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Learn About the Different Categories of Mutual Fund Schemes

Learn About the Different Categories of Mutual Fund Schemes



Mutual funds are one of the most straightforward and transparent investment avenues in these times. But with so many mutual fund schemes going around with different names, it becomes a big task for the lay investor to identify a suitable scheme. To bridge this gap, SEBI released a Circular in October 2017, which contained guidelines on categorisation and mutual fund schemes. In the Circular, SEBI has made 5 broad categories and sub-categories within each category. This article explains the different types of mutual fund schemes and the essential characteristics/conditions of each category.


Category # 1: Equity schemes:


S. No.

Category

Scheme characteristics/minimum conditions

1

Multi-Cap Fund

Invest across large-cap, mid-cap, small-cap stocks

Min. equity component – 65%

2

Large Cap Fund

Predominantly invest in large-cap stocks

Min. equity component – 80%

3

Large and Mid-Cap Fund

Invest in both large-cap and mid-cap stocks

Min. equity component (large-cap stocks) – 35%

Min. equity component (mid-cap stocks) – 35%

4

Mid Cap Fund

Predominantly invest in mid-cap stocks

Min. equity component (mid-cap stocks) – 65%

5

Small Cap Fund

Predominantly invest in small-cap stocks

Min. equity component (small-cap stocks) – 65%

6

Dividend Yield Fund

Predominantly invest in dividend-yielding stocks

Min. equity component – 65%

7

Value Fund

The scheme should follow a value investment strategy

Min. equity component – 65%

8

Contra Fund

The scheme should follow a contrarian investment strategy.


Min. equity component – 65%

9

Focussed Fund

Maximum 30 stocks

Min. equity component – 65%AMC to mention where the scheme intends to focus, viz.,

Multi-cap, large-cap, mid-cap, small-cap)

10

Sectoral/Thematic Fund

AMC to clearly mention the sector/theme that the scheme shall focus on


Min. equity component (for stocks belonging to that sector/theme) – 80%

11

Equity Linked Savings Schemes (ELSS)

The statutory lock-in period of 3 years


Min. equity component – 80% (per Equity Linked Saving Scheme, 2005, as notified by the Ministry of Finance)


Note: Mutual Funds will be permitted to offer either Value fund or Contra fund


Category # 2: Debt schemes:


S. No.

Category

Scheme characteristics/minimum conditions

1

Overnight Fund

Invest in overnight securities – Maturity of 1 day

2

Liquid Fund

Invest in debt and money market instruments – Maturity of up to 91 days

3

Ultra-short Duration Fund

Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 3 – 6 months

4

Low Duration Fund

Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 6 – 12 months

5

Money Market Fund

Invest in Money Market instruments – Maturity up to 1 year

6

Short Duration Fund

Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 1-3 years

7

Medium Duration Fund

Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 3 – 4 years

8

Medium to Long Duration Fund

Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 4-7 years

9

Long Duration Fund

Investin Debt & Money Market instruments – Macaulay duration of the portfolio to be more than 7 years

10

Dynamic Bond

Investment across duration

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