DEFINITION of Country Fund
A country fund is a mutual fund that invests in one country. A country fund holds a portfolio of securities, generally stocks, of companies located exclusively in a given country. Also called a “single-country fund.”
BREAKING DOWN Country Fund
A single-country fund for Russia, for example, will only invest in assets based in that country, such as the stocks of Russian companies, Russian government debt and other Russia-based financial instruments.
Country funds can demonstrate fantastic results because of their concentrated holdings. However, along with this type of performance also comes a high level of risk and price volatility, especially in developing countries, which are usually categorized as emerging markets. In emerging markets, a fund's portfolio may be concentrated in a small number of issues with very low market liquidity.
Even in developed markets like Europe, putting investment funds in a single-country fund means that you are subjecting your risk-return expectations to a relatively narrow market environment.
Example of a Country Fund
The Voya Russia A fund seeks long-term capital appreciation through investment primarily in equity securities of Russian companies. It normally invests at least 80% of its assets in equity securities of Russian companies, is not constrained by investment style or market capitalization and seeks companies undervalued by the market because their pace of development or earnings growth has been underestimated.
It had $83 million in assets under management, as of May 22, 2018. It had a one-year annualized return of 16.94% and a 10-year annualized return of -3.94%.
Global Funds vs. Country Funds
Country funds and global funds can both be used to add geographic diversification to a portfolio. A global fund is a fund that invests in companies located anywhere in the world, including the investor’s own country. A global fund often seeks to identify the best investments from a global universe of securities.
A global fund provides investors with a diversified portfolio of global investments. Investing in international securities can often increase an investor’s potential return with some additional risks. A global fund can help to mitigate some of the risks and fears investors may have when considering international investments through its diversified portfolio structure.
An investor could, in theory, construct a geographically diverse portfolio using individual country funds. This would require a great deal of research and effort and could be accomplished simply by selecting a global fund. However, country funds can easily be used to supplement a global portfolio and concentrate a bet on a region, in effect overweighting a single country, while the global fund maintains diversification.