Classification of Mutual Funds By the investment universe (Equity schemes)
- M Manohar Rao
- Jul 18
- 4 min read
Tags: Wealth Management, Investment Lesson, Mutual Funds, Mutual Fund Basics, Stock market, Budget, Finance, Investing, Personal Finance, Investment, ETFs, SIP, Multi cap
With a view to bring in standardization in the classification of mutual funds and to ensure the schemes are clearly distinct from one another, SEBI issued a circular on Categorization and Rationalization of Mutual Fund Schemes in 2017.
The objective was to bring uniformity in the characteristics of similar type of schemes launched by different mutual fund houses so that the investor can objectively evaluate the schemes chosen for investment. Accordingly, there are five broad categories of mutual fund schemes. Within each category, there are many sub-categories.
A. Equity Schemes (11 sub-categories)
B. Debt Schemes (16 sub-categories)
C. Hybrid Schemes (6 sub-categories)
D. Solution Oriented Schemes (2 sub-categories)
E. Other Schemes (2 sub-categories)
Equity schemes
1. Multi Cap Fund: An open-ended equity scheme investing across large cap, mid cap, small cap stocks. (See Box) As per SEBI, the Multi Cap Fund must have the minimum investment in equity and equity related instruments as 75 percent of total assets distributed in the following manner:
Minimum investment in equity & equity related instruments of large cap companies - 25% of total assets
Minimum investment in equity & equity related instruments of mid cap companies - 25% of total assets
Minimum investment in equity & equity related instruments of small cap companies - 25% of total assets
For this purpose, SEBI also defined the various market capitalization categories as under:
The same definition applies in case of other scheme categories, too, as applicable.
2. Large Cap Fund: An open-ended equity scheme predominantly investing in large cap stocks. The minimum investment in equity and equity related instruments of large cap companies shall be 80 percent of total assets.
3. Large and Mid-Cap Fund: An open-ended equity scheme investing in both large cap and mid cap stocks. The minimum investment in equity and equity related instruments of large cap companies shall be 35 percent of total assets. The minimum investment in equity and equity related instruments of mid cap stocks shall be 35 percent of total assets.
4. Mid Cap Fund: An open-ended equity scheme predominantly investing in mid cap stocks. The minimum investment in equity and equity related instruments of mid cap companies shall be 65 percent of total assets.
5. Small cap Fund: An open-ended equity scheme predominantly investing in small cap stocks. Minimum investment in equity and equity related instruments of small cap companies shall be 65 percent of total assets.
6. Dividend Yield Fund: An open-ended equity scheme predominantly investing in dividend yielding stocks. Scheme should predominantly invest in dividend yielding stocks. The minimum investment in equity shall be 65 percent of total assets.
7. Value Fund or Contra Fund: A value fund is an open-ended equity scheme following a value investment strategy. Minimum investment in equity & equity related instruments shall be 65 percent of total assets. A contra fund is an open-ended equity scheme following a contrarian investment strategy. Mutual Funds will be permitted to offer either Value fund or Contra fund.
8. Focused Fund: An open-ended equity scheme investing in maximum 30 stocks (the scheme needs to mention where it intends to focus, viz., multi cap, large cap, mid cap, small cap). Minimum investment in equity & equity related instruments shall be 65 percent of total assets.
9. Sectoral/Thematic: An open-ended equity scheme investing in a specific sector such as bank; power is a sectoral fund. While an open-ended equity scheme investing in line with an investment theme. For example, an infrastructure thematic fund might invest in shares of companies that are into infrastructure, construction, cement, steel, telecom, power etc. The minimum investment in equity and equity related instruments of a particular sector/ theme shall be 80 percent of total assets.
10. Equity Linked Savings Scheme: An open-ended equity linked saving scheme with a statutory lock-in of 3 years and tax benefit. The minimum investment in equity and equity related instruments shall be 80 percent of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by the Ministry of Finance).
11. Flexi-cap Fund: An open-ended equity scheme where the minimum investment in equity and equity related assets are 65% of the total assets. This would be a dynamic fund where there can be investment across large cap, mid cap as well as small cap stocks.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Join WhatsApp group for better and personalised communication regarding investment lessons, advice and help.
Note: Members of our WhatsApp group will enjoy lifetime free investment advice and will not be charged any consultation fee for mutual fund investments.
Support My Mission – Your Small Contribution Matters!
I am passionate about sharing financial knowledge and guiding people toward financial independence. Through my articles, I strive to provide valuable insights that can help you make smarter investment decisions and secure your future.
If my work has added value to your financial journey, I would truly appreciate your support. A small contribution from you—whatever amount you feel is right—will go a long way in motivating me to continue creating high-quality content.
💰 You can support me via:
✔ Paytm / Google Pay / Amazon Pay: 9000628943
✔ PayPal: manomatt@rediffmail.com
Every small payment is not just financial support—it’s an encouragement that fuels my passion for educating and empowering others. Thank you for being a part of this journey! 🙏
Here’s your chance to earn extra money effortlessly. Simply refer someone to invest in any mutual fund scheme, and as soon as they invest, you'll receive ₹50 - ₹100 instantly in your bank account via Paytm or PhonePay. Start referring and start earning today!
Comments