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New Life Cycle Funds Simplify Goal-Based Investing
26 Feb
Summary
- Life cycle funds automatically adjust asset allocation over time.
- Funds offer predetermined maturity with a glide path.
- Minimum tenure is five years, maximum is 30 years.
The market regulator, Sebi, has launched Life Cycle Funds, a novel mutual fund scheme category. These are open-ended funds characterized by predetermined maturity dates and a 'glide path' for goal-based investing.
Radhika Gupta, MD and CEO of Edelweiss Mutual Fund, hails this as a significant advancement for goal-based investing. She noted that these funds automatically adjust asset allocation according to an investor's time horizon. This feature helps maintain discipline and reduces the need for continuous investor intervention.
Life Cycle Funds can have a minimum tenure of five years and a maximum of 30 years, with launch tenures in multiples of five. Mutual funds are permitted to offer a maximum of six such funds simultaneously. The nomenclature will include the maturity year, such as Life Cycle Fund 2055.
