DEFINITION of 'Target Risk Fund'

A fund that attempts to expose its investors to a specified amount of risk. The fund manager of a target risk fund is responsible for overseeing all the securities owned within the fund, to ensure that the level of risk isn't greater or less than the fund's target amount of risk exposure.

BREAKING DOWN 'Target Risk Fund'

Target risk funds typically label themselves as "conservative", "moderate risk" or "aggressive" in terms of their risk exposure. Regardless of the label applied, the intent is to offer a relatively constant level of risk exposure to investors.

This allows investors who are considered highly risk averse to identify and select a fund of funds that has a conservative risk exposure target, and once invested in the fund, remain confident that their level of risk exposure will not change substantially.

The manager of a target risk fund is responsible for ensuring that the fund's level of risk exposure is on target, and the fee's charged for operating the fund (on top of the fees charged by mutual funds owned within the target risk fund) is compensation for the value-added service.

  1. Country Risk

    A collection of risks associated with investing in a foreign ...
  2. Gross Exposure

    Gross exposure is the absolute level of a fund's investments, ...
  3. Aggressive Growth Fund

    An aggressive growth fund is a mutual fund that seeks capital ...
  4. Mutual Fund

    Mutual funds combine money from many investors to invest in a ...
  5. Accepting Risk

    Accepting risk occurs when a business acknowledges that the potential ...
  6. Fund Category

    A fund category is a way of differentiating mutual funds according ...
Related Articles
  1. Retirement

    The Unknown Dangers of Target Date Funds

    If they fit within your risk tolerance and have reasonable fees, target date funds can be an option.
  2. Investing

    What’s Wrong with Target Date Funds?

    Target date funds seem convenient, but you pay for that convenience with fees and other factors.
  3. Financial Advisor

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  4. Investing

    Evaluating Hedge Fund Performance

    Most are aware of hedge funds, but many don't know the dirty details of this investment type.
  5. Managing Wealth

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
  6. Investing

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
  7. Investing

    8 Fund Types To Use In A Recession

    When the economy blows up, these funds offer some protection from major losses.
  1. What are the major categories of financial risk for a company?

    Examine four major categories of financial risk for a business that represent potential problems that a company may have ... Read Answer >>
Hot Definitions
  1. Compound Interest

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

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  3. 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 ...
  4. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  5. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
  6. Monero

    Monero is a digital currency that offers a high level of anonymity for users and their online transactions.
Trading Center