Regional mutual fund is a mutual fund that confines itself to investments in securities from a specified geographical area, such as Europe or Asia. A regional mutual fund will generally look to own a diversified portfolio of companies based in and operating out of its specified geographical area. The objective is to take advantage of regional growth potential before the national investment community does. They may be some regional funds whose objective is to invest in a specific segment of the region's economy, such as banking, energy etc.
For the investor, the primary benefit of a regional fund is that he/she increases his/her diversification by being exposed to a specific foreign geographical area. For the average investor, these funds are beneficial as most investors don't have enough capital to adequately diversify themselves across many investments in the region. Regional funds select securities that pass geographical criteria. Regional funds differ from the international mutual funds in the sense that international mutual funds have a diversified portfolio with investment spanning all across the world, where as regional funds invest in companies in one specific region or nation. Regional funds carry more risk as compared to international mutual funds because their investments are less diversified geographically.