What is 'Investment Style'

Investment style is the method and philosophy followed by an institutional money manager in managing separate accounts or managed funds. The investment style of a fund helps set expectations for risk and performance potential. Investment style is also an important aspect used by institutional managers in marketing and advertising the fund to investors looking for a specific type of market exposure.

BREAKING DOWN 'Investment Style'

Investment styles can range broadly across the market, with institutional investment managers offering investors a large selection of managed fund strategies for various allocations of a portfolio. Institutional investment styles can first be generally segregated by risk. Risk and the risk allocation fit for investors is typically a primary differentiator that helps mutual fund companies market to investors. Investors will typically begin their investing style choices by first considering their risk tolerance, which can be either conservative, moderate or aggressive. Among these categories, investment managers can offer both active and passive investment strategies that broaden the investment options even further for investors.


Conservative funds will often have investment styles focused around income and fixed income investments. Investments in this category can include money market funds, loan funds and bond funds. Conservative funds are generally good as income investments as well, with many paying interest distributions or reinvesting in capital appreciation growth.

In the fixed income category, managers will focus on offering funds by duration and credit quality. While fixed income credit investments are generally considered conservative, higher yielding lower-credit-quality investments would be the most aggressive style of funds offered for investors with conservative to moderate risk tolerance.


Many moderate risk investors will be attracted to managed funds with large-cap, blue chip securities or a value investment style. Large-cap, blue chip stocks can attract income investors since they are mature businesses with committed dividend payout ratios and steady dividends. Value funds may offer income as well. Generally value stocks have moderate risk with fundamental characteristics that show their market values discounted from their intrinsic value. Based on deep fundamental analysis and long-term assumptions, value investments can be a good core holding for all types of investors and are especially attractive in the moderate risk category.


Growth funds, aggressive growth funds, capital opportunity funds and alternative hedge fund investment styles that have broader flexibility to utilize leverage and derivatives are some of the most appealing managed fund investment styles for aggressive investors. These funds are typically actively managed funds that seek to outperform market benchmarks. Aggressive funds may also encompass broad investment universes for greater return potential. In some cases this can include global securities or international securities actively managed and focused on high growth regions of the world, such as the emerging markets, BRIC countries or Asia ex-Japan.

Investment Style Disclosures

Funds managed by all types of investment managers in the investment industry include investment documents that provide in-depth details on a fund’s investment style. Registered funds are more transparent, as directed by the Securities Act of 1933 and the Investment Company Act of 1940. Hedge funds and other alternative funds will also provide investment style disclosures in various forms for their investors.

In the registered universe, funds must file a prospectus and statement of additional information with their registration. A fund’s prospectus is typically the primary source of information for investors seeking to understand a fund’s investment style. Along with investment style, the prospectus will also disclose details about the levels of risk an investor can expect with the fund and the types of investors who would find the fund to be the best fit.

  1. Style Drift

    Style drift is the divergence of a fund from its investment style ...
  2. Fund Category

    A fund category is a way of differentiating mutual funds according ...
  3. Equity Style Box

    An equity style box is a visual representation of the principle ...
  4. Style

    The investment approach or objective that a fund manager uses ...
  5. Aggressive Growth Fund

    An aggressive growth fund is a mutual fund that seeks capital ...
  6. Management Risk

    Management risk is the risk associated with ineffective, destructive ...
Related Articles
  1. Investing

    Which Mutual Fund Style Index Is for You?

    The Russell and MSCI Barra style classification systems can help pick the right mutual fund style.
  2. Financial Advisor

    How To Pick Your Investment Style

    Find out what an investing style is and how to figure out which one suits you.
  3. Investing

    Understanding The Mutual Fund Style Box

    Evaluate your investments with this simple tool.
  4. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  5. Investing

    How Mutual Fund Managers Pick Stocks

    Learn about how mutual fund managers choose stocks based on the type of funds they manage and the investment goals of the funds' shareholders.
  6. Investing

    How's Your Mutual Fund Really Doing?

    Determine how mutual funds are doing by sizing them up against their peers.
  7. Investing

    Passively Managed Vs. Actively Managed Mutual Funds: Which is Better?

    Learn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
  1. Where does a hedge fund get its money?

    Learn how a hedge fund is structured and how the managing partner of the fund goes about the process of finding and soliciting ... Read Answer >>
  2. What is the most important section in an investment company's prospectus?

    Learn about the various elements included in an investment company's prospectus and which ones are most important for investors ... Read Answer >>
  3. What information should I focus on in my mutual fund's prospectus?

    Understand what information investors can find in a mutual fund prospectus and what they should focus on when reviewing the ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center