In a relief to some asset management companies (AMCs), the Securities and Exchange Board of India (Sebi) has decided that they can continue to have solution-based schemes with riders. In a master circular on mutual funds released on last Friday, it clarified that fund houses can choose to continue these schemes, but they will not be allowed to launch lifecycle funds with 20 years (for children’s fund) and 30 years (for retirement fund) tenures.
This implies that if fund houses want to have solution-based schemes for retirement and children’s education, they will be allowed to have lifecycle funds of remaining four tenures: 5 years, 10 years, 15 years and 25 years. Alternately, the fund houses can choose to discontinue their solution-oriented schemes of all tenures.
What did SEBI previously say?
On February 26, Sebi had said that solution-based schemes should be discontinued and the assets be merged with any other scheme. However, both the industry body – the Association of Mutual Funds in India and mutual fund distributors – asked it reconsider the decision. Currently, 11 AMCs have active retirement funds while 10 fund houses have an active children’s fund scheme.
DP Singh, deputy MD, SBI Mutual Fund said that the regulator’s decision to give AMCs an option between launching solution-oriented schemes and lifecycle funds of 20- and 30-year tenures was in line with the wishes of the mutual fund industry and will prevent any operational issues related to merging of solution-oriented schemes with another scheme of the fund house.
Industry experts also see this move as a boost to investors already invested in these schemes. As of February 2026, the category has close to 6.29 million folios, 3.06 million folios in retirement funds and 3.23 million folios in children’s funds. In all, these schemes had around Rs 65,000 crore in assets.
Madhu Nair, CEO, Union Mutual Fund believes the continuation of solution-oriented schemes will motivate investors to continue their investments for the goals of children’s education and retirement, leading to less redemptions during periods of market volatility and thus helping investors to accrue the benefits of compounding over a long-term.
However, some fund houses are also deliberating whether they should continue their existing solution-oriented schemes or launch higher tenure lifecycle fund schemes.
Quoting the old adage ‘ a bird in hand is better than two in the bush’, Dhirendra Kumar of Value Research believes that AMCs will keep the option of solution-oriented funds over lifecycle funds. “Most AMCs will quietly hold on to their solution-oriented schemes because those vague labels give them marketing flexibility without the discipline of a predefined glide path, the very discipline that makes life cycle funds actually useful for investors. Their inertia is profitable.”