What's in a name!

Summary: The mutual fund category name is meant to be a reliable shorthand. For multi-asset allocation funds, it permits a 50-percentage-point equity range. A shorthand that imprecise isn't clarity. It's a false sense of it.

There is an assumption that most mutual fund investors carry around without even realising it: that a fund’s category name tells you what the fund does. It is a reasonable assumption. SEBI spent years recategorising funds precisely to create this clarity. The category name is meant to be a reliable shorthand, a way for an investor to know at a glance what kind of portfolio they are looking at.

The multi-asset allocation fund (MAAF) category proves the assumption wrong. A fund in this category may hold between 20 per cent and 70 per cent of its net assets in net equity. That is not a narrow band. That is half the equity risk spectrum. Two funds sitting in the same SEBI-defined category can behave like completely different products. One might be a conservative hybrid with a 25 per cent equity allocation. Another might be an aggressive hybrid at 65 per cent. Both carry the same MAAF label. The name, in other words, tells almost nothing about managing investors’ money.

This is not a new problem. It is a problem that SEBI tried to solve and ended up recreating. Before the 2017 recategorisation, balanced funds suffered from the same ambiguity. The category permitted a wide equity range, and investors frequently discovered, too late, that the fund they had bought was far more aggressive or far more conservative than the name had suggested. The recategorisation was meant to fix this. It did, for most categories. For MAAFs, it simply moved the confusion to a different label.

The real problem is this: the infrastructure that helps investors understand what they own has not kept pace with the infrastructure that sells it to them. The Indian mutual fund industry has grown extraordinarily fast. Distribution is everywhere. Apps make investing frictionless. SIPs can be set up in under two minutes. New investors enter the market every month, many of them relying entirely on category names to make their choices. But the tools that help an investor figure out what is actually inside the fund they are buying have lagged. Category labels were meant to close that gap. For MAAFs, they have not.

Our cover story of Mutual Fund Insight, May 2026 edition, does what the MAAF label should have done but did not: it classifies funds by what they actually do, by how much equity they hold, how they behave in market downturns, and what kind of investor each bucket suits. It is the work that SEBI’s categorisation was meant to perform. We had to do it ourselves because the category name alone will not tell you what you need to know before you invest.

SEBI’s 2017 recategorisation was a step forward, but it was not the last step. If a category name permits a 50-percentage-point equity range, the category is too broad to be useful. The industry knows this. AMFI knows this. The solution is not complicated: create sub-categories, mandate risk labels and require fund houses to state equity ranges in their category tags. These are not radical demands. They are the minimum conditions for informed investing. Until that happens, investors will keep picking funds based on labels that promise clarity and deliver confusion.

For now, if you are considering a multi-asset allocation fund, read the cover story before you invest. The label will not protect you, but understanding what is behind it will.

Also read: One fund for all seasons