Equity Mutual Fund Scheme: Features and characteristics
An Equity Fund Scheme is a growth oriented mutual fund scheme that aims capital appreciation on long term. This scheme invests major portion of the investible fund in shares/stocks of companies identified by fund manager through research.
Securities and Exchange Board of India (SEBI), is the regulator of mutual funds in India. In a recent review, SEBI revised the norms and features of mutual fund schemes for ensuring uniformity in categorization of various schemes announced by different mutual fund houses. The revised norms were published vide its circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 6, 2017. The revised norms make it easy for the investor to compare similar schemes of different fund house and take judicious investment decision.
An Equity mutual fund scheme is also called growth fund as the primary objective is ensuring long term capital appreciation. They are mainly open ended funds or scheme. This kind of scheme is available for subscription and repurchase on a continuous basis. The fund manager conducts researches, studies and interview with the management before making investment decisions. Soundness of management, fundamentals of the company, past performance, business growth potential etc some of the major parameters assessed by fund managers before deciding investment in the shares of a company
Different types of schemes are announced by each mutual fund house. Thus, there are number of schemes an investor can choose from depending on his requirement. Such schemes include multi cap, large cap, mid cap or small cap funds, dividend yielding schemes, theme/ sector specific schemes, value schemes etc.
SEBI has specified conditions to be satisfied by each scheme type. They have also defined scheme types to prevent mis-selling.
Norms issued by SEBI for mutual fund scheme categorization
The norms and definitions provided by SEBI for classification of equity mutual fund schemes are provided below:
|
Sl No |
Category |
Scheme feature & investment ceiling |
MF scheme category definition |
|
1 |
Multi Cap Fund |
Minimum investment in equity & equity related instruments- 65% of total assets |
Multi Cap Fund is aAn open ended equity scheme that invests mainly in large cap, mid cap and small cap stocks |
|
2 |
Large Cap Fund |
Minimum investment in equity & equity related instruments of large cap companies- 80% of total assets |
Large Cap Fund is an open ended equity scheme investing primarily in large cap stocks |
|
3 |
Large & Mid Cap Fund |
Minimum investment in equity & equity related instruments of large cap companies- 35% of total assets. Minimum investment in equity & equity related instruments of mid cap stocks- 35% of total asset |
Large & Mid Cap Fund is an open ended equity scheme that invests primarily in both large cap and mid cap stocks |
|
4 |
Mid Cap Fund |
Minimum investment in equity & equity related instruments of mid cap companies- 65% of total assets |
Mid Cap Fund is an open ended equity scheme that targets mid cap stocks for investment |
|
5 |
Small cap Fund |
Minimum investment in equity & equity related instruments of small cap companies- 65% of total asset |
Small Cap Fund is an open ended equity scheme with investment attention in small cap stocks |
|
6 |
Dividend Yield Fund |
Scheme should predominantly invest in dividend yielding stocks. Minimum investment in equity- 65% of total assets |
Dividend Yield Fund is an open ended equity scheme chiefly investing in dividend yielding stocks |
|
7 |
Value Fund* |
Scheme should follow a value investment strategy. Minimum investment in equity & equity related instruments – 65% of total assets |
Value Fund is an open ended equity scheme pursuing a value investment strategy |
|
|
Contra Fund* |
Scheme should follow a contrarian investment strategy. Minimum investment in equity & equity related instruments – 65% of total assets |
Contra Fund is an open ended equity scheme adopting contrarian investment strategy |
|
*Mutual Funds houses can offer either Value fund or Contra fund |
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|
8 |
Focused Fund |
A scheme focused on the number of stocks (maximum 30) Minimum investment in equity & equity related instruments – 65% of total assets |
Focused Fund is an open ended equity scheme investing in maximum 30 stocks. The scheme has to mention where the scheme intends to focus, viz., multi cap, large cap, mid cap, small cap. |
|
9 |
Sectoral/ Thematic |
Minimum investment in equity & equity related instruments of a particular sector/ particular theme- 80% of total assets |
Sectoral/ Thematic – An open ended equity scheme investing in a specific sector or adopting a specific theme. The theme/ sector has to be specified initially itself. |
|
10 |
ELSS |
Minimum investment in equity & equity related instruments – 80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance) |
ELSS is an open ended equity linked saving scheme with a statutory lock in of 3 years and the investors get tax benefits |
