In a move aimed at simplifying mutual fund investments for common investors and to ensure fund houses do not launch multiple funds in similar themes, Securities and Exchange Board of India on Oct 6 released new guidelines for mutual funds.
According to the latest circular, fund houses will have to classify their schemes broadly under five categories - equity, debt, hybrid, solution oriented and others.
To avoid duplication, only one scheme will be permitted per category, except in case of index funds or exchange traded funds (ETF), which track different indices; fund of funds, which have various underlying schemes and sectoral and thematic funds, which invest according to different themes.
"It is desirable that different schemes launched by a mutual fund are clearly distinct in terms of asset allocation and investment strategy. Further, there is a need to bring in uniformity in the characteristics of similar types of schemes launched by different mutual funds," the market regulator said.
This, SEBI says, will ensure that a mutual fund investor would be able to evaluate the different options available before taking an informed decision to invest in a scheme.
The fund houses will have to now analyse all their existing and schemes and submit their proposals to SEBI after getting approvals from their trustees. They will have to carry out the necessary changes in all respects within a maximum period of three months.
Fund houses will now have to merge some schemes, wind up a few or change fundamental attributes of a scheme, to meet the new SEBI guidelines.