Financial Awareness Level
SEBI Mandated Mutual Fund Classifications
Securities and Exchange Board of India (SEBI), the mutual fund regulator in India, has introduced guidelines for classifying mutual funds into five broad categories. These categories are based on the risk and return of the investment and are designed to make mutual fund investments simpler, transparent and comparable.
SEBI’s five broad mutual fund categories are:
- Equity-oriented schemes
- Debt-oriented schemes
- Hybrid schemes
- Solution-oriented schemes
- Others
Each of these five categories has sub-categories (Table 1 below, SEBI Circular for reference here )
Table 1
| Equity-Oriented | Debt-Oriented | Hybrid | Solution-Oriented | Others | ||
|---|---|---|---|---|---|---|
| Multi cap Fund | Overnight Fund | Conservative Hybrid Fund | Retirement Fund | Index Funds / ETF | ||
| Flexi cap Fund | Liquid Fund | Balanced Hybrid Fund | Children’s Fund | FOFs: Domestic / Overseas | ||
| Large cap Fund | Ultra short duration Fund | Aggressive Hybrid Fund | ||||
| Mid cap Fund | Low duration Fund | Dynamic asset allocation or balanced advantage Fund | ||||
| Small cap Fund | Money market Fund | Multi-asset allocation Fund | ||||
| Large & mid cap Fund | Short duration Fund | Arbitrage Fund | ||||
| Dividend yield Fund | Medium duration Fund | Equity savings Fund | ||||
| Value / contra Fund | Medium to Long Duration Fund | |||||
| Focused Fund | Long duration Fund | |||||
| Sectoral / Thematic Fund | Dynamic Bond Fund | |||||
| ELSS Fund | Corporate bond Fund | |||||
| Credit risk Fund | ||||||
| Banking / PSU Fund | ||||||
| Gilt Fund | ||||||
| Gilt 10-year constant maturity Fund | ||||||
| Floater Fund | ||||||
Equity-oriented schemes are further categorized based on the market capitalization of the underlying securities into large-cap, mid-cap and small-cap shares.
- Debt-oriented schemes are categorized based on the maturity of the type of securities they invest in.
- Hybrid schemes are a combination of equity and debt / other investments.
- Solution-oriented schemes are designed for specific goal, such as retirement planning.
- The "Others" category includes passively managed index funds, ETFs and FoFs.
Note: Investors should refer to the SEBI Circular for detailed information on each category, including investment guidelines and risk-return characteristics.
Large-cap shares: 1st to 100th company as per market capitalization
Mid-cap shares: 101st to 250th company as per market capitalization
Small-cap shares: 251st onwards as per market capitalization
Equity-Oriented schemes (Table 2)
| Sr. No. |
Category of scheme | Characteristics | Type of Scheme |
|---|---|---|---|
| 1 | Multi Cap Fund | Minimum Investment in Equity & Equity-related Instruments: 75% of total assets in the following manner: a) Minimum investment in equity & equity related instruments of large cap companies - 25% of total assets; b) Minimum investment in equity & equity related instruments of mid cap companies - 25% of total assets; c) Minimum investment in equity & equity related instruments of small cap companies - 25% of total assets |
Multi Cap fund - An open-ended equity scheme investing across large cap, mid cap, small cap stocks |
| 1b | Flexi-Cap Funds | Minimum Investment in Equity & Equity-related Instruments: 65% of total assets | Flexi-Cap Funds - An open ended dynamic equity scheme investing across large cap, mid cap, small cap stocks |
| 2 | Large-Cap Fund | Minimum investment in equity & equity related instruments of large cap companies- 80% of total assets | Large Cap Fund - An open-ended equity scheme predominantly investing in large cap stocks |
| 3 | Large & Mid-Cap Fund | 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 | Large & Mid Cap Fund - An open-ended equity scheme investing in both large cap and midcap stocks |
| 4 | Mid-Cap Fund | Minimum investment in equity & equity related instruments of mid cap companies-65% of total assets | Mid Cap Fund - An open-ended equity scheme predominantly investing in mid cap stocks |
| 5 | Small-Cap Fund | Minimum Investment in Equity & Equity-related Instruments of small cap: 65% of total assets | Small Cap Fund - An open-ended equity scheme predominantly investing in small cap stocks |
| 6 | Dividend Yield Fund | Scheme should predominantly invest in dividend yielding stocks. Minimum investment in equity-65% of total assets | An open-ended equity scheme predominantly investing in dividend yielding stocks |
| 7a | Value Fund | Scheme should follow a value investment strategy. Minimum investment in equity & equity related instruments -65% of total assets | An open-ended equity scheme following a value investment strategy |
| 7b | Contra Fund | Scheme should follow a contrarian investment strategy. Minimum investment in equity & equity related instruments -65% of total assets | An open-ended equity scheme following contrarian investment strategy |
| 8 | Focused Fund | A scheme focused on the number of stocks (maximum 30) Minimum investment in equity & equity related instruments -65% of total assets | An open-ended equity scheme investing in maximum 30 stocks (Mutual Fund should mention where the scheme intends to focus, viz., multi cap, large cap, mid cap, small cap) |
| 9 | Sectoral / Thematic Fund | Minimum investment in equity & equity related instruments of a particular sector/ particular theme-80% of total assets | An open-ended equity scheme investing in sector (Mutual Fund should mention the sector)/ An open-ended equity scheme following theme (Mutual Fund should mention the theme) |
| 10 | ELSS Fund | Minimum investment in equity & equity related instruments -80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance) | An open-ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit |
Debt-Oriented schemes (Table 3)
| Sr. No. |
Category of scheme | Characteristics | Type of Scheme |
|---|---|---|---|
| 1 | Overnight Fund | Overnight securities with maturity of 1 day | An open-ended debt scheme investing in overnight securities |
| 2 | Liquid Fund | Investment in Debt and money market securities with maturity of up to 91 days only | An open-ended liquid scheme |
| 3 | Ultra-Short Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 months -6 months | An open-ended ultra-short-term debt scheme investing in instruments with Macaulay duration between 3 months and 6 months |
| 4 | Low Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolios between 6 months-12 months | An open-ended low duration debt scheme investing in instruments with Macaulay duration between 6 months and 12 months |
| 5 | Money Market Fund | Investment in Money Market instruments having maturity up to 1 year | An open- ended debt scheme investing in money market instruments |
| 6 | Short Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year –3 years | An open-ended short-term debt scheme investing in instruments such that Macaulay duration of the portfolio is between 1 year to 3 years |
| 7 | Medium Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 –4 years. Portfolio Macaulay duration under anticipated adverse situation is between 1–4 years | An open-ended medium-term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 years to 4 years |
| 8 | Medium to long duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 4 –7 years Portfolio Macaulay duration under anticipated adverse situation is 1 year to 7 years | An open-ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 4 years to 7 years |
| 9 | Long Duration Fund | Investment in Debt & Money Market Instruments such that the Macaulay duration of the portfolio is greater than 7 years | An open-ended debt scheme investing in instruments such that the Macaulay duration of the portfolio greater than 7 years |
| 10 | Dynamic Bond | Investment across duration | An open-ended dynamic debt scheme investing across duration |
| 11 | Corporate Bond Fund | Minimum investment in corporate bonds-80% of total assets (only in AA+ and above rated corporate bonds)) | An open-ended debt scheme predominantly investing in AA+ and above rated corporate bonds |
| 12 | Credit Risk Fund | Minimum investment in corporate bonds-65% of total assets (only in AA* and below rated corporate bonds) | An open-ended debt scheme predominantly investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds) |
| 13 | Banking & PSU Fund | Minimum investment in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds-80% of total assets | An open-ended debt scheme predominantly investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds |
| 14 | Gilt Fund | Minimum investment in Gsecs-80% of total assets (across maturity) | An open-ended debt scheme investing in government securities across maturity |
| 15 | Gilt Fund with 10-Year constant Maturity | Minimum investment in Gsecs-80% of total assets such that the Macaulay duration of the portfolio is equal to 10 years | An open-ended debt scheme investing in government securities having a constant maturity of 10 years |
| 16 | Floater Fund | Minimum investment in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/derivatives) -65% of total assets | An open-ended debt theme predominantly investing in floating rate instruments including fixed rate instruments converted to floating rate exposures using swaps/derivatives) |
Hybrid Schemes (Table 4)
| Sr. No. |
Category of scheme | Characteristics | Type of Scheme |
|---|---|---|---|
| 1 | Conservative Hybrid Fund | Investment in equity & equity related instruments-between 10% and 25% of total assets, Investment in Debt instruments-between 75% and 90% of total assets | An open-ended hybrid scheme investing predominantly in debt instruments |
| 2a | Balanced Hybrid Fund | Equity & Equity related instruments-between 40% and 60% of total assets; Debt instruments-between 40% and 60% of total assets. No Arbitrage would be permitted in this scheme | An open-ended balanced scheme investing in equity and debt instruments |
| 2b | Aggressive Hybrid Fund | Equity & Equity related instruments-between 65% and 80% of total assets; Debt instruments-between 20% 35% of total assets | An open-ended hybrid scheme investing predominantly in equity and equity related instruments |
| 3 | Dynamic Asset Allocator or Balanced Advantage Fund | Investment in equity/ debt that is managed dynamically | An open-ended dynamic asset allocation fund |
| 4 | Multi Asset Allocation Fund | Invests in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes | An open-ended scheme investing in assets of different classes |
| 5 | Arbitrage Fund | Scheme following arbitrage strategy. Minimum investment in equity & equity related instruments-65% of total assets | An open-ended scheme investing in arbitrage opportunities |
| 6 | Equity Savings Fund | Minimum investment in equity & equity related instruments 65% of total assets and minimum investment in debt-10% of total assets. Minimum hedged & unhedged to be stated in the SID. | An open-ended scheme investing in equity, arbitrage and debt |
Solution-Oriented Schemes (Table 5)
| Sr. No. |
Category of scheme | Characteristics | Type of Scheme |
|---|---|---|---|
| 1 | Retirement Fund | Scheme having a lock-in for at least 5 years or till retirement age whichever is earlier | An open-ended retirement solution oriented scheme 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 5 years or till the child attains age of majority whichever is earlier | An open-ended fund for investment for children having a lock-in for at least 5 years or till the child attains age of majority (whichever is earlier) |
Other Schemes (Table 6)
| Sr. No. |
Category of scheme | Characteristics | Type of Scheme |
|---|---|---|---|
| 1 | Index Funds / ETFs | Minimum investment in securities of a particular index (which is being replicated/ tracked)-95% of total assets | An open-ended scheme replicating/ tracking underlying index |
| 2 | Fund of Funds (Overseas / Domestic) | Minimum investment in the underlying fund-95% of total assets | An open-ended fund of fund scheme investing in underlying index |
The information contained in this document is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
FAQ Section
What are the 5 broad categories of mutual funds as mandated by SEBI?
The 5 broad categories of mutual funds as mandated by SEBI are: Equity-oriented schemes, Debt-oriented schemes, Hybrid schemes, Solution-oriented schemes, and Others.
How are equity-oriented schemes categorized?
Equity-oriented schemes are categorized based on the market capitalization of the underlying securities into large-cap, mid-cap and small-cap shares or investment strategy or the sector/theme they invest in.
What are debt-oriented schemes?
Debt-oriented schemes are categorized based on the maturity or type of securities they invest in, such as overnight funds, liquid funds, ultra short duration, low duration, money market, and others.
What are hybrid schemes in mutual funds?
Hybrid schemes are a combination of multiple asset classes like Equity, Debt, Gold/commodity, etc. Multi asset is a hybrid scheme which invests in 3 asset classes.
What are solution-oriented schemes in mutual funds?
Solution-oriented schemes are designed for specific purposes, such as retirement planning. They are a combination of equity and debt investments tailored towards meeting the specific investment objectives of the scheme.
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Disclaimer
An Investor Education And Awareness Initiative Visit https://www.hdfcfund.com/information/key-know-how to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints directly with the AMCs. if they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SCORES portal on https://scores.gov.in. SCORES portal facilitates investors to lodge complaint online with SEBI and subsequently view its status. In case the investor is not satisfied with the resolution of the complaints raised directly with the AMCs or through the SCORES portal, they may file any complaint on the Smart ODR on https://smartodr.in/login.
