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What is fund style, strategy and type?


A fund's management style is either active or passive.  The investment strategy can be growth, value or blend.  Asset allocation determines its type as a stock, bond, money market or mixed fund.

An actively managed fund engages professional asset management to construct and actively manage a portfolio of assets with the objective to outperform the market.  Portfolio managers select assets that are consistent with the fund's overall investment objective and strategy, which is generally to produce better returns than index funds.

A passively managed fund is constructed to achieve returns that closely correspond to its reference market index, such as the S&P 500 or FTSE China 50, without active management.  The fund manager buys and holds securities of the benchmark index without making further investment decisions, possibly using derivatives to help achieve the investment objective.

Growth is an investment strategy where shares with a record of growth and the potential for an increase in value are selected.  The value strategy is to select shares that are attractively priced relative to the company's earnings or internal value or to the market.  Blend is an investment strategy that is neither growth nor value.

Four Main Fund Categories
1. Equity
2. Bond
3. Money Market
4. Mixed
Source: EFAMA

Stock funds invest chiefly in the equity of different publicly traded companies with the objective of long-term growth, primarily through capital gains.  Stock funds are actively or passively managed and focus on a certain market sector, on companies of a certain size (e.g., small-, mid- or large-cap), and on growth and value factors.

Bond funds invest primarily in capital market debt and are classified by the nature of their issuer (e.g., government, agency, municipal or corporate). They may also be classified according to the portfolio's credit quality, sensitivity or some other feature.

A money market fund comprises a portfolio of high-quality, short-term money market instruments, such as treasury bills and commercial paper.  It typically pays dividends that reflect short-term interest rates.

A mixed fund is one that invests in a mixture of different asset categories, typically equities and bonds.  They are principally used for tax purposes, but also to limit risk exposure.

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