Sebi's New Proposal for Mutual Fund Categorization

Markets regulator Sebi has floated a consultation paper proposing significant changes to the mutual fund scheme categorisation process. This includes the types of financial instruments each fund can invest in and the possibility of launching solution-oriented schemes.

Wider Investment Basket: If approved, schemes could invest part of their corpus in REITs and InvITs, and see changes in nomenclature to include fund tenures in names.

Solution-Oriented Funds on the Horizon

Sebi is considering allowing fund houses to offer solution-oriented life cycle fund of funds (FoFs) with specific goals like retirement, housing, and marriage, featuring lock-in periods.

For example, a Retirement Life Cycle FoF targeting maturity in 2055 would shift investments from equity to hybrid and then to debt funds over its 30-year tenure.

Public Feedback and Future Steps

Sebi is seeking public opinion on lock-in periods for these FoFs and plans to modify investment objectives and strategies to align with new categories. Fund houses meeting certain conditions may launch additional schemes in existing categories.