Mutual Fund Categories

We have spent a lot of time on hedge funds.  Let's spend a little time on mutual funds.  Mutual funds, through their investment policy, define their investment universe.  This may be the type of security:  equities or fixed income.  Equities are divided by the size of the companies such as micro, small, mid or large capitalization stocks.  It can be the type of stock:  growth or value.  Fixed income can include different classes of bonds:  high yield, corporate, convertibles, US Treasuries or municipal.  Both equities and fixed income can be split into sector/industry and country/region of the company.

The basic sectors are:

• Basic Materials
• Conglomerates
• Consumer Goods
• Financial
• Healthcare
• Industrial Goods
• Technology
• Utilities

Regions can be classified as:

• US/Canada
• Latin America
• Western Europe
• Emerging Europe, Middle East and Africa
• Japan
• Australia/New Zealand
• Asia ex-Japan

Based on the investment universe, most mutual funds limit themselves to an asset box such as small cap growth stocks or high yield bonds of US companies.  An exception would be Ken Heebner at Capital Growth Management.  Mutual funds are usually constrained by what they can invest in.  Hedge funds are defined by how they trade.