What is an Equity Fund and How Does It Work?
As the name suggests, an equity fund invests exclusively in stocks (ownership shares in companies). The performance of the fund is directly tied to the performance of the companies it holds. If the underlying companies grow and perform well, the return for the entire fund increases.
Quartal offers a wide range of equity funds. You can easily find them in our fund list by filtering the category to “Equity Fund”.
Investing in funds involves risk.
Who Are Equity Funds Suitable For?
Equity funds generally carry a higher risk than mixed funds or bond funds. However, this higher risk goes hand in hand with a higher expected return over time.
An equity fund is suitable if you want:
- A robust option for long-term savings goals.
- The potential for significantly higher returns compared to interest-bearing savings accounts.
- Automatic risk diversification by investing in dozens of different stocks simultaneously.
- The ability to target specific industries, regions, or themes.
Types of Equity Funds
1. Actively Managed Equity Funds
In an actively managed fund, a dedicated management team conducts in-depth market analysis to hand-pick specific stocks. Their explicit goal is to outperform the general market index. Actively managed funds can quickly adapt to changing market conditions and exclude companies with poor future prospects, making them potentially more resilient during market turbulence. They carry a higher management fee to cover the cost of the active research.
2. Index Funds (Passively Managed)
An index fund is designed to simply track a specific financial market index (such as the Swedish OMXS30 or a global index). The fund automatically buys the exact same proportion of stocks as the index it tracks. Because they are run passively by algorithms rather than human analysts, index funds typically have very low management fees.
3. Enhanced Funds (Smart Beta)
Our “Enhanced” funds combine the best features of both passive index funds and active management. An Enhanced fund largely tracks a specific index, ensuring low costs. However, our managers apply active qualitative filters to the portfolio, deliberately excluding companies that are drastically overvalued or exhibit poor fundamental quality. The goal is to provide slightly better returns than a pure index fund while maintaining a price point lower than fully active funds.
Historical Returns Are No Guarantee
While historical data shows that investing in equity funds has been profitable over the long term, investing always involves risk. The value of your fund units will fluctuate, and there is no guarantee that you will get back the full amount you originally invested.
