Cash Deposit Funds
This is an interest bearing fund. Typically is offered by a financial institution which has variable interest rates dependent on size of cash holding and currency invested. Very stable funds used as a safe haven for investors when markets are too volatile. However interest rates do vary.

Bond Funds
The principal objective of these types of funds is to provide a stable income with minimal capital risk. Bonds have typically performed better in poor equity markets. These funds are fairly safe if investing in government securities. However some funds offer high yield bonds which invest in corporate bonds and speculative grade bonds and are considered a higher risk.

Bonds are given ratings to assist investors and these are being constantly monitored by the ratings agencies. Ratings range from AAA or Aaa for the safest bonds through to D for bonds issuers in default. The complete list is:

Bond Ratings

Income Funds
These types of funds seek to generate current income to distribute to investors rather than to achieve growth. They would receive dividends from preferred stocks; and coupon payments from bonds.

Advantages: regular income, medium risk; and good liquidity.
Disadvantage: relatively low capital appreciation.

Cautious Funds
These funds are categorised by their limitations on exposure to risk. These types of funds will hold several asset classes with at least 75% of the components being of low risk such as money market funds, fixed interest, bond funds etc. The rest may be equity funds with market exposure and an element of cash to pay charges and redemptions. These funds usually have lower but more consistent returns due to their lower volatility.

Balanced Funds
As with cautious funds they would have the same asset class distribution but with a more even split (50/50) of low risk assets and equity funds. These funds give more exposure to market movements and more volatile than the cautious funds.

Principal objective is to achieve both income and capital appreciation and to avoid excessive risk. These funds would invest in a combination of stocks and bonds emphasizing the growth potential of stocks and the relative stability of income from bonds. The funds are mid-way between bond and growth funds.

Advantages: balanced risk and return and diversification.
Disadvantage: medium return and may not fully capitalize on a bull market

Growth or Aggressive Funds
From the generic name these funds seek to capitalise on a greater exposure to market growth whilst still having an element of low risk assets. Usually 75% would be invested into equities. The principal objectives are to achieve maximum capital appreciation rather than an income from dividends. A special feature of these types of funds is that they may invest in growth stocks and in smaller, lesser known companies out of the mainstream market which managers believe, based on their research, possess excellent potential for growth.

Advantages: higher growth rate and full utilisation of fund manager’s expertise.
Disadvantage: some fund managers may adopt highly aggressive or speculative strategies which may involve extremely high risk couple with no consistent income or dividends.

Equity Funds
The main objective of equity funds is to achieve higher long-term capital appreciation by investing in equity markets. These types of funds tend to be more suitable for long-term investment as they could be considered as being equivalent to holding a diversified portfolio of equities managed by a professional fund manager.

Advantages: higher historical returns than cash deposits that offer a good hedge against inflation and benefits from the utilisation of the fund manager’s expertise.
Disadvantages: higher risk than bond funds and a risk of company failure.

Index or Tracker Funds
Index or Tracker funds were established to mirror a specific index and its performance. These funds have a passive management system which utilises an automated dealing system to make investment decisions. These funds are limited to the number of transactions they do and strictly adhere to the index.

Advantages: easy to understand with lower management fees and less risky than index futures.
Disadvantages: cannot capitalize on market movements and only track market performance. Index funds cannot outperform market which makes them unattractive during a bear market.

Warrant Funds
Warrant funds seek to achieve exceptionally high returns investing mainly in warrants and use leverage through the use of warrants. These are for professional investors familiar with these types of investments and specialist fund managers.

Advantage: possible high return
Disadvantage: exceptionally high risk

Global Funds
These funds are designed to invest in stocks or bonds on any index or country in the world. This gives excellent diversification as global economies do not all move in unison.

Advantages: global diversification and ability to capture overseas investment opportunities.
Disadvantages: currency, political risks, complicated custodian arrangements,
restricted information access, needs extensive research teams.

Regional or Specific Country Funds
Principally these types of funds seek to invest in a specific region or country to take advantage of growth opportunities in other economies.

Advantages: potentially higher growth and capitalise on opportunities in a different region or country.
Disadvantages: high risk; low liquidity and lack of diversification.

Specialty, Themed or Sector Funds
These types of specialist funds seek to invest in a specific industry or sector and capitalise on the return potential. This allows investors to be more focused on particular types of companies that may be showing good growth potential.

Advantages: potentially high growth and full utilization of fund manager’s knowledge on a particular industry to capitalise on opportunities in a particular industry.
Disadvantages: higher risk potential, lack of diversification; and low liquidity.

Guaranteed Fund
For investors who are risk averse and wish to protect their capital then capital guaranteed funds may be the answer. These funds offer a capital guarantee underwritten by a major financial institution. These funds seek to be neutral to negative market performance and to guarantee principal and/or return. The guaranteed amount will be paid upon maturity for which there is a fairly lengthy lock in period.

Advantage: no risk of principal
Disadvantages: minimum investment period applicable, special conditions may apply and relatively lower return as upside growth is generally capped.

Fund of Funds (Unit Portfolio Management Funds)
A fund of funds or sometimes referred to an umbrella fund is designed to have a diversified professional management investing in other mutual funds

Advantage: diversification
Disadvantage: higher management fee may be incurred

---

| Home | About TTG | Products & Services | News | Links | Careers | Contact TTG |
| Privacy Statement | Disclaimer | Glossary |