Sources :
* Banco (Forward S.A.)
* La Bourse de A-Z (August 1989) SBS
* Lexique bancaire UBS (1993 edition)
|
A
to Z of Investment funds
|
| All-in | Charging structure which includes all costs and commission generally charged individually to a fund. |
| Allocation of assets | Spread of investment categories in a portfolio. |
| Analyst | Specialist in economic and financial studies of companies or markets. |
| Anticyclical sensitivity | An investment's propensity to move against the economic cycle. |
| Assets (Class of) | Investment category or group of securities (e.g. small and mid caps are a class of assets). |
| Basis point | 100 basis points = 1%. |
| Benchmark | Index used as a reference in comparing/analysing the performance of a portfolio. |
| Blue chips | Shares in large companies with capitalisations classed among the world's largest |
| Bottom-up | Style of portfolio management which emphasises the selection of securities rather than macro-economic analysis. |
| Broker | Broker or intermediary in the purchase and sale of securities. |
| Build (one's) positions (for a fund) | Find and buy shares for the portfolio by following the policy established at the outset. This building of positions can prove tricky in the case of small and mid caps since the shares of such companies are not great in number or are hard to come by on the market (see "Liquidity"). |
| Call (option) | Purchase option which may be used as a hedge or as an investment. |
| Capital growth fund | Fund which capitalises its income and therefore does not pay any coupons. |
| Capitalisation segments | Large, mid and small caps are capitalisation segments. |
| Cash | Disposable amount in cash (e.g. in a fund the cash amount is not invested in securities and where the need arises can be used to redeem units which investors wish to dispose of or to cover investments undertaken via options or futures). |
| Cash flow | Difference between a company's operating income and expenses before deduction of depreciation and provisions. |
| CFB | Commission fédérale des banques (Federal Banking Commission). |
| Closed end fund | Fund which does not issue new units once the subscription period has closed or does not issue more than the number of units stipulated when it is launched. |
| Commission | Percentage retained on a transaction by the party performing it, as consideration for his work. Depending on the transaction this is known as management commission, transaction commission, brokerage commission, etc. |
| Commission Fédérale des Banques (CFB) | Supervisory body for banks and investment funds. |
| Convertible (bond) | Bond which can be converted under certain conditions to another security, usually to shares in the company which issued the bond. |
| Correlation | Relationship between two indices or between a fund and its index. |
| Coupons | A fund may elect to pay on a regular basis (usually once a year) a coupon comprising one part "income" and one part "capital gains". |
| Cushion | In dynamic ratchet management, the amount available (i.e. representing the maximum permissible authorised loss) to determine the maximum authorised exposure. |
| Custodian bank | Bank with whom the amounts invested in a fund are deposited. |
| Cycle (positive/negative) | Period during which the price of one or more securities (or of a group of securities) moves upwards then downwards (or vice versa). |
| Delegation | The management company may delegate certain tasks, such as the choice. (of management-related tasks) of securities held by the fund, but remains unconditionally responsible for decisions taken by its appointees as if for its own actions (see "Fund manager "). |
| Derivative instruments | Generic term designating synthetic products (futures, options) which have indices, currencies or securities as underlying assets (see "Underlying"). |
| Direct (or theoretical) yield | "Profit" on a fund. This is "direct" if the fund pays dividends to its clients and "theoretical" if the profit is reinvested in the fund's assets. |
| Direct investment | Investment directly in shares and not via a fund. |
| Diversification | Spread of securities in a portfolio with the aim of reducing risk. |
| Dividend | Proportional share of profit which is payable to holders of a security or a fund unit. |
| Domestic market | Market restricted to local or national size. |
| Dynamic ratchet | Exposure management technique (derived from portfolio insurance) with an upwardly mobile floor which serves to minimise downward risks while retaining an unlimited upward potential (see Lloyds Bank IPB-SIG brochure). |
| Efficiency curve | Curve on which the points represent the best possible "return/risk" ratios. |
| Efficient | The adjective used to describe a "liquid" and "transparent" financial market. |
| Emerging markets | Countries or regions which are undergoing strong economic development. |
| Exchange effect | Impact of currency market movements on a fund's performance. |
| Exposure | Position in an asset held spot or via derivative instruments (see "Position"). |
| Financial future | Forward purchase or sale transaction based on an index which is representative of the price movement of an underlying over a set period. |
| Financial instruments | Financial tools which are used to manage, circulate and obtain a return from money (e.g.: "investment funds" are a financial instrument accessible to the general public). |
| Float | Amount of securities circulating freely on the market (compared with those held by stable shareholders). |
| Floor | In dynamic ratchet management, the level below which the value may not fall. |
| Foreign funds | Funds domiciled abroad and which meet the relevant legal requirements (in particular with regard to tax). Funds marketed in Switzerland must however be approved by the CFB and are subject to the IFL. |
| Forex (market) | Currency market. |
| Fund manager | The person who defines the investment policy of a fund and on whose advice positions are bought or sold. He may be independent of the management company. |
| Fund prospectus | Compulsory publication issued by the management company of a fund for the information of holders of units. |
| Fund regulations | Contract setting out the rights and obligations of the fund management company and of its custodian bank vis-a-vis the investors. |
| Fund's assets | Total of sums invested in a fund. |
| Fund's domicile | Place whose legislation is binding for a fund. |
| Fundamental analysis | Classic financial analysis, i.e. based on the study of macro- and micro-economic data. |
| Going public | The listing of a company for the first time. |
| Goodwill | Intangible asset (reputation, brand, skill, technique, corporate name, etc.) which is added to the sum of a company's tangible assets, very important when valuing its shares. |
| Growth company | Business which has strong potential to increase its profits. |
| Growth stocks | Shares of companies with strong potential for growth. |
| Hedged yield | International investment in bonds expressed in a given reference currency which carries no exchange risk (see Lloyds Bank IPB-SIG brochure). |
| Hedging | Cover provided to afford protection against any losses that may result from price fluctuations. |
| IFL | Federal law of 18 March 1994 governing investment funds. |
| Index | Indicator of the movement of a stock exchange or a part thereof. Indices serve as a measure of the performance of a fund investing in the type of market covered by the index. |
| Institutional investors | Professional investors who bring together very large amounts of capital, such as banks, pension providers and insurance companies, as opposed to private investors. |
| Intrinsic or market value | Price which would be obtained from the sale of an asset in a normal market. |
| Investment consultant | An expert, who may be an individual or a company, appointed by the fund management company to advise it on predetermined subjects. |
| Investment fund | Collective investment enabling participation in a widely diversified portfolio managed by professionals without necessarily requiring large sums of money. |
| Investment philosophy | Standards of conduct set to protect investors against changes that may be occasioned by, for example, the departure of the fund manager; the investment philosophy makes it possible to continue applying in the long term the initial principles which persuaded investors to subscribe to a given fund. |
| Investment policy | Method of portfolio management, whereby a style (active/passive), an investment set (eg small caps) and all sorts of constraints (such as the minimum/maximum amount of liquid assets in the portfolio, whether or not derivative instruments shall be used etc.) are defined. |
| Investment set | Geographical market, economic sector or class of assets in which a security or a fund is located. |
| Issue price | Price at which a fund unit (or a share) is put on the market for the first time. |
| Issue-redemption spread | Difference between the issue and redemption price of a fund, which often favours the fund, intended to ensure that the buyer/seller pays the costs incurred by the fund in connection with his transaction. |
| Large cap | Company with a large capitalisation (by comparison to the stock market on which it is traded). |
| LBGB (Fund) concept | Swiss fund family the objective of which is to provide investors with at least adequate income regardless of the stage of the economic cycle at any given time (see Lloyds Bank IPB-SIG brochure). |
| Liquidate a position | Resell a group of securities. |
| Liquidity | Ability of a company's shares or of a class of assets to circulate, or equilibrium between the number of buyers and sellers of such securities. |
| Listing | Admission of a security to the stock exchange. |
| Management committee | Organ that sets the management guidelines for the fund. |
| Management company | Company which issues a fund and is accountable both to the investors and the supervisory bodies for management of the fund in a legal capacity. |
| Management discipline | Philosophy which consists in committing oneself to intervene when levels set at the time a strategy was adopted have been attained, which has the effect of reducing the risk of a managed product. |
| Market capitalisation | A company's stock market value. This value fluctuates as it corresponds to the number of shares multiplied by their price (or "market value"). |
| Market maker | Someone who, through their activity, ensures supply and demand for a security. |
| Market timing | Ideal time, taking account of the market situation, to effect a transaction |
| Matrix of hedged yields | Matrix which calculates in a reference currency the yield (net of exchange hedging costs) of different international bond markets and which assists in making decisions when choosing bond markets in which to invest in this currency. |
| Micro cap | Company with a very small capitalisation (by comparison to the stock market on which it is traded). |
| Mid cap | Company with a medium capitalisation (by comparison to the stock market on which it is traded). |
| Multiple | In dynamic ratchet management, a multiplying factor (of the cushion) used to determine authorised exposure. |
| Nasdaq | "National Association of Securities Dealers Automated Quotations". American stock exchange which specialises in small and mid-caps. |
| NAV | See "Net asset value". |
| Net asset value | This corresponds to the fund's net assets divided by the number of its units and is used (NAV) as a basis for calculating the "purchase/sale price". |
| Net assets | These are the fund's assets calculated at market value, after deduction of any debts. |
| Net yield | Yield on a security after deduction of withholding tax. |
| OPCVM | Undertaking for collective investment in transferable securities (in France and Luxembourg). |
| Open end fund | Fund which can issue new units. |
| Option | Contractual right, but not obligation, to buy or sell a certain amount of a stipulated underlying during a specified period at a price set in advance. |
| Other funds (types of fund) | Investment funds which are neither securities funds nor real estate funds. |
| Outperform the benchmark | Achieve better performance than the benchmark. |
| Outperformance commission | Management commission charged only when the net performance achieved is better that of the "Benchmark". |
| Overexposure | Risk resulting from too great a concentration of a given class of assets. |
| Passive/active management | Passive management copies the benchmark, as opposed to active management which over-/under-weights certain securities of that same index with the aim of outperforming it. |
| Performance (outperformance/ under-performance) | (Movement in the value of units in a fund (upwards or downwards). |
| Performance history | Summary of the evolution of a fund, share, index, etc. to observe the positive/negative cycles. |
| Performance/volatility | Relationship between gain and volatility in the value of units in a fund. If this volatility is too great the investment constitutes a significant risk (see "Volatility"). |
| Portfolio manager | In the absence of a "management committee", the person who advises customers on the distribution of their assets and/or manages said assets on the basis of a management authority. |
| Position | All securities (shares, bonds, etc.) or currencies held by a fund. |
| Price | Stock market value or price of a share at a given moment (as opposed to the nominal value). The price rises or falls as a function of the price asked by the seller and that offered by the buyer. |
| Put (option) | Option to sell that may be used for hedging or for investment. |
| Realise | Recover in the form of cash the amounts invested in securities by selling the securities. |
| Redemption of units | Redemption by a fund's management company of units which fund clients no longer wish to hold. |
| Reference currency | Currency in which a product's performance is calculated. |
| Risk | Substantial potential for gain or loss on a security, a fund or another type of investment. |
| Risk-free rate | Usually, money market yield. |
| ROE | "Return on equity" |
| ROI | "Return on investment" |
| Sale/purchase price | Price of a fund unit corresponding to the net asset value plus/less a percentage set in advance by the fund. |
| Securities fund | Securities fund which can only invest in securities issued in large numbers and traded on the stock exchange or on another regulated market open to the public. |
| Security | Paper security corresponding to a unit in a company's capital (share, participating certificate, bond, etc.) |
| Segment | Sub-fund or part of a fund with a number of segments (segment, umbrella fund). |
| Shareholder value | Principle whereby the shareholder also benefits from any growth in the business's assets and profitability. |
| Shareholders' funds | Funds belonging to shareholders, as opposed to debts. |
| Sharpe ratio | Annualised performance of a given portfolio less the performance of a (risk-free rate) risk-free asset (usually the short-term interest rate) divided by the annualised volatility of the portfolio. The Sharpe ratio shows the real interest of an investment that involves risk as opposed to a risk-free investment (eg rate paid on a savings account) |
| Small cap | Company with a small capitalisation (by comparison to the stock exchange on which it is traded). |
| SMI | "Swiss Market Index", index for Swiss shares initially established to cover 22 Swiss blue chips on the basis of 1500 points on 30 June 1988 (see detailed text in LBGB-Nikkei 225 prospectus/regulations). |
| Smoothing effect | Levelling off produced by two conflicting strategies. |
| SOFFEX | Abbreviation for "Swiss Options and Financial Futures Exchange SA". Under its aegis a fully automated Swiss exchange has been created for share options (May 1988) and stock index futures. |
| SPI | "Swiss Performance Index", global index of Swiss shares calculated on the basis of 1000 points on 1 June 1987. |
| Spin-off | Following the break-up of a large company, this is the birth of a legally and economically independent company. |
| Standard deviation | See "Volatility" or "Standard deviation". |
| Start up | New company which has just begun trading. |
| Stock-picking | Choosing shares on the market. |
| Technical analysis | Market analysis which, to forecast future price movements, takes as a basis graphical illustrations of the historical evolution of prices (see Lloyds Bank IPB-SIG brochure). |
| TER (Total expense ratio) | Total expenses deducted from fund units, equivalent to fixed administration charges, management commission and transaction costs, brokerage fees, etc. The real performance of a fund can only be ascertained taking account of the TER. |
| Term (short/long) | Period corresponding to the duration of an investment or observation of a market. |
| To weight (weighting) | To allot to a market or a market sector a relative weighting greater/smaller than that which it represents in the benchmark (to over-weight / under-weight). |
| Top-down | A management style which, taking as its point of departure the conclusions reached by fundamental analysts, effects allocation according to class of assets and currencies then chooses the industrial sectors and finally selects individual securities. |
| Transaction frequency | Frequency with which units in an open end fund can be bought or sold. |
| Transparency | A company's capacity to voluntarily provide clear, detailed and regular financial information on itself. |
| True and fair | Principle of honesty and clarity in the presentation of accounting information. |
| Underlying (asset) | Term used to designate assets that might be purchased/sold through the purchase/sale of a derivative instrument. |
| Units held by institutional | This detail is crucial for the investor. If a major investor withdraws investors from a fund the remaining investors may suffer if the "manager" is forced to quickly sell units in a market which is not very "liquid". |
| Units in a fund | Paper security corresponding to a unit in a fund's assets. |
| Volatility | See "Standard deviation"or "Volatility". |
| Volatility or standard deviation | Measure of the degree of fluctuation in the price of a security/a market. The more marked such fluctuations are, the more risky the security/market is deemed to be (e.g. while Swiss bond funds have an average volatility of 3%, that of Swiss share funds is in the region of 12%). |
| Volume | Quantity of, for example, securities traded on the stock exchange. |
| Warrant | Options certificate. |
| Watermark principle | Principle intended to protect the investor when outperformance commission is payable, whereby account is taken of under-performance during previous financial years when calculating the amount of outperformance commission to be charged to the fund. |
| Zero bonds | Zero coupon bonds valued on the basis of the discounted yield on maturity. |
Sources :
* Banco (Forward S.A.)
* La Bourse de A-Z (August 1989) SBS
* Lexique bancaire UBS (1993 edition)