SEBI discontinues children's and retirement mutual fund category, revamps scheme classification rules
Mumbai, Feb 26
The Securities and Exchange Board of India on Thursday discontinued the solution-oriented mutual fund category, which includes children's and retirement funds, and announced a major overhaul of mutual fund categorisation rules to bring more clarity and transparency for investors.
The markets regulator said that the solution-oriented category stands discontinued from the date of the circular.
Existing schemes under this segment will immediately stop accepting fresh subscriptions.
These schemes will now be merged with other schemes that have similar asset allocation and risk profiles, subject to prior approval from SEBI.
As of January 31, 2026, there were 15 schemes in the children's fund category and 29 schemes in the retirement fund category.
SEBI had first proposed changes in July 2025 as part of a broader review of mutual fund categorisation.
The aim was to improve clarity, introduce new schemes and address the issue of portfolio overlap across different schemes.
At that time, the regulator had said mutual funds should be allowed to offer different types of schemes in the solution-oriented category with varying mixes of equity and debt, provided the asset allocation was suitable for the scheme's stated objective.
The regulator had also proposed that mutual funds be allowed to invest the residual portion of their solution-oriented schemes in REITs and InvITs, except for Retirement Fund -- Hybrid and Children's Fund -- Hybrid schemes, within regulatory limits.
In its latest circular issued on February 26, SEBI introduced new categories such as contra funds and sectoral debt funds.
It also added goal-based life cycle funds and directed asset management companies (AMCs) to align their existing schemes with the new framework within six months.
The regulator has also specified limits for launching Fund of Funds (FoFs) to ensure better discipline in product offerings.
Nikunj Saraf, CEO at Choice Wealth, said Sebi's new mutual fund classification rules are a meaningful step towards simplifying an industry that had become increasingly complex for retail investors.
— IANS
Reader Comments
I had just started a SIP in a children's fund for my daughter's education. Now I'm worried about what happens to my money. Will the merger be seamless, or should I redeem and look for a new plan? SEBI should ensure AMCs communicate clearly with existing investors.
Finally! The 'solution-oriented' tag was just a marketing gimmick. The underlying portfolios were often the same. This overhaul was long overdue. Hope the new 'goal-based life cycle funds' are genuinely different and not just another label.
As an NRI investing in Indian markets, I appreciate steps towards more transparency. The introduction of contra funds is interesting. It gives more options for seasoned investors looking for specific strategies.
While simplification is good, I hope this doesn't reduce choice for conservative investors. Retirement funds had a psychological comfort. Now we have to figure out which 'hybrid' or 'debt' fund fits our retirement goal. A bit more guidance would help.
Good step for the industry's long-term health. The portfolio overlap was a real issue. Fund managers were running similar strategies under different names. This should force more genuine product differentiation. Thumbs up, SEBI! 👏
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