Friday, December 24, 2010

Sector Fund

A sector fund is a fund that invests solely in a single sector, or particular group of companies. Sector funds can be provided through various vehicles, for example a single sector ETF or exchange traded fund, a closed end mutual fund, or open stock mutual fund. Sector funds can also specialise in the type of security, but for the most part sector funds will be stock based, but some bond sector funds exist. Sector funds can be passive (i.e. following a sector index, or pro-rata weightings based on a wider index's sub-indexes) or active (i.e. a stock picker that focuses on a single sector such as real estate e.g. CBRE or infrastructure e.g. Cohen & Steers). Sector funds do not possess the same type of diversification benefits of a wider equity fund, but offer benefits of concentration when the sector does well, as well as being a useful tool in active personal investment portfolio management and construction.

Synonyms: Sector ETF, Specialist fund, Focused fund, Industry fund, Sector specialist
 
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