Target Risk Fund

What is ‘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.

Explaining ‘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.

Further Reading

  • Bank characteristics and stock reactions to federal funds rate target changes – [PDF]
  • Averting crisis? Assessing measures to manage financial integration in emerging economies – [PDF]
  • … movements, risk perceptions, and economic outcomes: The effect of primary and secondary stakeholder activism on firms' perceived environmental risk and financial … – [PDF]
  • Friends or foes? Target selection decisions of sovereign wealth funds and their consequences – [PDF]
  • Risk management failures: What are they and when do they happen? – [PDF]
  • Interest rate pass through and asymmetric adjustment: evidence from the federal funds rate operating target period – [PDF]
  • Sovereign Wealth Funds: a literature review – [PDF]