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SEBI creates Life Cycle fund category to boost retirement offerings by AMCs

ICICIdirect Research 27 Feb 2026 DISCLAIMER

Major changes include introduction of Life Cycle Funds. Each AMC can launch 6 funds with varying maturity from 5 years to 30 years like “2055 Fund”, 2050 Fund, 2045 Fund etc. with net equity declining as per the glide path till its maturity. Exit load will cease to apply post 3 years. This can become a big category with long term money into equity market.

  • In U.S., similar funds are known as Target Date Funds (TDF). Retail non-retirement taxable Target Date Fund AUM is estimated at around USD 300-350 billion.
  • In U.S., non-retirement retail equity mutual funds AUM is USD 6 trillion. Within this retail Target Date Fund AUM is 300-350 bn. So effectively, 5% of the MF Industry Retail Equity AUM is in TDF.
  • In India, Current equity-oriented category AUM is Rs 35 lakh crore and therefore life cycle funds have the potential to grow to Rs 1.5 to Rs 2 lakh crore size (5% of the equity AUM).

No major impact is seen for the rule of not more than 50% overall in Sector/Thematic Funds as largecap funds are excluded while comparing overlap. Besides, the funds can offer both value and contra funds, subject to the rule of not more than 50% overlap.
Current Retirement and Children Funds category to discontinue. This category was anyways not able to grow with current AUM at Rs 57,000 crore (mere 0.7% of total AUM) and monthly inflow of Rs 300 crore. Such schemes shall be merged with any other scheme having similar asset allocation and risk profile. Its impact shall be negligible.

  • Overall, at net level, the regulations support better flow for the MF industry going ahead. We have BUY rating on HDFC AMC and Nippon AMC

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