Tehran Stock Exchange on Sunday unveiled the first sector fund for the petrochemical industry to attract indirect investment to the key sector.
Mahmoud Goudarzi, the TSE chief, said, "Sector funds are being developed to diversify investment instruments and help meet the needs of investors," the TSE website quoted him as saying.
The ‘Agah Petrochemical Sector Investment Fund was created by the Tehran Stock Exchange in cooperation with Agah Portfolio Manager Group, and is approved by the Security and Exchange Organization, Goudarzi said.
Sector funds, also known as specialty funds, are mutual funds and ETFs (exchange-traded funds) that concentrate on a specific industry or market.
Sector funds give investors the option to take targeting bets on the appreciation of a potential industry category. Some sectors offer better growth potential due to economically boasted investing catalysts. Sector funds can also be part of a wider portfolio plan with certain sector offering characteristics related for specific portfolio allocations.
Goudarzi noted that work is underway for developing put option contracts based on sector funds. He did not elaborate.
Sector funds focus on an individual segment of the market, letting no room for diversification, and depending entirely on the performance of that specific sector. The funds also offer the benefit of diversification of the portfolio through multiple holdings.
Nevertheless, overall sector funds also carry individual risks that have an effect on the entire investment portfolio due to targeted sector exposure. The performance of sector funds depends on the economic cycle and performance, which is dependent on multiple factors.
