Definition of specialized investment funds

With the diversity of mutual funds and their different investment orientations, the conversation is divided between diversified and comprehensive funds or other funds that specialize in one type of investment or a specific geographical area, which is known as specialized investment funds or sectoral funds.

So, specialized investment funds are a type of specialized funds that focus their investments in one sector or a specific market, such as mutual funds that specialize in a specific industry, or special types of securities, that support the fund's focus on its projects, and increases its chances of competing within its field.

The difference between specialty funds and traditional funds

After the previous definition of sector or specialized funds, we conclude that the most important differences between traditional funds and this type of funds are: Specializing in one specific sector, such as technology or health care, unlike other funds that may be more diversified or in more than one sector.

By specializing in one sector, sector funds are tempted by the opportunity to benefit from the growth of that chosen investment sector, but with a relatively higher risk than diversification, as diversified investments support each other in the event of a decline.

Types of Specialized Investment Funds

There are different forms of specialization in sector or specialty funds:

Funds specializing in specific sectors

Investments are limited to those sectors, such as investing in companies that manufacture electrical appliances, medical devices, real estate, tourism services, or basic commodities.

Specialized funds in specific geographic areas

For example, investing in companies that specialize in investing in certain developed countries, or perhaps only in local markets.

Funds that specialize in specific asset classes

For example, limiting the fund's investments to fixed-income bonds, government bonds only, or large-cap stocks.

Advantages of specialized investment funds

There is no doubt that the many advantages of these funds are one of the most important motivations for investors and fund administrators to choose them:

Capitalizing on growth in niche sectors

We often observe that investment growth is at its peak in a number of specialized sectors, whose returns are an attractive factor for many investors, and these sectors may vary from time to time according to market influences, demand, societal needs, evolving lifestyles, and other factors.

Therefore, we find that these funds focus heavily on opportunities and seek to exploit them in the best possible way, taking advantage of the launch of some sectors, for example, or the emergency need for others.

Hedging against the risks associated with over-diversification

Instead of dispersing the effort of hedging in different assets, hedging in a single investment type is more straightforward.

Access to unique investment opportunities

These funds are based on the idea of capturing opportunities and growing investments faster, allowing for capital growth, and possibly gaining control of a specialized investment sector, a specific market, or establishing a strong presence in those markets.

Disadvantages of Specialty Investment Funds

Due to the nature and specialization of these funds, the investment disadvantages we find revolve around this specificity and the nature of each fund, for example:

High-risk level

By tying investment success to the success of a specific fund selection, the investor is exposed to a range of potential risks, such as the risk of asset depreciation, declining demand, strong competition, or disrupted supply lines.

Lack of variety

The lack of asset diversification is one of the main investment risk factors that investors are concerned about with these funds, as the lack of diversification carries additional risk.

Costs and fees

Working in rare or niche specializations may also entail higher management costs, as well as the fees these funds may charge investors for opening and closing trades.

When should you invest in specialized investment funds?

Specialized and sectoral funds may be suitable for some investors but not others, due to the special nature of these funds, as we explained above. Therefore, the investor must have or possess the necessary investment fundamentals to make such an investment, such as:

• Have minimal knowledge of the nature of the investment field and its specialization, and benefit from the experience of specialists in this field without venturing into what you are not proficient in.
• Recognize the nature of risks, prioritize them according to a plan that protects capital as much as possible, and prepare for potential market fluctuations.
• Patience for the desired investment goals, as investing in these funds may require more patience in some cases, so it is advisable not to invest in amounts that may need to be liquidated at a certain stage.
• It's okay to consider diversifying your investments into more than one fund, which will help you diversify your investments beyond a single fund.

Let Oragon choose the best investment funds in Turkey for you

Through Oragon, a company specializing in the field of participatory investment in Turkey, and taking advantage of its licenses and its team's advanced expertise in the field of investment fund services, interested investors have the opportunity to grow their capital while achieving ambitious investment returns through its strong funds, which are managed by the most skilled investment experts in various business fields in Turkey.

A subsidiary of Imtilak Investment Group in Turkey, Oragun manages several investment funds that have grown their assets thanks to its long-standing expertise, market risk management, and expert capital management strategies.

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