Scheme Characteristics |
Type |
of |
scheme |
(uniform |
|
No |
Schemes |
|
|
description of scheme) |
|||
|
|
|
|
|
|
|
||
|
1 |
Retirement Fund |
Scheme having a lock-in for at least |
An open |
ended |
retirement |
||
|
|
|
|
5 years or till retirement age |
solution |
oriented |
scheme |
|
|
|
|
|
whichever is earlier |
having a lock-in of 5 years or till |
|||
|
|
|
|
|
retirement |
age (whichever is |
||
|
|
|
|
|
earlier) |
|
|
|
|
|
|
|
|
||||
|
2 |
Children’s Fund |
Scheme having a lock-in for at least |
An open ended fund for |
||||
|
|
|
|
5 years or till the child attains age of |
investment for children having |
|||
|
|
|
|
majority whichever is earlier |
a lock-in for at least 5 years or |
|||
|
|
|
|
|
till the child attains age of |
|||
|
|
|
|
|
majority (whichever is earlier) |
|||
|
|
|
|
|
|
|
|
|
|
|
A. Other Schemes: |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Sr. |
Category |
of |
Scheme Characteristics |
Type |
of |
scheme |
(uniform |
|
No |
Schemes |
|
|
description of scheme) |
|||
|
|
|
|
|
|
|
|
|
|
1 |
Index |
Funds/ |
Minimum investment in securities of |
An |
open |
ended |
scheme |
|
|
ETFs |
|
a particular index (which is being |
replicating/ tracking _ index |
|||
|
|
|
|
replicated/ tracked)- 95% of total |
|
|
|
|
|
|
|
|
assets |
|
|
|
|
|
|
|
|
|
||||
|
2 |
FoFs (Overseas/ |
Minimum investment in the |
An open ended fund of fund |
||||
|
|
Domestic) |
underlying fund- 95% of total assets |
scheme investing in ___ fund |
||||
|
|
|
|
|
(mention the underlying fund) |