Glossary

Absolute return strategy
This strategy aims to deliver positive returns whatever the market conditions.
Accumulation date
The date when income from investments in a fund is reinvested back into the fund, therefore increasing the value of the accumulation units or shares.
Accumulation units or shares
Accumulation units or shares are those where the income to the fund is not distributed to investors but is automatically retained and reinvested. This results in the fund increasing the value of each accumulation unit or share, but leaving the number of units/shares held by the investor unchanged.
Active management
Active management is a style of investment management where the fund manager aims to achieve superior returns than the benchmark and sector, by actively selecting the stocks he or she believes will be winners from the relevant benchmark.
Administrator
A third party who carries out a number of fund administration functions.
Alpha
Alpha is a measure of investment performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's 'alpha'. Simply stated, alpha is generally considered to represent the value that a fund manager adds to or subtracts from a fund's return.
Alternative Investment Market (AIM)
This is a separate market within the London Stock Exchange set up for the purpose of trading shares in small, young and growing companies.
Alternatives
Alternative investments and assets are typically those other than stock, company shares or bonds which include strategies such as private equity, real estate and hedge funds.
Annual management charge
This is the fee paid to a fund manager for managing a fund. The fee is calculated daily, based on the value of the fund's net assets and is reflected in the daily value of the fund's assets.
Annualised return
This shows the average rate of return over a number of years on a per-year basis.
Asset allocation
This describes the allocation of the portfolio's assets according to geographical region, sector or type of security.
Asset class
These are categories of assets, such as cash, company shares, fixed income securities and their sub-categories, as well as tangible assets such as real estate.
Assets
The underlying investments of a fund, which may comprise, for example, shares, bonds, cash, currencies, or commodities, depending on the type of portfolio in which a fund typically invests.
Attribution analysis
The attribution analysis is a performance-evaluation tool used to analyse the abilities of fund and portfolio managers. It uncovers the impact of a manager's investment decisions with regard to overall investment policy, asset allocation, security selection and activity.
Authorisation
Any firm wishing to conduct investment business in the UK requires to be authorised under the provisions of the Financial Services and Markets Act 2000. This authorisation is granted by the Financial Conduct Authority, being one of the regulatory bodies for the financial services industry.
Basis point
A basis point is equal to one hundredth of one per cent. When analysts refer to interest rates being decreased by 50 basis points, they mean, for example, from 6.0% to 5.5%.
Bear market
A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.
Benchmark
A benchmark is a standard, which a fund manager will use as a comparison against the performance, risk and holdings of his or her fund portfolio.
Beta
Beta represents a measurement of the expected volatility of an investment compared with the volatility of the market as a whole during the same period. The higher the beta, the more sharply the value of the investment can be expected to fluctuate in relation to a market index.
Bid Price (shares purchased on a stock exchange)
The selling price of shares traded on a stock exchange.
Bid price (Unit Trusts)
This is the price at which units in a unit trust fund are usually sold and is the price which investors will receive when they sell their units.
Blue chip
These are companies which are generally considered to be well established, highly regarded and usually large in size and scale.
Bond
A loan in the form of a security, either issued by a UK or overseas government (government bonds) or company (corporate bonds), which pays a fixed rate of interest over a given time period, at the end of which the initial amount borrowed is repaid.
Bottom-up
A bottom-up fund manager will build a portfolio by focusing on selecting stocks which he or she believes to be the best opportunities within their industry or sector.
Bubble
When the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations, making a sudden collapse likely (at which point the bubble "bursts").
Bull market
A 'bull market' is a rising market when shares or other asset prices are going up.
Calendar year returns
Calendar year returns relate to the performance of an investment from 1 January to 31 December in any given year.
Cancellation notice
Where a client has purchased units or shares in a fund under advice from a professional adviser, the fund provider is obliged to give the client the right to cancel their investment within 14 days.
Cancellation price
This is the lowest price at which the Authorised Corporate Directors (ACDs) may sell shares and the price which an ACD receives for a share when he cancels shares off his book/box. Also applies to units in a Unit Trust.
Capital
In modern business, capital is defined as the money needed to finance a company's fixed and operating assets; and the financial instruments, such as debt and company shares, used to raise that money.
Capital gain
A capital gain occurs when an investment is sold at a price higher than that originally paid as the investor has made a profit on his/her investment.
Capital gains tax (CGT)
Individuals are usually required to pay capital gains tax (CGT) on an increase in value that crystalises on a sale of assets. Each UK individual has a personal, annual capital gains allowance.
Capital growth
Increase of the value of an asset or investment over time. If a fund states that its objective is 'to seek capital growth', the underlying investments will be those the investment manager believes have the potential to grow in value over time.
Capital protection
Capital protection is an investment where the aim is to preserve a specified amount of the initial investment.
Capitalisation
A company's outstanding shares multiplied by its share price. This is better known as "market capitalisation".
Central banks
The monetary authority and major regulatory bank in a country. Its functions include issuing and managing the country's currency, controlling monetary policy and supervising money market operations, managing exchange and gold reserves, acting as lender of last resort to commercial banks, and providing banking services to the government.
Citywire rating
Citywire is an independent financial publishing and data group which rates qualifying individual fund managers as AAA, AA, A or 'plus', depending on their risk-adjusted performance. Ratings measure both a manager's outperformance against suitable benchmarks and also how much risk the manager took in order to generate the returns.
Closed ended fund
A closed ended fund, such as an investment trust, has a fixed number of shares and is structured in a similar way to a company.
Collective investment scheme
A collective investment scheme is a generic term for investment funds with more than one investor, such as unit trusts, OEICs and investment trusts, which are managed by professional managers.
Commodities
Commodities are a type of asset which include a broad range of physical assets known as either 'hard' commodities such as oil, gas and metals or 'soft' commodities such as agricultural products.
Contract note
A contract note provides confirmation of the terms of sale or purchase of an investment or asset.
Conversion
Conversion is the process of changing an existing investment within a fund from one type of unit or share to another - for example, converting accumulation units/shares into distribution units/shares.
Convertible Bonds
A bond that can be converted into a predetermined amount of the company's equity at certain times during its life.
Corporate bond
Are issued by companies to raise capital as an alternative to issuing. Similar to government bonds, corporate bonds will pay a regular rate of interest and will generally be redeemed at their issue price on a set date.
Correction
Professional investors and analysts will refer to a 'correction' when a market is falling, but they believe share prices are simply coming back to more realistic levels following a period of over-valuation.
Coupon
A coupon is the regular interest payment that is paid on a bond. It is described as a percentage of the face value of an investment.
Creation price
This is the price before the initial charge has been applied. It represents the value of the trust at current market levels, with all expenses included, and is then divided by the number of units in issue. The creation price is used to calculate the offer price also known as the purchase price.
Credit rating
In general terms, a credit rating is an assessment of the credit worthiness of a borrower, or of a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, authority or sovereign government.
Credit risk
Credit risk is the risk that a bond issuer may not be able to meet its contractual obligation to investors and will default on debt payments.
Currency hedging
Currency hedging is the act of entering into a financial contract in order to protect against unexpected, expected or anticipated changes in currency exchange rates.
Currency risk
When a fund invests in assets that are priced in a different currency to that which the fund is priced in, there is a risk of losses occurring due to adverse currency movements.
Current yield
The current yield is the annual interest on an asset, divided by the asset's current market price.
Daily valuation point
The valuation point is the time of day at which units or shares in a fund are priced.
Dealing
Dealing is the process of buying and selling investments.
Default risk
Default risk is the risk that a bond issuer may not be able to meet its contractual obligation to investors and will default interest payments due on a bond issued by the issuer.
Depositary
In an OEIC fund, the Depositary oversees the actions of the fund manager on behalf of shareholders (investors). It ensures the fund manager adheres to the investment restrictions of both the OEIC and the regulations of the relevant regulatory body. The Depositary fulfills the same role as the Trustee for unit trusts.
Derivatives
Derivatives are financial instruments whose value is derived from and dependent on the value of another investment. The term applies to products such as futures, options and warrants. Derivatives can be used for investment reasons whether to make money or to limit risk, reduce costs and/or generate additional income.
Director
A director is a person or corporate entity appointed by the company members to run the company on their behalf.
Discount/premium to share price
The discount/premium to share price is the difference between the share price and the underlying value of an investment trust.
Distribution
Distribution refers to income paid out (distributed) to investors in a fund.
Distribution shares
Distribution units/shares (sometimes called 'income' units/shares) are those where income will be paid to investors on set dates relating to the financial year of the fund.
Distribution yield
A yield is the calculation of the income return on an investment relative to its price. It is the amount of income paid by an investment, divided by the current price of that investment, expressed as a percentage of that price The Distribution Yield reflects distributions amounts that may be expected to be distributed over the next 12 months as a percentage of the mid-market price (or unit price if UT). Also see 'Historic yield'.
Diversification
If assets are diversified, they are spread amongst a range of types of investment. This can reduce the risk of loss through exposure to only one individual asset, type of asset or sector.
Dividend
A dividend is the amount, usually expressed on a per-share basis, that a company pays to its shareholders or that a fund pays to its investors from after-tax earnings.
Dividend Cover
Dividend cover expresses a company's ability to pay ordinary dividends to shareholders out of profits earned. It shows how many times the ordinary dividend can be paid out of its annual profits after tax.
Dividend reinvestment
When any income received from an investment in the form of a dividend is not distributed to investors but is instead used to buy additional units or shares in the same investment, it is referred to as dividend reinvestment.
Dividend yield
Dividend yield is the annual dividend paid by a company or fund on a per-share basis, divided by the current share price, and expressed as a percentage.
Domicile
Domicile is the location of a fund or a company for legal purposes.
Duration
Duration is used in relation to investments in bonds. It is a measure of the sensitivity of the bond price to a change in interest rates and is expressed as a number of years. The longer the duration the more sensitive it is.
Earnings per share (EPS)
Earnings per share is the calculation of the profits of a company that are attributable to each share in that company. EPS is calculated by dividing the profits of a company after tax by the number of shares in issue.
Eligible market
An eligible market is one of a list of markets in which a fund is permitted to invest as a result of the provisions of the fund's prospectus.
Emerging Market
Economies in the process of rapid growth and increasing industrialisation. Investments in emerging markets are generally considered to be riskier than those in developed markets.
Entry charge
The sales fee charged by a fund manager on the purchase of units or shares in a fund.
Equalisation
Dividends paid out by a fund manager reflect the distribution of income for the whole period since any previous dividends were paid, regardless of when the units or shares were purchased. To ensure the fair treatment of all unit/shareholders, the purchase price of the fund includes a sum of money which represents the income accumulated on those units/shares up to the point of purchase. When an investor receives their first dividend, it will include an 'equalisation' payment, which is the value of the accumulated income up to the point of purchase. This in effect returns part of the purchase price and as such, is not taxable as income.
Equities
Shares of ownership in a company.
Ethical investments
Ethical investments take factors other than simply the potential financial return of an investment into account be environmental or humanitarian. For example, an ethical investment portfolio might not invest in tobacco or oil companies, or in companies that use cheap labour in developing countries.
Ex-dividend date
The ex-dividend date, also known as the XD date, is the date on which any dividend income to be paid is taken out of the value of a fund or company's shares or units, thereby reflecting that payment in the value of the share/unit.
Exchange Traded Fund (ETF)
An exchange traded fund is a fund that tracks an index, a commodity or a basket of assets like an index fund. Most ETFs track an index, such as the FTSE All-Share.
Execution-only
'Execution-only' refers to investors who make investments directly, rather than investors who take financial advice from a professional adviser and use the adviser to make investments on their behalf.
Factsheet
A factsheet is a document that provides information about a fund. It typically states the fund's objective, the stocks and assets in which the fund invests, the performance of the fund, the risks of investing in the fund, and other relevant information for investors and potential investors.
Financial Conduct Authority (FCA)
The Financial Conduct Authority regulates the financial services industry in the UK. Its aim is to protect consumers, ensure the industry remains stable, and promote healthy competition between financial services providers. It has rule-making, investigative and enforcement powers that it uses to protect and regulate the financial services industry. The FCA was created in April 2013 and prior to this the role was undertaken by the Financial Services Authority.
Financial Services Compensation Scheme (FSCS)
FSCS is the compensation fund of last resort for customers of authorised financial services firms. The scheme is designed to protect private investors from financial loss as a result of the default of an authorised investment company.
Fixed income securities
A fixed income security is an alternative term for a bond or similar instrument which obligates the borrower to pay a fixed amount of interest during the period of issue and to repay the issue price when the instrument expires.
Fixed interest
Fixed interest refers to a fixed income security, which is an alternative term for a bond or similar instrument which obligates the borrower to pay a fixed amount of interest during the period of issue and to repay the issue price when the instrument expires. Many different types of institution issue fixed income securities, such as governments, publicly held companies, banks etc.
Forward pricing
Units or shares in a fund are priced on a forward basis when they are bought or sold by the manager at a price which will be fixed at the next valuation of the fund.
FTSE 100 Index
The FTSE 100 Index, also called FTSE 100 stands for Financial Times Stock Exchange and is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation. It is one of the most widely used stock indices and is seen as a gauge of business prosperity for business regulated by UK company law. The index is maintained by the FTSE Group which is a subsidiary of the London Stock Exchange Group.
FTSE 250 Index
The FTSE 250 Index is a capitalisation-weighted index consisting of the 101st to the 350th largest companies listed on the London Stock Exchange.
FTSE AIM All-Share
The FTSE AIM All-Share index is an index consisting of all companies listed on the Alternative Investment Market which meet the FTSE's eligibility criteria.
FTSE All-Share
The FTSE All-Share Index is a capitalisation-weighted index, comprising around 1000 of more than 2,000 companies traded on the London Stock Exchange. It aims to represent at least 98% of the full capital value of all UK companies that qualify as eligible for inclusion.
FTSE Fledgling Index
The FTSE Fledgling Index is an index comprising of companies listed on the main market of the London Stock Exchange which qualify as eligible for inclusion in the FTSE UK series but are too small to be included in the FTSE All-Share. There is no liquidity requirement for constituents of the FTSE Fledgling Index.
FTSE Small Cap
The FTSE Small Cap Index is an index of small market capitalisation companies consisting of companies from the 351st largest listed companies on the London Stock Exchange main market onwards.
Fund manager
A fund manager is the person who runs a fund/OEIC and makes investment decisions.
Fund objective
A fund's objective is what the fund aims to achieve. It sets out in broad terms the remit and focus of the fund and guides the fund manager in his or her overall selection of stocks or assets.
Fund of funds
A 'fund of funds' is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This is often referred to as multi-manager investment.
Fund size
A fund's size is its net asset value, being the total value of a fund, measured by taking the total value of its assets, less its liabilities. It is effectively the total value of all investments in a fund.
Fund/OEIC
Also known as an Open Ended Investment Company (OEIC), a fund is a type of' collective investment scheme', which is an investment vehicle that is made up of a pool of funds collected from multiple investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
Fundamental Value
The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.
Fundamentals economic
A basic principle, rule, law, or the like, that serves as the groundwork of a system. Economic fundamentals are factors such as inflation, employment, economic growth.
Funds
A fund is a generic term for many different types of collective investment schemes, such as unit trusts, OEICs, investment trusts, venture capital trusts, and hedge funds.
Futures
A futures contract is a contract between two parties to buy or sell a particular commodity or financial instrument at a pre-determined price at a future date. Futures are traded on a regulated exchange.
Gearing
Gearing is the level of a company's debt in relation to its assets. A company with significantly more debt than capital is considered to be geared. German bunds A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury bonds. The German government uses bunds to finance its spending. Long-term bonds are the most widely issued, with billions of euros' worth outstanding, and these come in 10-year and 30-year durations.
Gilts
Gilt edged securities ('gilts') are bonds issued by the UK government.
Gross exposure
Gross exposure is the total of a fund's long exposure plus its short exposure. For example, a manager who has a 90% long exposure and 50% short exposure, has a gross exposure of 140%, and a net exposure of 40%. Typical gross exposure is the usual total exposure of the fund, commonly expressed in a range of exposures.
Gross redemption yield
The gross redemption yield is the total return for a share or a bond including the expected income and the capital return. It may also include capital growth over its life.
Growth fund
A growth fund is a fund whose main objective is to increase the value of its investments over time also known as capital appreciation.
Growth philosophy
Growth investors aim to invest in companies where they believe the earnings per share growth will be in excess of what the market expects.
Growth stock
A growth stock refers to a company that is expected to produce increasing profits and exceed the average returns of the relevant stock market over time.
Hedge
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.
Hedge fund
A hedge fund is an aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns either in an absolute sense or over a specified market benchmark. Investing in hedge funds is only suitable for sophisticated experienced investors.
High yield bonds
Fixed income securities issued by companies with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default than better quality, i.e. higher-rated fixed income securities but have the potential for higher rewards.
Historic pricing
Historic pricing is where managers will buy and sell shares on the basis of prices calculated at the last valuation point - investors therefore know the price they will receive when they deal.
Historic yield
Yield refers to the dividends received by a holder of company shares and is usually expressed annually as a percentage based on the investment's cost, its current market value or face value. Dividends represent a share in the profits of the company and are paid out to a company's shareholders at set times of the year. The historic yield reflects distributions declared over the past 12 months as a percentage of the mid-market price, as at the date shown.
IA sector
As there are numerous funds in the market available from different fund managers, the Investment Association (previously called the Investment Management Association or IMA) provides a list of sectors as a way of dividing these funds into broad groups; with the aim of helping investors and their advisers compare funds in any one sector to assist them in making investment decisions.
Income distribution
Income distribution refers to income paid out (distributed) to investors in a fund.
Income fund
An income fund is a fund with a main aim to provide income to investors in the form of dividend or interest payments.
Income units or shares
Funds may issue two types of units or shares to investors in a fund. Income units/shares are those where income will be paid to investors on set dates relating to the financial year of the fund. Conversely, accumulation units/shares are those where income is not distributed but is instead automatically retained and reinvested.
Index
An index is an indicator of the value of a sector of shares in a market. The most common index in the UK is the FTSE 100 which is an indication of the performance of the top 100 UK companies' shares by market capitalisation.
Index fund
An index fund does not attempt to outperform a particular benchmark, but instead aims to replicate a particular index's performance by buying the same constituent shares of the index in the same percentage sizes. Index funds are also known as tracker funds or passive funds.
Index put option
A financial instrument that gives the holder the right, but not the obligation, to buy or sell securities, such as the S&P 500 Index, at an agreed-upon price and before a certain date. They are most commonly used to protect against the decline of the price of a security below a specified price.
Index-linked bonds
Fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security. They are also referred to as inflation-linked bonds.
Individual savings account (ISA)
An ISA is a tax efficient wrapper for savings and investments in the UK. It is a scheme allowing individuals to hold cash and investments in shares, and funds free of tax on dividends, interest, and capital gains.
Inflation
Inflation is a measure of the increase in prices of goods and services over time. It is usually expressed as a percentage.
Inflection points
Investment opportunities where the future is different from the past.
Investment Association (IA)
The Investment Association (previously the Investment Management Association or IMA) represents the UK investment management industry. It was originally formed in 2002 when the Association of Unit Trusts and Investment Funds (AUTIF) and the Fund Managers Association (FMA) merged to establish the Investment Management Association (IMA), and changed to its current name in 2015 when the IMA and the Investment Affairs division of the Association of British Insurers merged.
Investment grade bond
An investment grade bond is a bond which has a higher credit rating than 'high yield' bonds. They are considered to have a lower risk of default and therefore pay a lower yield.
Investment trust
An investment trust is a publicly-quoted company that invests its shareholders' monies in the shares of other companies. An investment trust is a collective investment scheme, but has a fixed number of shares.
ISIN
An International Securities Identification Number (ISIN) uniquely identifies a security, such as shares, options, debt securities, derivatives and futures. The ISIN code is a 12-character alpha-numerical code intended for uniform identification of a security at trading and settlement.
Key Investor Information Document (KIID)
A Key Investor Information Document provides essential information and key facts about funds, to help investors assess whether a particular investment fund meets his or her needs. It comes in a standardised format intended to be useful for comparing different investment providers' products. It is not marketing material.
Launch price
The launch price is the price at which a fund was originally launched.
Liquidity
Liquidity refers to the ease of dealing in Securities.
Listing particulars
Listing particulars refer to the details a company - including a collective investment scheme such as an investment trust - is obliged to publish about itself together with any securities it issues before it obtains a listing on a recognised stock exchange. Listing particulars are usually published in the form of a prospectus prior to flotation.
Long position (or long exposure)
A 'long position' is the purchase of a security, commodity or financial instrument for example, shares or bonds in the belief that its price will rise, with the aim of making a gain from the increase.
Lorem ipsum
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using 'Content here
Macro-economic environment
Macro-economic environment refers to conditions that exist in the economy as a whole. This will generally include trends such as inflation, employment, spending, GDP (Gross Domestic Product) and fiscal policy.
Market capitalisation
Market capitalisation is the total value of a company, calculated by multiplying the number of shares in issue by the current price of the shares. Stocks with a market capitalisation of less than £250m (the total value of a company, calculated by multiplying the number of shares in issue by the current price of the shares).
Mega Cap
The biggest companies in the investment universe, as measured by market capitalisation. While there is no exact definition of the term, mega cap generally refers to companies with a market cap exceeding $100 billion.
Mid price
The mid-price is the price midway between a stock or fund's purchase price (offer price) and selling price, (bid price).
Minimum investment
This is the minimum amount of money accepted as a first investment in a fund. Investors can typically invest either a lump sum or a regular monthly amount - see also 'minimum monthly investment'.
Minimum monthly investment
This is the minimum amount of money accepted as a regular monthly investment in a fund.
Monetary Policy Committee (MPC)
The Monetary Policy Committee is a committee of the Bank of England. It sets interest rates in the UK. The committee sets an interest rate it judges will enable the inflation target to be met.
Money laundering
Money laundering is the process of passing money gained illegally through the financial system to convert it to legitimate funds.
Money market instruments
Investment vehicles that allow banks, businesses, and the government to meet large, but short-term, capital needs at a low cost. The money market refers to the borrowing and lending for periods of a year or less.
Morningstar Analyst Rating
The Morningstar Analyst Rating is an assessment of a fund’s past performance – based on both return and risk – which shows how similar investments compare with their competitors.
Multi Cap Funds
Are funds which can invest across the entire spectrum of stocks, from companies with a very high market capitalisation to those with a small market capitalisation.
NASDAQ
NASDAQ is a global electronic marketplace for buying and selling securities, as well as the benchmark index for US technology stocks. The term NASDAQ is also used to refer to the NASDAQ Composite, an index of more than 3,000 stocks listed on the NASDAQ exchange that includes the world's largest technology and biotech giants such as Apple, Google and Microsoft.
Net asset value (NAV)
Net asset value is the term used to describe the underlying value of a fund's units or shares. The net asset value per unit or share, is calculated by dividing the resulting number by the number of units or shares in issue.
Net exposure
Net exposure, also referred to as 'net market exposure', is a fund's long exposure less its short exposure. Net exposure is a measure of the extent to which a fund's portfolio is exposed to market fluctuations. The fund manager will adjust the net exposure in accordance with his or her investment outlook – bullish, bearish or neutral. A fund has a net long exposure if the percentage amount invested in long positions exceeds the percentage amount invested in short positions, and has a net short position if short positions exceed long positions.
Net gearing
Net gearing is a measure of a company's level of long-term debt (borrowing) compared to its equity capital, usually expressed as a percentage.
Nominee Company
A nominee company is a firm into whose name shares/stocks or other assets are transferred in order to facilitate transactions, while leaving the customer as the actual owner. A 'nominee account' is a type of account in which a stockbroker holds shares belonging to clients, making buying and selling those shares easier.
Non Farm Payroll
A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees: general government employees, private household employees, employees of non-profit organisations that provide assistance to individuals and farm employees.
Nulla purus
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga.
Nulla purus nunc lacus id
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using 'Content here
OEIC
Open-Ended Investment Company (OEIC): A type of managed fund, whose value is directly linked to the value of the fund’s underlying investments.
Offer price (Unit Trusts)
The price at which units in a unit trust fund are offered for sale by the fund manager and are the price which investors will pay to purchase those units. Shares in an OEIC funds are usually bought and sold at the 'mid price'.
Ongoing charges
Ongoing charges are the annual operating expenses of running a fund and are deducted from the net assets of the fund. Ongoing charges include fees paid for investment management, (the annual management charge) custody, administration and the costs of independent oversight functions. They exclude portfolio transaction costs.
Open ended fund
An open ended fund refers to investment vehicles such as unit trusts and OEICs where the number of units/shares can be varied according to demand.
Options
Options are contracts that give the holder the right, but not the obligation, to buy or sell an asset at an agreed price on or before a specified date. They are a financial instrument that represents a contract sold by one party, called the option writer to another party (the option holder). The contract offers the buyer the right, but not the obligation, to buy or sell a security or other financial asset at an agreed-upon price which is referred to as the strike price during a certain period of time or on a specific date called the exercise date. Call options give the option to buy at certain price, so the buyer would want the stock to go up in order to make a profit. Put options give the option to sell at a certain price, so the buyer would want the stock to go down.
Ordinary share
An ordinary share is a share which represents an interest in a company and has full voting rights and dividend entitlements.
Overweight
Being 'overweight' is when a fund has a greater percentage weighting in an asset class, stock, sector or geographical region than the index or benchmark against which it is measured.
Passive management
Passive management is a style of investment management that aims to replicate the performance of a benchmark or index.
Pay date
The pay date is the date on which a dividend is distributed to share or unit holders.
Performance fee
A performance fee, also called an incentive fee, is a payment made to a fund manager for generating positive returns. The fee is usually dependent upon the manager achieving specified performance returns over a set period of time and is generally calculated as a percentage of investment returns.
Portfolio
In fund management terms, a portfolio refers to a fund's collection of investments - the range of stocks/shares, bonds, and other assets which make up a fund.
Portfolio yield
Portfolio yield is the annual dividend from a fund's portfolio, divided by the current unit or share price of the fund and expressed as a percentage.
Pound cost averaging
An investor can minimise the risk of purchasing all his or her shares or units at the top of the market by investing relatively small amounts of cash on a regular basis. By putting money into the stock market gradually, an investor can benefit from the smoothing effect of buying some shares at a lower price and others at a more expensive price at different times.
Preference share
A preference share is a share issued by companies in a similar way to ordinary shares as it represents an interest in a company. However preference shares are different to ordinary shares in that they pay a predetermined fixed price dividend and preference shareholders receive priority over ordinary shareholders when receiving their dividends and in the distribution of assets.
Price-to-earnings ratio (P/E ratio)
The price-to-earnings ratio is a ratio used to value a company's shares. It is calculated by dividing the current market price of a company's shares by the company's earnings per share. In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E
PRIIPs Key Information Document (PRIIPs KID)
A Key Investor Information Document provides essential information and key facts about Packaged Retail Insurance-Based Investment Products (PRIIPs).  The document is required by law to help investors assess whether a particular investment product meets his or her needs. It comes in a standardised format intended to be useful for comparing different investment providers' products.  It is not marketing material.
Prospectus
A prospectus is a document issued by a company or fund intending to issue shares or units to the public. A unit trust, OEIC or an investment trust will issue a prospectus at its launch which will then be updated if any material changes occur.
Qualitative and quantitative research
Securities analysis that uses subjective judgment based on non-­quantifiable information, such as management expertise, industry cycles, strength of research and devel­opment, and labour relations. This type of analysis technique is different than quantitative analysis, which focuses on numbers. However, the two techniques can often be used together.
Quantitative Easing (QE)
An unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds. This process aims to directly increase private sector spending in the economy and return inflation to target.
Quartile ranking
Quartile ranking is a common statistical measure used to compare the performance of a fund in relation to its peer group. The performance of funds in a 'sector' is divided into four equally-sized groups (quartiles) ranked from best to worst. For example in a sector of 200 funds, the top 50 would be in the top quartile, being the funds in the top 25% of the group.
Redemption
Redemption is the act of selling units or shares in a fund back to the fund manager.
Redemption yield
Redemption yield is the estimated total annualised return on a fixed income security such as a bond, made up of income plus any gain or loss to the date of redemption.
Registered office
The registered office is the legally-registered address of a corporate entity, such as a company or fund, where all official documents, notices and court papers are sent.
Registrar
The registrar is the person responsible for keeping a register of shareholders (members) in a company or fund such as a unit trust or OEIC and issuing certificates for individual quoted companies. The registrar also deals with other member administration including dividend distribution, rights and scrip issues, etc.
Reinvestment of income
Reinvestment of income refers to income or dividends paid by a company or fund which are reinvested to purchase further units or shares in the existing investment vehicle.
Return
In investment terms, a return is the amount by which an investment increases (positive return) or decreases (a negative return) in value after interest and dividend income and capital growth have been taken into account.
Risk
In investment terms, risk refers to the chance of incurring a loss from an investment.
Risk rating
Some funds are riskier than others and have a greater or lesser chance of losing value. One indicator of risk is the Synthetic Risk and Reward Indicator (SRRI), which is intended for investors and potential investors. It displays the historic volatility of a fund's performance and categorises it accordingly. The SRRI's range of values is from 1 which is low risk to 7 which is higher risk. All collective investment schemes funds such as OEICs and unit trusts are required to calculate and disclose the SRRI for the scheme. It is important to understand that the risk rating of a fund is not static as it will be calculated on an ongoing basis using the most recent data about a fund.
Risk/return factor
The risk/return factor is the relationship between an investment's potential return and its likelihood of losing value. The principle is that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns.
RSMR Rated Fund
Identifies the top active and passive funds endorsed by the rating agency Rayner Spencer Mills Research Ltd.
Running yield
The running yield is the current level of income/dividend payments made by a fund or a bond.
Sector
Sector is the term given to a group of companies engaged in a similar type of industry/business or a group of funds investing in similar stocks. Also see 'IA sector'.
Sector weighting
The proportions of a fund, relative to its total net assets, held in industry sectors. For example, a fund with 20% of its net assets invested in companies in the technology sector will have a 20% weighting to the technology sector.
SEDOL
SEDOL stands for Stock Exchange Daily Official List, a list of codes used in the UK and Ireland to uniquely identify each security, including unit trusts, OEICs, investment trusts and other types of funds. The codes are assigned by the London Stock Exchange, on request by the security issuer. SEDOLs serve as the national securities identifying number for all securities issued in the United Kingdom and are therefore part of the security's 'ISIN' as well. The SEDOL Masterfile (SMF) provides reference data on millions of global multi-asset securities, each uniquely identified at the market level using a universal SEDOL code.
Share class
Share class is a designation applied to a share in a fund. Different share classes within the same fund will confer different rights on their owners.
Share price
A share price is the price of a particular company's shares at a particular time.
Share type
In investment funds terms, a share in an OEIC fund represents a proportion of the property of the fund. A share can be either an 'accumulation' share, where income is not distributed to investors but instead retained within a fund thus increasing the value of each share but leaving the number of shares held unchanged or a 'distribution share', where income will be paid to investors on set dates relating to the financial year of the OEIC fund.
Shares in issue
Shares in issue refers to the number of shares of a company or OEIC fund that have been issued to shareholders.
Short position (or short exposure)
By taking a short position a fund manager is expressing his or her view that the market might fall in value.
Short-dated government bonds
Fixed income securities issued by government and repaid over a relatively short period of time.
Spread
In investment terms, a spread is used to describe the difference between the buying (Offer) and selling (Bid) price of an investment (the bid-offer spread). This can vary depending on the demand for the investment and the volumes in which it is normally traded. Collective investment schemes (funds) normally have a set spread between the buying and selling prices.
SRRI (Synthetic Risk and Reward Indicator)
Some funds are riskier than others (i.e. have a greater or lesser chance of losing value). The Synthetic Risk and Reward Indicator (SRRI) is a risk rating indicator intended for investors and potential investors. It displays the historic volatility of a fund's performance and categorises it accordingly. The SRRI's range of values is from 1 (lower risk) to 7 (higher risk). All collective investment schemes (funds such as OEICs and unit trusts) are required to calculate and disclose the SRRI for the scheme. It is important to understand that the risk rating of a fund is not static as it will be calculated on an ongoing basis using the most recent data about a fund.
Stamp duty
Stamp duty is a tax levied on purchases of shares listed on the London Stock Exchange. As of 28 April 2014, stamp duty is no longer chargeable on purchases of AIM and ISDX-listed securities.
Stamp duty reserve tax (SDRT)
SDRT was a tax that was previously chargeable on the value of surrenders and issues of fund units and shares. Although the UK government abolished this tax with effect from 30 March 2014, there are some instances in which SDRT continues to be levied.
Stock selection
Stock selection is the process by which a fund manager selects stocks (shares) for inclusion in a fund's portfolio.
Subscription share
A subscription share issued by a company carries the right to be exchanged for ordinary shares at a pre-determined price within a specified period. Holders may have the right to a dividend before the shares are exchanged. Also see 'ordinary share'.
Switch
Switching is the process of moving an investment from one fund to another within the same provider's range of products.
Tax efficient investments
Tax efficient investments is a generic term for investments that offer some form of tax relief on contributions, income or capital gains. In the UK, for example, ISAs are a common form of tax efficient investments.
Test glossary term
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using 'Content here
Top-down
A top-down fund manager will make investment decisions based on the macro-economic environment and related data rather than on stock specific criteria. Sector and country allocation will both be made in this way, with stock selection made according to index weightings rather than its own particular characteristics.
Total return
The total return on an investment is made up of capital appreciation or depreciation and any income paid out by the investment. Measured over a set period, it is expressed as a percentage of the value of the investment at the start of that period.
Tracker fund
A tracker fund does not attempt to outperform a particular benchmark, but instead aims to replicate a particular index's performance by buying the same constituent shares of the index in the same percentage sizes. Success will be measured by the 'tracking error' - the amount by which the fund's return differs from that of the index. Tracker funds are also known as index funds or passive funds.
Treasury
In the UK, the Treasury is the government department responsible for all financial and fiscal decisions and for the regulation of the financial services sector. It is overseen by the Chancellor of the Exchequer.
Trustee
In a unit trust, the Trustee oversees the actions of the fund manager on behalf of unit holders or investors. It ensures the fund manager adheres to the investment restrictions of both the unit trust and the regulations of the relevant regulatory body. The Trustee fulfills the same role as the Depositary for OEICs.
UCITS
UCITS stands for Undertakings for Collective Investment in Transferable Securities. UCITS provides a single European regulatory framework for an investment vehicle (i.e. funds) which means it is possible to market the vehicle across the EU regardless of which country it is domiciled in.
Underlying yield
The underlying yield indicates the annualised income from a fund, net of expenses. It is shown as a percentage of the market price of the fund's units or shares on a particular day. The distribution yield will be higher than the underlying yield if the fund's annual management charge is charged to capital. This has the effect of increasing the distributions for the year and constraining the fund's capital performance to an equivalent extent. Also see 'historic yield' and 'distribution yield'.
Underweight
Being 'underweight' is when a fund has a lower percentage weighting in an asset class, stock, sector or geographical region than the index or benchmark against which it is measured. For example, if a fund has a 4% weighting in the technology sector, but its benchmark has a 6.5% weighting, the fund is 2.5% underweight.
Unit
A unit trust is a collective investment scheme (an investment fund) governed by trust law, in which investors' monies are pooled together and invested according to set investment guidelines. Investors purchase 'units' which represent their interest in the underlying assets of the fund. The changing price of the units reflects the rise and fall in value of the underlying assets of the fund.
Unit class
Unit class is a designation applied to a share in a fund. Different unit classes within the same fund will confer different rights on their owners. Also see 'class R / class I'.
Unit trust
A unit trust is a collective investment scheme (an investment fund), governed by trust law, in which investors' monies are pooled together and invested according to set investment guidelines.
Unit type
Units in a unit trust fund can be either an 'accumulation' unit, where income is not distributed to investors but instead retained within a fund. This increases the value of each unit but leaves the number of units held unchanged, or a 'distribution unit', whereby income will be paid to investors on set dates relating to the financial year of the unit trust.
Valuation point
The valuation point is the time of day when a fund's units or shares are valued.
Value investing
A fund manager who adopts a value philosophy searches for companies that have not been fully valued by the market and may be due for a re-rating.
Volatility
Volatility is a measure of how quickly the value of an investment rises and falls over time and is a term applied to single shares, markets and collective investment schemes (investment funds).
Warrant
A warrant is a derivative security that gives the holder the right to purchase securities usually stocks or shares from the issuer at a specific price within a certain time frame.
Weighting
Weighting refers to the proportion of a fund's portfolio held in a particular asset or sector compared with its benchmark or an index. Being 'underweight' is when a fund has a lower percentage weighting in an asset class, stock, sector or geographical region than the index or benchmark against which it is measured.
XD date
The XD date is the ex-dividend date, the date on which any dividend income to be paid is taken out of the value of a fund or company's shares or units, thereby reflecting that payment in the value of the share or unit.
Year end
In investment terms, the year end is the end of the financial year of the fund or company. It is the date to which formal financial reports are prepared.
Yield
The income return on an investment. Fund yields are a measure of income earned by the fund's portfolio, net of the fund's expenses.
Yield (in relation to bonds)
This refers to the interest received from a fixed income security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.
Yield (in relation to equities)
Refers to the dividends received by a holder of company shares and is usually expressed annually as a percentage based on the investment's cost, its current market value or face value. Dividends represent a share in the profits of the company and are paid out to a company's shareholders at set times of the year.
Zero dividend preference share
A zero dividend preference share is a share in a company that has no right to receive a dividend. It is entitled instead to a fixed sum on a fixed repayment date. As a result, this type of share aims to deliver pre-determined growth.

You might be interested in...