In a bid to end duplication of schemes launched by mutual funds, market regulator SEBI has categorised schemes under five different heads to bring in uniformity. In a notification issued on Friday, SEBI has categorised mutual fund schemes under the broad heads of equity, debt, hybrid, solution-oriented and others.

The regulator said that different schemes launched by a mutual fund needed to be distinct in terms of asset allocation and investment strategy. Further, there is a need to bring in uniformity in the characteristics of similar schemes launched by different mutual funds to ensure that investors are able to evaluate their options before taking a decision.

In the case of solution-oriented schemes, there will be a lock-in period of at least five years or till the retirement age, whichever is earlier, it added.

However, SEBI said the lock-in period would not be applicable to any existing investment by an investor, registered SIPs (systematic investment plans) and incoming STPs (systematic transfer plans) in existing-solution oriented schemes.

SEBI has also restricted mutual funds to one scheme per category, except for index funds, ETFs (exchange traded funds) tracking different indices, a fund-of-funds with different underlying schemes, sectoral and thematic funds.

The regulator has directed mutual funds to analyse each of their existing schemes and submit a proposal in two months after fitting them into the newl categories.

Mutual funds have been given three months to ensure that they are fully compliant with the new norms.

Aashish Somaiyaa, Managing Director & CEO, Motilal Oswal AMC, said the regulatory direction enables investors to make optimal choices.

Being focused, Motilal Oswal AMC goes a long way in ensuring that investors can make simplified choices, their portfolios are reasonably focused and they have scope for better outcomes, he added.

Related Topics
comment COMMENT NOW