A helpful classification of active funds is by outcome or intended outcome. For example: capital growth, income, capital preservation, and liability-matching. The means by which the objectives outcomes are met might be of lower importance, but generally capital growth funds are likely to be all-equity or dominated by equities, income funds are likely to have both equities and bonds, and capital preservation funds are also likely to be a mix. Liability-matching portfolios are likely to be all bonds if the funding level is greater than or equal to 100%, or a mix of bonds and a risk-controlled growth asset if the funding level is less than 100%.
Even within each of these outcomes, a range of different strategies could be used. In the UK in the mid-2000s, ‘diversified growth funds’ evolved from more traditional balanced funds. These typically invest across asset classes and put their investments into ‘growth’ and ‘defensive’ buckets. That allows them to, for example, use non-equity growth assets to generate returns if they feel that other assets, for example commodities, will outperform equities.
These – and others like them – are multi-asset funds but investors can also use single-asset funds. For example, within equities managers can use styles such as growth, quality, value, or blend. They might have sector or regional biases or target subsets of the market that don’t correspond with one of the established styles. They could be small, large, or multi-cap. The same is true of bond portolios, albeit with slightly different definitions and approaches taken.
Importantly, active funds which are globally invested must consider their currency exposure, which they may choose to manage actively like the other asset classes they invest in. This is especially true for multi-asset and fixed income funds.
To the pound 