What SEBI's new mutual fund rules change

Summary: Rs 57,000 crore in children's and retirement funds is being scrapped as a category. A new product is replacing them with automatic rebalancing built in. Do you know where your money stands? Market regulator SEBI’s new mutual fund categorisation framework, issued in late February, introduces meaningful changes for asset management companies (AMCs) and investors alike. Among the most notable are the tightening of portfolio allocation rules, limits on overlap in a few categories, and the introduction of a new mutual fund category replacing another. We round up these changes below. Equity threshold raised in key schemes First, some of the sectoral and thematic funds will now be treated as separate categories, instead of being clubbed together. This increases the number of equity scheme categories from 11 to 13. Second, a few strategy-based equity schemes—dividend yield funds, value funds, contra funds, and focused funds (restricted to a maximum of 30 stocks) now must maintain at least 80 per cent equity allocation, up from 65 per cent. This higher threshold reduces room for fund managers to dial equity exposure down so that these funds remain distinctly equity-oriented in practice, not just by label. Further, the non-equity portion of an equity scheme can be invested in money market instruments, gold and silver instruments, InvITs and other permitted assets, within prescribed