SEBI Introduces Life Cycle Funds, Allows Sectoral Debt Schemes

The Securities and Exchange Board of India (SEBI) has introduced a new mutual fund category called Life Cycle Funds, while discontinuing the existing Retirement Fund and Children’s Fund categories.

Life Cycle Funds

SEBI stated that Life Cycle Funds will have:

• A minimum duration of five years
• A maximum duration of 30 years

These funds are designed to align investments with different life stages of investors, offering structured long-term financial planning options.

Introduction of Sectoral Debt Funds

In a significant move, SEBI has permitted Asset Management Companies (AMCs) to launch Sectoral Debt Funds. Key features include:

• Minimum 80% investment in debt and debt-related instruments of a particular sector.
• Investments restricted to corporate bonds with a credit rating above AA+.
• The bonds must be listed instruments.

SEBI indicated that such funds may be launched in sectors such as:

• Financial Services
• Energy
• Infrastructure
• Housing
• Real Estate

Greater Flexibility in Equity Schemes

Additionally, SEBI has allowed mutual funds to invest the residual portion of equity schemes in:

• Equity instruments
• Money market and other liquid instruments
• Gold and silver instruments (as permitted)
• Infrastructure Investment Trusts (InvITs)

These investments will remain subject to ceilings prescribed under mutual fund regulations for respective asset classes.

Source: TH