Non-Diversified Management Company is an investment company, which concentrates its investments among a few issuers or securities and does not meet the diversification requirements of the Investment Company Act of 1940.
Applying "Non-Diversified Management Company" to Securities Exams:
The objective of most mutual funds is to provide the investor diversification while making a single investment that is designed to meet the investor’s investment objective. As such there are limits to how much the investment company can invest in any single company. Investment companies that do not meet this requirement are classified and non diversified. When investments are concentrated in any one issuer or area of the market there is an increased amount of risk and a higher potential for reward depending on how the investment performs.