Fund Categories

Equity Funds

Equity funds invest largely in shares (stocks) of exchange listed companies and represent one of the largest categories in investment funds. There are many different sub classes of equity fund covering many different sectors, geographical areas and sizes of company. An equity funds in general are geared for a long-term investment horizon and offer comparatively higher returns, with higher risks.

Bond Funds

Bond funds (also known as Fixed Income Funds) primarily invest in government and corporate debt. In general these aim to provide investors with a steady, regular income as part of a balanced portfolio of investments. A bond fund usually has a medium to long-term investment horizon and generally has less price fluctuations than equity funds.

Money Market Funds

Money market funds invest exclusively in short term securities. These funds aim to offer investors with interest rates usually reserved for major institutional investors. Due to their short residual terms, the prices of these funds remain relatively stable as a result they are often considered a good alternative to savings and fixed deposits.

Balanced Funds

Balanced Funds invest in a combination of shares and bonds in anticipation of meeting investors’ needs for safety, income and capital appreciation. A common strategy of these funds are to invest in a combination of fixed-income bonds, property and equities in varying percentages, depending on the investment strategy and related returns it seeks to achieve.

Fund of Funds

Funds of funds invest in a range of individual investment funds (target funds) in anticipation of providing the investor with diversity – broader risk and an enhanced return compared to investing in individual funds. If the focus is primarily investing in new funds this is a Primary or Primaries fund of funds and if focusing on investing in existing funds this is referred to as a Secondary fund of funds.

Retirement Funds

Retirement Funds (retirement plans) are funds that aim to provide a steady income to its investor at a future date (usually after retirement). The final investment combination is age-dependent and linked to retirement. Typically the Initial investment focus of the fund is on shares, whereas in later years a shift will occur towards more defensive asset classes such as bonds and money market investments for greater security. Some retirement plan (or superannuation) designs accumulate a cash balance (through a variety of mechanisms) that a retiree can draw upon at retirement, rather than promising annuity payments.

Absolute/Total Return Funds

Typically conventional funds aim to beat their benchmark – achieve greater returns than investing in a comparable index/market. Total return and absolute return funds are different as they aim to secure a return to its investor regardless of the related market performance. However the investor should be aware that these types of fund do not necessarily guarantee a positive return.

Commodity Funds

Commodity funds invest in directly in commodity markets and in some cases in shares of companies related to the production of such commodities. These funds typically allow investors to participate in the price appreciation / depreciation of commodity markets.

Guaranteed Funds

Guaranteed funds are funds that guarantee to repay either the full original investment amount (excluding exchange premium) or a percentage of this amount – for example 95% – at the end of a fixed term.

Structured Funds

Structured Funds utilize derivative products to create additional cash flow or security features for investors. These funds aim to provide added functionality to investors – potentially offering added flexibility, security and/or enhanced returns.