The ACD acts as an independent steward protecting the interests of investors in a fund. Overseeing the investment manager to ensure the fund is run in accordance with its stated objectives and UK regulations, rules and principles, the ACD has the ultimate regulatory responsibility for a fund. They are accountable to the UK regulator, the Financial Conduct Authority.
Used to describe investments which seek to achieve a positive return over an explicit timeframe.
Alternative assets are considered any asset class excluding equities, bonds, and cash. The term is a relatively loose one and includes tangible assets such as precious metals or infrastructure.
The division of investments into specific markets, sectors or investment instruments like shares.
when the prices in the stock market are typically falling or down for a prolonged period of time.
when the prices in the stock market are rising or up for a prolonged period of time.
Describes the attitude of a person towards a market and its potential: bearish = pessimistic, bullish = optimistic.
A baseline for comparison.
A term used to describe large, well-established, nationally recognised companies, which are also considered, historically, to be financially sound. Typically such companies sell high-quality, widely accepted products and services.
A loan of money to a company or government for a stated period of time in exchange for a fixed interest rate and the repayment of the initial amount at its conclusion.
Selecting shares based on the attractiveness of a company.
Wealth used or available for use in the production of more wealth.
Occurs when the current value of an investment is greater than the initial amount invested.
A raw material or primary agricultural product that can be bought and sold (such as gold, coffee beans etc).
Reinvesting interest payments from an investment in order to add to total amount invested and in turn increase the amount of interest paid.
A baseline for comparison with respect to performance.
The likelihood something with spread from one country to another – either economic booms or crises.
Investments that can be changed from one form to another, for example company debt into shares.
A certificate issued by a company promising to repay borrowed money at a fixed rate of interest at a specified time
A measurement of how two assets move in relation to each other.
The interest rate paid on a bond.
The debt of companies or governments – in investing it is another word for bond or fixed income.
An evaluation of the credit worthiness of a borrower such as a particular company or government (For example, a AAA rated company is considered to be more credit worthy than one rated A).
Companies whose price is considered to be more sensitive to the ups and downs in the overall economy.
Bonds (see bonds).
When a borrower does not maintain interest payments or repay the amount borrowed when due.
The chances a lender will not receive interest and full repayment of a loan when due.
Companies whose price is considered to be less sensitive to the ups and downs in the overall economy.
An economic environment in which there is a general decline in prices.
Lowering debt levels.
A financial instrument that derives its value from something else. They can be used to gain exposure to, or help protect against, expected changes in the value of the underlying investments. They can be traded on a regulated exchange or over the counter.
Effectively a discretionary exit charge levied when exiting a fund.
Investing in different regions, sectors and/or asset classes in order to spread out risks; investing in a variety so that poor performance from one thing can potentially be offset by positive performance in another…
A sum paid somewhat regularly by a company to its investors as a reward for holding their shares.
How quickly a bond will repay its true cost – the longer it takes, the greater exposure it has to changes in the interest rate environment.
A type of investment strategy that combines some of the benefits of passive (index) investing with some of the advantages of active management. (Active investing is when professional investors attempt to select – based on their individual analysis – the companies or debt of companies they believe will perform best, irrespective of their position, by size and weight, in any index.).
Elect (to cancel)
To take a decision to, to decide to.
Also known as developing economies. An emerging market is one that transitioning from a low income, less developed, often pre-industrial economy towards a modern, industrial economy with a higher standard of living.
Cashing in an investment.
Shares issued by a company.
Stands for environmental, social and governance. They are factors by which some investors use to assess and screen companies as potential investments.
Euro Interbank Offer Rate: The rates offered to other banks, based on average paid by a panel of around 50 European banks that lend and borrow from each other.
Exercise (your right)
Take an option available to you, to sell or vote on something.
Fallen angels (referring to stocks)
A company, which is still trading but where the share price has fallen substantially.
A situation in which a particular set of financial factors cause or threaten sudden and severe economic decline.
Government spending and tax policies which influence the overall economy.
A type of investment under which the borrower/issuer is obliged to make payments of a fixed amount on a fixed schedule; (also see bond).
Flattening yield curve
A yield curve shows the difference between long-term and short-term interest rates for bonds of the same credit quality ie deemed equally likely to repay the lender.
If a yield curve is flattening, the difference between these rates is becoming less pronounced. If it is flat there is little to no difference between short-term and long-term rates for bonds of the same credit quality.
Floating rate notes
A type of bond that pays a variable rate of interest, generally in line with a country’s interest rate.
Foreign Exchange/Exchange Rate
The value of a nation’s currency when measured against another currency.
A type of derivative, it is a customised contract between two parties to buy or sell an asset at a specified price on a future date.
Basic underlying factors which can affect or influence the value of an investment or the share price of a company.
Fund of funds
Fund of funds is a type of investment strategy or pooled fund that invests in other collective investment schemes, which in turn invest directly in stocks, bonds or other securities. It literally is a fund invested in other funds.
A financial contract obligating the buyer to purchase an asset, such as a commodity or financial instrument at a predetermined future date and price.
Debt issued by the British government.
Debt issued by a government.
A general term given to debt issued by governments (colloquial).
Greenwashing a form of marketing spin used to persuade the public that an organization’s products, aims and policies are environmentally friendly.
A method of reducing unnecessary or unintended risk. For example, ‘hedging your bets’.
High watermark (HWM)
The highest peak in value an investment has reached. Sometimes used to ensure a fund manager does not get paid large sums for poor performance. So, their bonus remuneration is calculated with reference to a previous high water mark.
High yield bonds (also sub-investment grade)
Fixed income securities that have a low rating from a recognised credit rating agency. They are considered to be at higher risk of default than higher-rated bonds and as such pay a higher level of interest. (Also known as ‘junk bonds’).
An imaginary portfolio of securities representing a particular market or a portion of it; For example: The FTSE 100 is an index designed to follow large-cap stocks; its basket includes the shares of the 100 largest companies on the London Stock Exchange.
Index investing is a passive investment technique (see passive) that attempts to generate returns similar to a broad market index.
An economic environment in which prices are generally going up.
Inflation-linked bonds or index-linked
Fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the lifetime of the bond.
A rating given by a recognised credit rating agency to indicate the company or government behind a bond has relatively less risk of defaulting compared to lower rated investments.
The first sale of shares by a private company to the public.
The use of various financial instruments or borrowed capital to increase the potential return of an investment. Or this can be the amount of debt on a firm’s balance sheet used to finance its assets. A firm with significantly more debt than equity is considered to be highly leveraged.
Liability-Driven Investment (LDI)
An investment strategy of a company or individual which is based on the their need to fund specific future liabilities.
The London Interbank Offered Rate is a benchmark rate that some of the world’s leading banks charge each other for short-term loans. It serves as the first step to calculating interest rates on various loans throughout the world.
To convert assets into cash or cash equivalents by selling them.
The degree to which an asset or investment can be bought or sold in the market without affecting its price. A company’s shares are considered highly liquid if they can be easily bought or sold.
Buying of an investment such as a stock, commodity or currency with the expectation it will rise in value.
Conditions that exist in the economy as a whole. In general this takes into account GDP, inflation, employment, spending and monetary and fiscal policies.
The date on which the original investment in a note or debt instrument becomes due and is repaid to the investor. Interest payments stop.
Modern portfolio theory
Modern portfolio theory is a theory on how risk-averse investors can construct investment portfolios to maximise expected returns based on a given level of risk.
A form of monetary policy from central banks in which they purchase government bonds or other investments in order to lower interest rates and increase the flow of money in the market.
This refers to trading in very short-term debt investments – often considered cash-like or cash-equivalent assets. A money market fund is a pooled fund that invests in such liquid, near-term instruments.
A portfolio or investment which is invested in a combination of different asset classes, such as cash, shares and bonds.
A municipal bond is a debt investment issued by a US state, municipality or county to finance its capital expenditures, including the construction of highways, bridges or schools.
A mutual fund is a type of financial vehicle – it is another name for a collective investment fund; it “pools” the money of many investors to invest in a group of securities like the shares and debt of companies.
Net Asset Value (NAV) (in reference to funds)
A fund’s price per share calculated by taking the current value of its assets and subtracting its liabilities.
A measure of the extent to which a fund’s trading book is exposed to market movements.
An investment strategy that aims to deliver a specified outcome.
Trading done directly between two parties, without any supervision of a stock exchange.
Having more invested in a company/region/sector, than a comparative index.
The face value of a bond – the amount of money a holder will get back once it matures.
Your investment aims to replicate the returns generated by a specified index – also known as tracking
Pound cost averaging
The practice of drip-feeding money into an investment or market to avoid hitting a peak or a trough in prices. The idea is that over time the effects of market volatility will be smoothed out. The opposite of trying to time the market by aiming to buy on the lows and sell on the peaks.
The first financing of a debt issuer (I.O.U., bond or debt issue) for money raising purposes.
Shares or stakes in a company, in the hopes it will increase in value, however, unlike publically-traded equities these are not bought and sold on a stock exchange.
An unconventional monetary policy used by central banks to stimulate their economies when standard monetary policy has become ineffective.
The act of selling.
The sale of an investment or when it matures or is cancelled by the issuer.
Senior secured loans
These loans are typically senior to other debt in the issuer’s capital structure, which helps maintain relatively high recovery rates in the event the issuer defaults. These loans also receive interest payments before any other creditors can.
A way for a fund manager to express his or her view that the market/company/sector might fall in value.
Debt issued by governments (See bonds)..
Shares or equities.
An agreement of intent to buy a newly issued investment prior to its launch date.
An international, quasi-government organisation, such as the World Bank.
Tier 1 bonds
These are lower-rated bank bonds, which means if the issuer defaults all other creditors must be paid back before tier one investors are.
An investment approach that involves looking at the ‘big picture’ in the economy and financial world. (see macro).
Debt issued by the US government.
A fund that adopts an investment strategy/process without sector/instrument/asset/regional limitations.
Having less invested in a company/region/sector, than a comparative index.
The degree to which a given security, fund or index rapidly changes. Fluctuations in price or value.
The income return on an investment.
The interest received from a fixed income investment, usually expressed annually as a percentage based on its cost and its current market value.
Refers to the dividends received by a holder of company shares or from a fund.
Yield to maturity
The rate of return expected of a bond if held until the date when it matures.