What is focused equity investing and how does it differ from traditional diversification?

Focused equity investing concentrates on a select number of high-conviction stocks rather than spreading investments across many holdings. Instead of owning hundreds of stocks, focused strategies might hold 20-50 carefully chosen companies. This approach aims for higher potential returns by betting on your best ideas, though it typically involves higher risk than broad diversification.

Why invest in the infrastructure companies rather than the focused funds themselves?

By investing in the companies that enable focused investing - like asset managers, trading platforms, and data providers - you gain exposure to the entire ecosystem's growth. As more investors worldwide adopt focused strategies, these infrastructure companies benefit regardless of which specific funds perform well. It's like investing in the tools rather than the individual craftsmen.

What does 'cross-border investment' mean for Nigerian investors?

Cross-border investment means buying stocks, funds, or other assets listed on foreign exchanges, like the US or European markets. For Nigerian investors, this provides access to global companies and diversification beyond the domestic market. The companies in this basket provide the technology, platforms, and services that make such international investing possible.

What is an asset manager and why are they important?

Asset managers are companies that invest money on behalf of individuals and institutions. They create and manage investment funds, make buying and selling decisions, and provide research and analysis. Companies like BlackRock and Goldman Sachs are major asset managers who design the focused equity strategies that this theme explores.

How do market infrastructure companies like Nasdaq make money?

Market infrastructure companies earn revenue by providing essential services for trading and investing. They charge fees for executing trades, providing market data, hosting trading systems, and offering technology services to financial firms. As global trading volume grows, especially in cross-border investing, these companies typically see increased revenue.

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SBI Focused Equity Fund Global Infrastructure Explained

As Nigerians increasingly look to grow wealth beyond domestic markets, the principles of focused equity investing present a potential model for building concentrated portfolios. This basket offers exposure to US-listed global asset managers and financial platforms that provide the infrastructure for cross-border investment.

Han Tan | Market Analyst

Updated today | Published at September 8