Reviewed by Sep 30, 2020| Updated on
Investment style is the method followed by the management of separate accounts or managed funds by an institutional money manager and the philosophy behind it. A fund's investment style helps set expectations about the potential for risk and success.
Investment style is considered as an important aspect used by institutional managers to market and advertise the fund to investors who are looking for a particular type of market exposure.
Investment preferences may vary widely across the industry, with institutional investment managers offering investors a wide range of managed fund approaches for specific portfolio allocations. It is generally possible to segregate institutional investment types first by risk.
Investors' risk and risk management match is usually a key differentiator that lets investors sell to mutual fund firms. Typically, investors will start their investment style choices by first considering their risk tolerance, which can be conservative, moderate, or aggressive.
In addition, investment managers can come up with both active and passive investment strategies that broaden investment options even further for investors.
Conservative: Conservative funds often have equity and fixed-income investment forms. Investments can include money market funds, loan funds, and bond funds in this group.
Moderate: Most moderate risk investors will be drawn to large-cap, blue-chip, or value-investment-style managed funds. Large-cap and blue-chip stocks can draw revenue investors as they are mature companies with dedicated dividend pay-out ratios and steady dividends.
Aggressive: The most attractive structured investment strategies for cautious investors include growth funds, aggressive growth funds, capital opportunity funds, and alternative investment types of hedge funds with wider ability to use leverage and derivatives.
Other than investment style, the prospectus will be capable of disclosing details about the risk levels an investor can expect from the fund and the types of investors who best fit the fund.