Focused Funds: Why Concentrated Portfolios Are Gaining Investor Attention Again

• Focused funds invest in a limited number of stocks, typically no more than 30, contrasting with highly diversified mutual funds.
• They appeal to investors seeking potential outperformance through high-conviction stock-picking by fund managers, rather than market tracking.
• The current interest stems from investor disappointment with average returns from overly diversified portfolios and a desire for clearer investment stories.
• While offering significant upside if successful, focused funds carry higher risk due to concentration; poor choices can lead to sharp declines.
• Best suited as a satellite holding for investors with existing diversified portfolios, demanding patience and confidence in the fund manager's judgment.

Why It Matters: Focused funds offer potential for higher returns through concentrated bets but require tolerance for increased risk and volatility.