All you need to know about 16 new debt mutual fund

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All you need to know about 16 new debt mutual fund

The Securities and Exchange Board of India has directed mutual fund houses to recategorise
all their schemes in the new and distinct categories specified by the board. In
the debt space there are 16 new categories under which the fund houses will be aligning
their existing and new schemes. This move by the regulator is intended to bring uniformity
in the practice of categorizing schemes across mutual funds.

Several mutual fund houses have started changing the attributes of their schemes, while
others are merging schemes to comply by the new regulations. Sebi released its order to
standardize the scheme categories and characteristics of each category in October, 2017.
Here are the new debt categories and what kind of assets they will invest:

Overnight funds: These open-ended debt schemes will invest in overnight securities.
Investment in overnight securities with a maturity of one day.

Liquid funds: These schemes will invest in debt and money market securities with a maturity of up to 91 days.

Ultra short duration funds: These open ended ultra-short term debt schemes will invest in instruments with a maturity between three months and six months.

Low duration fund: These open-ended debt schemes will invest in instruments with a duration between six months and 12 months.

Money market funds: These open-ended debt schemes will invest in money market instruments with a maturity of up to one year.

Short duration funds: These open-ended debt schemes will invest in instruments with a duration between one year and three years.

Medium duration funds: These open ended debt schemes will invest in instruments with a duration between three years and four years.

Medium to long duration funds: These open-ended debt schemes will invest in instruments with a duration between four years and seven years.

Long duration funds: These open-ended debt schemes will invest in instruments with a duration of greater than seven years.

Dynamic bonds: These open-ended debt schemes will invest across durations.

Corporate bond funds: These open-ended debt schemes will predominantly invest in highest-rated corporate bonds. These schemes should invest at least 80 per cent of total assets in corporate bonds, only in highest-rated instruments.

Credit risk funds: These open-ended debt schemes will invest in below highest-rated corporate bonds. They should invest at least 65 per cent of the total assets in corporate bonds.

Banking and PSU funds: These open-ended debt schemes will predominantly invest (80 per cent of assets) in debt instruments of banks, public sector undertakings and public financial institutions.

Gilt funds: These are open-ended debt schemes will invest in government securities across maturity. These schemes should invest a minimum of 80 per cent of its total assets in G-secs.

Gilt fund with 10-year constant duration: these open-ended debt schemes will invest in government securities with a constant maturity of 10 years. These schemes should invest at least 80 per cent of the total assets in G-secs.

Floater funds: These open-ended debt schemes will mostly invest in floating rate instruments. These schemes will invest at least 65 percent of the total asses in floating rate instruments.


 Source :Economic Times






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