Fund Categories & Strategies

A collective investment scheme (CIS) pools money from many investors and invests it according to a stated investment objective and policy set out in the prospectus. Classifying funds helps investors match a scheme to their risk appetite, time horizon and income needs.

Funds are grouped along three independent dimensions, and any one fund sits on all three at once:

• •ASSET CLASS — what the fund holds (shares, bonds, cash instruments, or a mix).
• •MANAGEMENT STYLE — how holdings are chosen (active security selection vs passive index tracking).
• •STRUCTURE — how the fund is built (direct holdings, a feeder into a master fund, or a fund investing in other funds).

The prospectus and product highlights sheet disclose the objective, permitted investments, risk factors and fees, so an adviser must read them to establish suitability rather than rely on the fund's name alone.

An EQUITY (stock) fund invests mainly in shares, aiming primarily at capital growth, with dividends a secondary source of return. Equity funds generally carry the highest risk and the highest expected long-term return among the mainstream asset classes.

They are often sub-classified by investment style or focus:

• •GROWTH funds target companies expected to grow earnings faster than average; VALUE funds target shares seen as under-priced relative to fundamentals.
• •By market capitalisation — large-cap (typically more stable) versus small/mid-cap (higher growth potential, higher volatility).
• •By income emphasis — DIVIDEND / equity-income funds tilt towards higher-yielding shares.

Key risks are market (price) risk, and for foreign holdings, currency and country risk. Equity funds suit investors with a longer time horizon who can tolerate short-term volatility.