TYPES OF MUTUAL FUNDS PART III

Hey, this is “Mutual Fund” once again. In the last two articles, I had introduced my family members from the equity and debt categories. Now, finally, I will introduce you to my family members from the hybrid, solution-oriented and other categories. So, let’s get started.

SEBI (Securities and Exchange Board of India) has classified us into five main categories viz. equity, debt, hybrid, solutionoriented and other schemes. So, in this article, my family members in the categories of hybrid, solution-oriented and other schemes would introduce themselves.



HYBRID SCHEMES
My seven family members come under this category. So, now they will introduce themselves.

Conservative Hybrid Fund : Hi! I am conservative hybrid fund and I can hold investments from both the worlds, i.e. from the equities as well as debt. However, there are certain restrictions imposed on me by SEBI. According to the SEBI guidelines, I can invest between 10 per cent to 25 per cent of the total assets in equity and equity-related instruments and 75 per cent to 90 per cent of total assets in debt instruments.

Balanced Hybrid Fund : Hey! I'm balanced hybrid fund! I can have 40 per cent to 60 per cent of the total assets in equity and equity-related instruments and 40 per cent to 60 per cent of the total assets in debt instruments.

Aggressive Hybrid Fund : Hello! I am aggressive hybrid fund and I can have 65 per cent to 80 per cent of my assets invested in equity and equity-related instruments and 20 per cent to 35 per cent of the assets invested in debt instruments. AMCs (Asset Management Companies) have to choose between me and the balanced hybrid fund. They cannot have both of us.

Dynamic Asset Allocation or Balanced Advantage Fund : Hi! I am dynamic asset allocation fund. You can also call me balanced advantage fund. I have my total assets invested in equity and equity-related instruments as well as in debt instruments that is managed dynamically. This means that I am free to tweak investment proportions in equity and debt. I am not restricted to any proportions, as in the case of my other family members.

Multi-Asset Allocation Fund : Hey guys! I am multi-asset allocation fund and I am unique among my other family members as I invest in at least three asset classes, with a minimum allocation of 10 per cent each in all the three asset classes. However, my investment in foreign securities would not be treated as a separate asset class.

Arbitrage Fund : Hello everyone! I am arbitrage fund and I look out for arbitrage opportunities in the market. I have minimum 65 per cent of the total assets invested in equity and equity-related instruments. 

This is the sixth article of the knowledge series sponsored by Sundaram Asset Management Company, which will cover various topics important for your financial well-being.

Equity Savings Fund : Hi! I am equity savings fund and I have minimum of 65 per cent of the total assets invested in equity and equity-related instruments and minimum of 10 per cent of the total assets invested in debt instruments. It is mandatory for AMCs to state minimum hedged and unhedged portion in my SID (Scheme Information Document)

SOLUTION-ORIENTED SCHEMES

Only two family members come under this category. So, they will both introduce themselves now.

Retirement Fund : Hi all! Am retirement fund here. I am free to invest in any of the instruments, may it be debt or equity in whatever proportion I deem fit to invest. However, I come with a lock-in period of 5 years or till retirement age, whichever is earlier. I am specifically designed to cater to people having retirement goals.

Children’s Fund : I am children’s fund and, like retirement fund, I am also free to invest in any of the instruments, be it debt or equity in whatever proportion I consider fit to invest. However, I also come with a lock-in period of 5 years or till the child attains the age of majority, i.e. until he/she turns 18, whichever is earlier. I am specifically designed to cater to people who wish to save for their child’s education or marriage or just accumulate savings for child.

OTHER SCHEMES
Only two of my family members come under this category. So, they will both introduce themselves now.

Index Fund or ETFs : Hey everyone! I am index fund and this is my sibling ETF, also known as Exchange Traded Fund. We both have some similarities like we both manage passively as we track a particular benchmark index in its true sense. This means that we buy the exact same stocks that constitute the index and in the same proportion as in the index. However, we differ in the way we are structured. As per SEBI, we must have minimum 95 per cent of the total assets invested in securities of a particular index that is being tracked.

Fund of Funds (Overseas/Domestic) : Hi all! I am fund of funds and I am unique among all my other family members. This is because I trust my family members and I invest only in my family members. SEBI has mandated me to invest minimum 95 per cent of the total assets in the underlying fund. I am free to invest in domestic as well as overseas funds.

All my family members (equity, debt, hybrid, solution-oriented and other schemes) have introduced themselves. Hope now you would have understood who all are my family members, how they have been categorised by SEBI and what are their traits. I am sure this will help you in making the right investment decision and understand which family members suits you better. Remember, before choosing in which of my family members to invest, it would be wise to assess your risk profile. This is because investment in my family members do carry some amount of risk. It would be also interesting for you to know that we come in two variants, namely, regular plan and direct plan. The only difference between the regular plan and direct plan is the commission that is paid to the MFD (Mutual Fund Distributor) in the case of regular plan.