Sectors are groupings of companies that provide the same product, material or service, such as the healthcare sector, which groups companies that provide medicines, medical services and general healthcare; or the construction sector, which groups building companies, both domestic and commercial.
An investment fund may focus on a specific sector and have an investment objective and risk profile that reflects this focus, or it could cover a range of sectors in a specific geographical region. It could also be sector neutral and base its objective and strategy on companies that exhibit attractive characteristics from any sector.
Investing solely in one sector may increase the risk of external events that affect the sector as a whole, and therefore affect all of the companies in that sector, such as regulatory or political change, or a natural disaster.
Spreading investment across a range of sectors can diversify a portfolio and make the impact of any such sector disruption less impactful.
You may also see the term in our interactive fund centre tool for our ILP sub-fund range.