NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Collective Investment Vehicles

Mutual Fund Structure and Types of Schemes in India

Updated 11 October 2026 · Fact-checked

An Indian mutual fund has a three-tier structure: a sponsor sets it up, a trust holds the assets for unit holders, and an AMC manages the schemes. SEBI groups schemes into equity, debt, hybrid, solution-oriented and other categories. Solve questions by identifying who does what and which category fits.

Understand Mutual Funds: Structure and Types of Schemes

A mutual fund pools money from many investors and invests it in securities such as shares and bonds. Each investor gets units. The value of one unit is the NAV (net asset value per unit). Profits and losses are shared in proportion to units held.

In India a mutual fund is set up under the SEBI (Mutual Funds) Regulations, 1996 and has three tiers. The sponsor is the person or entity that creates the fund. It applies to SEBI for registration and must meet SEBI's eligibility conditions. The trust is created by the sponsor. The trustees hold the fund's property for the benefit of unit holders and supervise the AMC. The AMC (asset management company) is appointed by the trustees with SEBI approval. It manages the schemes, makes the investment decisions and runs day-to-day operations.

Other parties support the structure. The custodian holds the securities. The registrar and transfer agent keeps unit holder records. The auditor audits the accounts. Distributors sell the schemes. Remember who holds what: trustees hold the assets for unit holders, the AMC manages them, and the custodian keeps the securities safe.

Schemes differ by structure and by what they invest in. By structure, an open-ended scheme offers units for sale and repurchase on an ongoing basis, so you can enter and exit at NAV-based prices. A close-ended scheme has a fixed maturity. Units are offered during the new fund offer and exit is usually through stock exchange listing or at maturity. An interval scheme is a mix that opens for transactions only at set intervals.

By investment objective, SEBI's categorisation groups schemes into equity, debt, hybrid, solution-oriented (such as retirement and children's funds) and other schemes (index funds and ETFs). An ETF is a fund whose units trade on an exchange, usually tracking an index. Within each group SEBI defines categories with set investment rules, so the same name means the same thing across fund houses. Always check the exact category definition before choosing an answer.

Key formulas to remember

Three-tier structure: Sponsor → Trust (trustees) → AMC; Sponsor creates the trust, trustees hold assets for unit holders, AMC manages the schemes.
NAV per unit: NAV = (Market value of assets − Liabilities) ÷ Number of units outstanding; Liabilities include accrued expenses. Used for purchase and redemption prices.
Open-ended vs close-ended: Open-ended: continuous entry and exit | Close-ended: fixed maturity, exit via listing or maturity; Interval schemes allow transactions only at specified intervals.
SEBI scheme groups: Equity | Debt | Hybrid | Solution oriented | Other (index funds, ETFs, FoFs); Each group has defined sub-categories with set investment rules.

How to solve Mutual Funds: Structure and Types of Schemes questions

Use this sequence for any structure or scheme-type question.

1Read the question and mark whether it asks about a party (sponsor, trustee, AMC, custodian) or about a scheme type.
2For a party question, recall its role: sponsor creates, trustees hold assets and supervise, AMC manages, custodian safekeeps.
3For a scheme question, decide the structure first: open-ended, close-ended or interval.
4Then decide the objective group: equity, debt, hybrid, solution oriented or other.
5Match any specific feature in the question (listing on exchange, tracking an index, fixed maturity) to the scheme type.
6Eliminate options that give one party another party's role.
7Check wording such as 'only', 'always' and 'except' before marking.

Quickest way: Role and feature matching

When to use it: When you have under a minute and the options look similar.

Ask: who creates, who holds, who manages? Sponsor, trustees, AMC.
Ask: can I buy and sell any day? Open-ended. Fixed term? Close-ended.
Ask: does it trade on an exchange and track an index? ETF.
Pick the option that matches and discard those that swap roles.

Common mistakes in Mutual Funds: Structure and Types of Schemes

Saying the sponsor manages the fund's investments.
Sponsor sounds like the main owner, so students assume it runs the fund.
Fix: The AMC manages investments. The sponsor only sets up the fund and the trust.
Saying the AMC holds the assets for unit holders.
Students link asset management with ownership.
Fix: The trustees hold the assets for unit holders. The AMC acts under their supervision.
Treating close-ended funds as having no exit.
Fixed maturity is read as locked-in forever.
Fix: Exit is at maturity or by selling listed units on an exchange, subject to market price.
Treating ETFs as the same as index funds.
Both track indices.
Fix: ETF units trade on an exchange at market prices. Index fund units are bought from the fund at NAV.
Placing a scheme in the wrong SEBI group, such as calling a retirement fund hybrid by default.
Students go by the investment mix, not the SEBI category.
Fix: Retirement and children's funds fall under solution-oriented schemes. Check the category list.

Worked examples

Example 1

Which party in the mutual fund structure holds the scheme's property for the benefit of unit holders?
A. Sponsor
B. Trustees
C. AMC
D. Registrar and transfer agent

Show the solution

The question asks who holds the property for unit holders.
The sponsor only creates the fund and the trust.
The trustees hold the property in trust and supervise the AMC.
The AMC manages investments and the registrar keeps records, so neither holds the property.

Answer: B. Trustees

Example 2

A scheme has a fixed maturity period, units are offered only during the new fund offer, and investors normally exit by selling units on a stock exchange. What type of scheme is it?
A. Open-ended scheme
B. Close-ended scheme
C. Money market scheme
D. Overnight scheme

Show the solution

Fixed maturity points to a close-ended structure.
Units sold only in the new fund offer rules out continuous sale and repurchase, so it is not open-ended.
Exit through an exchange is typical for listed close-ended schemes.
Money market and overnight are debt categories defined by investments, not structure.

Answer: B. Close-ended scheme

Exam tips

Learn the role of each party in one line; questions often swap roles between sponsor, trustees and AMC.
Separate structure (open, close, interval) from objective (equity, debt, hybrid); options often mix them.
Know the ETF versus index fund difference: exchange trading versus buying at NAV.
Read qualifiers like 'only', 'always' and 'except'. Negative marking applies in this exam, so skip a question you cannot narrow down.

Practice questions from Collective Investment Vehicles

Mutual Funds: Structure and Types of Schemes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Mutual Funds: Structure and Types of Schemes: frequently asked questions

What is the structure of a mutual fund in India?

It has three tiers: the sponsor, the trust with its trustees, and the AMC. The sponsor sets up the trust, the trustees hold assets for unit holders, and the AMC manages the schemes. The custodian and registrar act as supporting service providers.

What is the difference between open-ended and close-ended funds?

An open-ended fund accepts purchases and redemptions on an ongoing basis at NAV-based prices. A close-ended fund has a fixed maturity, and units are bought during the new fund offer. Exit is usually at maturity or through exchange listing.

How does SEBI categorise mutual fund schemes?

SEBI groups schemes into equity, debt, hybrid, solution-oriented and other schemes. Each group has defined categories with set investment rules. This keeps scheme names consistent across fund houses.

What is an ETF?

An exchange traded fund is a fund whose units trade on a stock exchange at market prices. Most track an index. You need a demat account to buy and sell them.