SEBI discontinues solution‑oriented funds: What happens to schemes like SBI Magnum Children’s Benefit Fund?

The markets regulator said that the solutions-oriented scheme category is being discontinued with effect from February 26, 2026.

According to the circular, the existing schemes in the solutions-oriented category need to immediately stop all subscriptions. They will be merged with any other scheme having a similar asset allocation and risk profile, with prior approval from the regulator.

“Solutions-oriented scheme category is being discontinued w.e.f the date of the circular. Existing schemes in this category shall stop all subscriptions with immediate effect. Such schemes shall be merged with any other scheme having similar asset allocation and risk profile with prior approval from SEBI,” the circular said.

What is a Life Cycle Fund?

A Life Cycle fund will be an open-ended fund with a target date maturity following a glide path investing in a mix of asset classes i.e. Equity, Debt, InvITs, ETCDs, Gold & Silver ETF.

Here are some key points to know about the Life Cycle Funds:

• Mutual Fund may launch Life Cycle Funds with a minimum tenure of 5 years and a maximum tenure of 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.

• Additionally, as each fund reaches less than 1 year to maturity, such fund may be merged with nearest maturity Life Cycle Fund with positive consent from the unitholders.

• Exposure in debt instruments shall be limited to AA & above rated instruments with residual maturity less than the target maturity of scheme.

• For years to maturity less than 5 years, all Life Cycle Funds may take equity arbitrage exposure upto 50% in addition to the investment range specified for equity while ensuring that total investment in equity and equity related instruments remains within 65%- 75% in such schemes

Higher exit load

Life cycle funds may have an exit load of 3%.

“In order to inculcate financial discipline, in life cycle funds, an exit load of 3% would be chargeable on any exit by an investor within one year of investment; an exit load of 2% within first two years of investment and 1% in the first three years of investment.

The Life Cycle Funds will follow benchmark framework as prescribed for Multi Asset Allocation Funds.