Sebi Approves Life-Cycle Funds with Varied Tenures and Phased Exit Loads

Sebi Introduces Life Cycle Funds to Promote Long-Term Investing

Overview On February 26, 2026, the Securities and Exchange Board of India (Sebi) introduced Life Cycle Funds, a new category of open-ended mutual fund schemes designed to promote disciplined, long-term investing through a pre-defined asset allocation strategy.

Key Features

• Life Cycle Funds will have a pre-determined maturity and a glide path for investing across multiple asset classes, including equity, debt, InvITs, exchange-traded commodity derivatives, and gold and silver exchange-traded funds.
• The schemes will have a tenure ranging from a minimum of 5 years to a maximum of 30 years, with funds launched in multiples of 5-year maturities.
• A maximum of 6 funds by a mutual fund can be active for subscription at any given point in time.

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Structure and Investment Horizon

• Life Cycle Funds can be organised with different target maturities, such as 30, 25, 20, 15, 10, and 5 years.
• In the final years of the investment horizon, when the residual maturity drops below 5 years, the schemes will be permitted to take exposure to equity arbitrage of up to 50 percent, in addition to the prescribed equity allocation.
• The total exposure to equity and equity-related instruments must stay within the 65 percent to 75 percent range.

Exit Load Structure

• A graded exit load structure has been implemented to promote long-term commitment and minimise early withdrawals.
• Investors exiting within one year will incur an exit load of 3 percent, which decreases to 2 percent if redeemed within two years, and to 1 percent if they exit within three years.

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Benchmark Framework and Naming Conventions

• The schemes will adhere to the benchmark framework applicable to multi-asset allocation funds.
• The schemes must include the maturity year in their names, such as Life Cycle Fund 2045 or Life Cycle Fund 2055, to help investors easily identify the investment horizon.