Debt Mutual Funds: Everything You Wanted To Know About 16 Types Of Fixed Income Funds
In order to bring uniformity in the mutual fund industry's investment options, the markets regulator Securities Exchange Board of India (SEBI) in October last year had categorized the funds into a plethora of broad categories on the basis of their allocation to asset class and duration for which money has been invested. Though the mutual fund houses have traditionally coined the fund-specific names in alignment with their goals, and the sales pitch, however, the latest rules mandate that irrespective of the fund-specific names, the fund must fall under the contours of one of the categories that are prescribed by the SEBI.
For instance, a fund may be putting 60% of the accumulated money into corporate bonds, but it does not qualify it to be called "XYZ corporate bonds Scheme" unless the threshold reaches 80%. Similarly, a fund can be called floater only if a minimum of 65% of the total assets are invested into floating rate instruments.
Also Read: Sebi Eases Norms For Debt Mutual Fund Investment In Housing Finance Firms
As far as debt mutual funds are concerned, there are 16 debt schemes as prescribed by SEBI Read Here for the details:
Overnight funds:Â These debt mutual funds (MFs) make investment in overnight securities having maturity of 1 day.
Liquid Funds: These debt mutual funds make investment in Debt and money market securities with maturity of upto 91 days only.
Ultra-short duration funds: These debt mutual funds make investment in debt and money Market instruments such that the Macaulay duration of the portfolio is between 3 months to 6 months.
Low duration fund: These debt mutual funds make investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months - 12 months
Money market fund: These debt mutual funds are mandated to make investment in Money Market instruments having maturity upto 1 year
Short Duration fund: These debt mutual funds are mandated to make investment in debt and money market instruments such that the Macaulay duration of the portfolio is between one year and three years.
Medium duration fund: These debt mutual funds are supposed to make investment in debt and money market instruments such that the Macaulay duration of the duration is between 3 years-4 years.
Medium to long duration fund: These debt mutual funds make investment in debt and money market instruments such that the Macaulay duration of the portfolio is between 4-7 years.
Long duration fund:Â These debt mutual funds are mandated to make investment in debt and money market instruments such that the Macaulay duration of the portfolio is greater than 7 years.
Also Read: Debt Mutual Funds Seen As A Better Bet In Times Of Falling FD Rates
Dynamic Bond: These debt mutual funds are mandated to make investment across duration.
Corporate Bond Fund: These debt mutual funds are mandated to make a minimum of 80% investment in corporate bonds (only in highest rated instruments)
Credit Risk fund: These debt mutual funds are mandated to make a minimum 65% investment in corporate bonds (investment in below highest rated instruments)
Banking and PSU fund:Â They make minimum investment in debt instruments of banks, public sector undertakings, public financial institutions- 80% of total assets.
Gilt fund: These debt mutual funds are mandated to make a minimum investment in G-Secs (government securities) of 80% of the total assets.
Gilt fund with 10 year constant duration: These debt mutual funds are mandated to make 80% investment in government securities such that the Macaulay duration of the portfolio is equal to 10 years.
Floater Fund: These debt mutual funds are mandated to make 65% of total investment in floating rate instruments.
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