Equity funds may either have a broad focus that stretches across the market, or they may be more narrowly focussed on specialist sectors or certain types of shares defined by their size.
Funds in the equity general sub-category have a broad focus and will invest across the different sectors of the market – resources, financial and industrial shares.
The sub-category includes funds that track the index or benchmark for the sub-category – for example, South Africa equity general funds that track the FTSE /JSE All Share index (ALSI) or a similar index for the whole market, like the FTSE / JSE Shareholder Weighted All Share index.
Most of the funds are, however, actively managed, which means the fund manager will choose shares for the fund.
The degree to which the manager will deviate from the weightings in the benchmark index for each sector and each holding, will depend on the manager.
Some will take smaller positions to hold more or less of a sector or individual share than is in the index, while others may pay little attention to the holdings in the benchmark and choose shares solely based on the manager’s views on how they will perform.
Managers who make decisions on shares with little attention to the holdings in the benchmark are said to be benchmark agnostic.
Funds that invest across the market include those with mandates to pick a particular type of share – for example, those that invest in shares that have a track record of paying good dividends – but they still invest across the sectors.
Specialist equity funds focus solely on a sector of the market or certain kinds of shares. For example:
Funds in the South Africa equity large cap sub-category invest in the 40 largest shares on the JSE that make up the FTSE/JSE Top 40 index. Many of them track 
the index although some are actively managed and invest only in some of the top 40 shares.
These shares have a market capitalisation (share price multiplied by number of shares in issue) of more than R10 billion.
Funds in the equity mid and small cap sub-category invest in shares with a market capitalisation of less than R10 billion. These shares are either in the FTSE/JSE Mid cap index (with a market capitalisation of between R1 billion and R10 billion, or in the FTSE/JSE Small Cap index (with a market capitalisation of less than R1 billion).
The more narrowly focussed specialised funds are likely to have returns that are more volatile – go up and down more than the shares of funds invested across the market.
Funds that invest across the market are more diversified, while those that invest more narrowly in a specific sector may be subject to investment cycles, like the commodity cycle (resources shares) or the interest rate cycle (financial shares).
Equity funds that invest only in large cap or small and mid-cap shares invest across sectors but they may also be more volatile than funds that invest across all sectors and in shares of all sizes. Mid and small cap funds are likely to be more volatile than large cap funds.
