Also known as a regional mutual fund, a regional fund is any mutual fund that is focused on investments connected with a specific geographical area. A fund of this type will usually attempt to include a diversified range of investments that are related to the selected region, a strategy that helps to reduce the degree of risk associated with the holdings overall. In some cases, all the securities acquired by the fund will not only be associated with a defined geographical location, but also have an additional link, such as each security being associated with energy and energy production in some manner.
While a regional fund is somewhat similar to what is known as a country or national mutual fund, there is a slight difference in the focus of the two funds. With a country fund, the idea is to only include investments that are offered by businesses that operate within the borders of a selected nation. By contrast, a regional fund may focus on investment opportunities that relate to a region composed of several different countries. This means that the regional fund may secure investments associated with any nations that are considered part of Asia, North America, or Europe, rather than only considering investments associated solely with Japan or Canada.
One benefit to the regional fund is that fund managers can capitalize on what is happening in the markets where the included securities are traded. For example, if energy companies in the Asian markets are undergoing a significant upswing in the value of their stocks, the manager of the regional fund may purchase shares issued by not only utility companies but also businesses that produce piping for use by natural gas suppliers or electrical cabling that is used by the electricity suppliers. As long as the economy in that region remains more or less constant, and does not have a negative impact on the energy industry, the regional fund is likely to earn consistent profits for its investors.
As with any type of mutual fund, the investments included in a regional fund are subject to review and may change from time to time. Administrators evaluate the performance of each asset included in the fund portfolio, to determine if the asset is producing an equitable rate of return. When an asset is not performing according to projections, administrators may choose to replace the investment with a new option that exhibits greater potential, or hold the investment if there is some indication that the present slump will soon reverse and the value of the security will increase once again.