Islamic Fund Management
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3.1.2 Review and Analysis of Various Funds by Investment Portfolio
Different types of funds―based on their investment portfolios―carry different risk profiles, as
delineated i Equity funds, for instance, entail high risks and represent long-term
investments, which are more suitable for aggressive investors.
Figure 3.3: Analysis of the Various Types of Funds by Investment Portfolio
Sources: Compilation from various funds’ prospectus, RAM
1. Equity Funds
Equity funds invest in a portfolio of stocks and equity-related instruments. Instead of investing
directly in a company, the investor shares the risk of the market performance of a portfolio of
stocks in various sectors with the fund’s other unit holders. The strategies of diversified equity
funds are detailed below:
a) Large-cap equity funds invest in stocks of large and liquid blue-chip companies with
stable performance returns.
b) Mid-cap funds invest in mid-cap companies that have the potential for greater growth
and returns.
c) Small-cap funds invest in companies with small market capitalisations, with the
intention of benefitting from greater gains in the form of the stocks’ price performance
as smaller companies may benefit from newer business opportunities.
d) Sector funds invest in companies that belong to a particular sector, e.g. technology or
banking. The risks of sector funds are high as they are not diversified. Declines in the
stocks of one sector can lead to a significant fall in investment value.
e) Thematic funds invest in the stocks of companies which may be defined by a unifying
underlying theme. For example, infrastructure funds invest in stocks in the