Types of Mutual Funds

In the last few years, mutual fund companies were releasing various mutual fund scheme and there was a lot of confusion amongst retailers on the definition of the same and how are the classified. To avoid this, SEBI released a notification to classify mutual fund schemes into 5 broad categories:
  1. Equity Schemes
  2. Debt Schemes
  3. Hybrid Schemes
  4. Solution Oriented Schemes
  5. Other Schemes
An understanding of the classifications of the various categories of schemes will help sort clear the confusion to a certain extent.
All the listed Equity Stocks are divided into large cap, mid cap, and small cap equity stocks based on the ranking on the stock exchange as per their market capitalization. Accordingly, AMFI, in consultation with SEBI and Stock Exchanges, has prepared the list of stocks, based on the data provided by Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Metropolitan Stock Exchange of India (MSEI).
  • Large Cap Equity Stocks – 1st – the 100th company in terms of full market capitalization.
  • Mid Cap Equity Stocks are – 101st – the 250th company in terms of full market capitalization.
  • Small Cap Equity Stocks are – 251st company onwards in terms of full market capitalization

EQUITY MUTUAL FUNDS

Any fund which invests not less than 65% of its corpus in equities is known as an equity fund. 
  1. Large Cap Funds: An open-ended equity scheme which invests a minimum of 80% of its total assets in large-cap equity stocks.
  2. Large & Mid Cap Funds: An open-ended equity scheme which invests in both large-cap and mid-cap stocks with a minimum of 35 % of its total assets in large-cap equity stocks and a minimum of 35% of. its total assets in mid-cap stocks.
  3. Mid Cap Funds – An Open-ended equity scheme which invests a minimum of 65% of its total assets in mid-cap equity stocks.
  4. Small Cap Funds – An Open-ended equity scheme which invests a minimum of 65% of its total assets in small-cap equity stocks.
  5. Multi-Cap Funds: An Open-ended equity scheme which invests a minimum of 65% of its total assets in equity related instruments. These funds invest across large-cap, small-cap and mid-cap stocks.   
  6. Thematic Funds: These funds are also known as Sectoral Funds. An open-ended scheme which invests a minimum of 80% of its assets in equity stocks of a particular sector/theme. Such funds can be focused on Infrastructure, Power, Banking sector, Pharma companies, only Public Sector Undertakings(PSUs), etc. 
  7. ELSS – Equity linked savings scheme – An open-ended scheme with a statutory lock-in of 3 years for the purpose of tax deduction. It has a minimum investment in equity and equity related instruments of a minimum of 80%.
  8. Focussed Fund – An open-ended scheme focussed on the number of stocks (maximum 30) and has a minimum investment of 65% of its total assets in Equity and equity related instruments.
  9. Dividend Yield Funds – An open-ended scheme which predominately invests in dividend yielding stocks and has a minimum of 65% of its total assets invested in Equity.
  10. Value Funds – An open-ended scheme following a value investment strategy and invests a minimum of 65% in equity and equity related instruments.
  11. Contra Funds – An open-ended scheme should follow a contrarian investment strategy with a minimum of 65% in equity and equity related instruments.
  12. Index Funds: An index fund is a mutual fund or exchange-traded fund(ETF) that aims to replicate the returns of a specific index. The fund manager does not have a major role as he has to only replicate the composition of the index.

DEBT FUNDS

Debt Funds are funds that invest in debt securities like debentures, commercial paper(CP), certificate of deposit(CD), government securities, etc.
  1. Overnight Funds – Investment in overnight securities having a maturity of 1 day.
  2. Liquid Funds – Investment in debt and money market securities with a maturity of up to 91 days only.
  3. Ultrashort Duration Funds – Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 months – 6 months.
  4. Low Duration Funds – Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months- 12 months.
  5. Money Market Funds -Investment in Money Market instruments having maturity up to 1 year
  6.  Short Duration Funds – Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 years
  7. Medium Duration Funds – Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 years – 4 years
  8. Medium to Long-Duration Funds – Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 4 – 7 years
  9. Long Duration Funds – Investment in Debt & Money Market Instruments such that the Macaulay duration of the portfolio is greater than 7 years
  10. Dynamic bond – An open-ended dynamic debt scheme investing across the duration
  11. Corporate bond Funds – An open-ended debt scheme  with a minimum investment of 80% in the highest rated corporate bonds
  12. Credit Risk Funds – An open-ended debt scheme with a minimum investment of 65% in the highest rated corporate bonds.
  13. Banking and PSU Fund – An open-ended debt scheme with a minimum investment of 80% of total assets in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
  14. Gilt Fund – An open-ended debt scheme with a minimum investment of 80% of its total assets in government securities across the maturity
  15. Gild Fund with a 10-year constant period – An open-ended debt scheme with a minimum investment of 80% of its total assets in government securities having a constant maturity of 10 years
  16. Floater Fund – An open-ended debt scheme with a minimum investment of 65% of its total assets in floating rate instruments.

HYBRID FUNDS

Hybrid funds are funds that invest in a mix of debt and equity based on their investment mandate.

  1. Conservative Hybrid Funds – An open-ended scheme investing 10%-25% of its total assets in Equity and 75% -90% in debt instruments.
  2. Balanced Hybrid Funds – An open-ended balanced scheme investing up to 40%-60% of its total assets in both debt and equity. No arbitrage is permitted in this scheme.
  3. Aggressive Hybrid Funds – An open-ended hybrid scheme investing 65%-80% of total assets in Equity and Equity related instruments and 20%-35% in debt and debt related instruments.
  4. Dynamic Asset allocation or balanced advantage – Investment in equity/debt that is managed dynamically.
  5. Multi-Asset Allocation – An open-ended scheme which invests in at least three asset classes with a minimum of 10% in each of the three asset classes.
  6. Arbitrage Funds – An open-ended Scheme following arbitrage strategy. Minimum investment in equity and equity related instruments of 65 of total assets.
  7. Equity Savings – An open-ended scheme investing in equity, arbitrage and debt with a minimum investment of 65% of its total assets in equity or equity-related instruments and a minimum of 10% in debt instruments.

SOLUTION ORIENTED FUNDS

  1. Retirement Fund – 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 – An open-ended fund for investment for children having a lock-in for at least 5 years or till the child attains the age of majority (whichever is earlier)

OTHER SCHEMES

  1. Index Funds/ETFs -An open-ended scheme with a minimum investment of 95% of its total assets in securities of a particular index (which is being replicated/ tracked).
  2. FOFs (Overseas Funds) – An open-ended fund of fund scheme investing 95% of its total assets in the underlying funds.

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