In a big move for mutual fund investors, the Securities and Exchange Board of India (SEBI) has scrapped the “solution-oriented” mutual fund category — the segment that included children’s and retirement funds.
The decision is part of a larger clean-up exercise aimed at making mutual funds simpler, clearer, and more transparent for investors.
What Has SEBI Changed?
SEBI has officially discontinued the solution-oriented category from the date of its latest circular.
This means:
Existing children’s and retirement funds will stop accepting fresh investments immediately.
These schemes will be merged with other similar schemes based on asset allocation and risk profile.
The merger will happen only after SEBI’s approval.
As of January 31, 2026, there were 15 children’s fund schemes and 29 retirement fund schemes operating under this category.
Why Is This Happening?
SEBI had first proposed these changes in July 2025 after reviewing the mutual fund structure.
The regulator found that many schemes had overlapping portfolios, which confused investors and made it harder to compare products.
The goal now is to:
Reduce duplication
Improve transparency
Introduce clearer categories
Make investing easier for retail investors
Earlier proposals had suggested allowing more flexibility in asset allocation and limited exposure to REITs and InvITs in solution-oriented schemes.
However, with the latest circular, the category itself has been removed.
New Categories Introduced
In its February 26 circular, SEBI introduced several new categories to better organise mutual fund offerings.
These include:
Contra funds
Sectoral debt funds
Goal-based life cycle funds
Asset Management Companies (AMCs) have been given six months to align their existing schemes with the new rules.
Tighter Rules for Fund of Funds
SEBI has also placed limits on launching new Fund of Funds (FoFs).
The aim is to bring more discipline to product launches and prevent unnecessary clutter in the market.
According to industry experts, these changes are designed to simplify the mutual fund landscape, which had become increasingly complex for retail investors.
What This Means for Investors
If you are invested in a children’s or retirement mutual fund, you won’t lose your money.
However:
You won’t be able to make fresh investments in the same scheme.
Your scheme may soon merge with another similar fund.
The bigger message is clear — SEBI wants fewer, clearer, and more transparent mutual fund options.
For investors, that could mean less confusion and smarter decision-making in the long run.
