A new fund category aims to take timing decisions out of investors’ hands

ETFs (exchange traded funds).While fund houses are preparing to launch offerings under the new category, the key question is whether these products meaningfully improve outcomes for investors.At its core, the structure is simple: risk reduces automatically over time.In the early years, for instance, 15 to 30 years before maturity in a 30-year fund, portfolios can hold high equity exposure, typically between roughly 65% and 95%, with smaller allocations to debt and limited exposure to gold and silver. As maturity approaches, equity allocation is gradually reduced while debt exposure rises to cushion volatility and preserve gains.

In the final years, equity exposure may fall to around 5% to 20%, with debt becoming the dominant component.Fund houses will be allowed to launch life cycle funds with maturity of five to 30 years. “Such fund may be launched for tenures in multiple of 5 years and a maximum of 6 funds by a mutual fund can be active for subscription at any given point in time,” Sebi said in its circular.Funds must include maturity in their names.

For instance, a scheme maturing in 10 years would carry a year-based title such as ABC Fund 2036. As the fund reaches less than one year to maturity, fund houses may offer investors the option to merge into another scheme with a later maturity to continue their investments, subject to positive consent from investors.Life cycle funds are allowed to invest in multiple asset classes.

However, additional provisions will allow life cycle funds to invest in arbitrage segment up to 50% of the portfolio, when the fund’s residual maturity is less than five years.As an open-ended fund, investors will have the flexibility to withdraw their investments at any point in time. But as