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Glossary
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Absolute return |
An investment strategy that aims to produce a positive return regardless of the direction of financial markets (such results are not, however, guaranteed).
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| Accumulation units |
Any interest earned or dividend paid to shareholders is automatically reinvested into the fund. This increases the value of the units held. |
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| Active Management |
Where the fund manager seeks returns over and above the benchmark and sector. Through thorough research, the fund manager will select stocks he or she believes will provide the highest return on investment. |
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| Alternative Investment Market (AIM) |
A market for small, young and growing companies operated by the London Stock Exchange. The market provides an opportunity for companies to raise capital for expansion without the cost and regulatory burden of a full listing on the main market. As the regulations are less stringent, the shares are likely to be more volatile. |
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| Annual Management Charge (AMC) |
A fee paid to a Jupiter for the management and administration of a fund accrued daily. |
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| Annual report |
A report, required by the Financial Services Authority and prepared by the fund manager, which includes the fund's investments, how it performed and financial information relating to the fund. Short form versions are sent to unit holders as at the funds annual and six monthly accounting dates. Long form annual reports are available on request. |
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| Asset allocation |
How a fund manager spreads the underlying investments of a fund. In most cases, the portfolio is divided across a range of assets such as equities, bonds, property or cash. The purpose of asset allocation is to reduce risk through diversification. |
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| Assets |
Underlying investments of a fund such as equities, bonds or cash. |
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| Authorisation |
Any company wishing to conduct investment business in the UK is required to be authorised under the provisions of the Financial Services and Markets Act 2000. This authorisation is granted by the Financial Services Authority, the regulatory body for the financial services industry. |
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| Authorised fund |
A fund that has been authorised by the Financial Services Authority for marketing to the public in the UK. |
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| Balanced fund |
A fund typically investing in both equities and fixed interest stocks or funds. |
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| Basic rate tax |
The most commonly paid rate of income tax. |
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| Bear Market |
A period during which the stock market is generally expected to fall. |
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| Benchmark |
A stock market index such as the FTSE All Share, against which a fund manager can compare his or her fund's performance. |
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| Bonds |
Governments and companies issue bonds in order to raise money. The bonds are issued with a promise to pay the money back at a fixed time along with interest at a fixed rate. Also known as fixed interest securities. |
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| Bottom up |
An investment approach in which a fund manager will pay a great deal of attention to analysing individual companies in terms of such factors as the strength of its management, growth prospects and operating models, to select companies for a portfolio. Market conditions and economic issues are taken into consideration but are of lesser importance. |
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| Bull Market |
A market where share prices are rising and expected to rise further over the medium term. |
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| Capital |
The initial investment before interest or capital growth. |
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| Capital Gain |
When an investment is sold for a higher price than it was purchased. |
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| Capital Gains Tax |
A tax paid on the net increase in value of an investment when the investment is sold and the gain exceeds your annual exemption (after deducting any losses and applying any reliefs), currently £10,100 (2009/10). The tax is currently charged at 18%. ISA investments are free of CGT. |
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| Capital Growth |
An increase in the value of an investment. |
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| Cash Fund |
A fund that invests in cash investments, such as bank deposits, and has the potential to achieve higher returns than high-street deposit accounts while maintaining a similar level of security. |
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| Citywire Fund Manager Ratings |
Ratings which track the performance of individual fund managers. Citywire calculates a Manager Ratio which reflects how much 'added value' in terms of outperformance against the benchmark the fund manager has delivered. Fund managers who achieve or exceed certain performance thresholds, based on their 36 month Manager Ratio, are assigned 'AAA', 'AA' and 'A' ratings. Citywire states that 'only a handful of managers receive a rating'. |
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| Closed ended funds |
Like companies, closed-ended funds issue a fixed number of shares to the public in an initial public offering, after which, shares in the fund are bought and sold on a stock exchange. The price of a share in a closed-ended fund is determined by market demand as well as the funds underlying assets. |
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| Collective investment schemes |
An investment where a group of investors pool their money into a fund such as a unit trust, which is then invested in a wide spread of stocks and shares and fixed interest securities. Investors receive units in the fund and the fund is managed by a fund manager who aims to achieve maximum returns based on the investment objectives and policy of the fund. |
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Contract for Difference |
A type of derivative instrument that generally provides an efficient way of securing exposure to the movement in price of an underlying share or index without owning the stock or physically investigating in the index. Such instruments can be used with the aim of gaining a benefit from either increases or decreases of the value of the underlying asset.
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| Corporate Bonds |
A bond issued by a company in order to raise money. The bonds are issued with a promise to pay the money back at a fixed time along with interest at a fixed rate. These bonds often pay higher rates of interest than government bonds since the risk of default is higher. |
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| Decile ranking |
A ranking in percentiles that are multiples of 10. For example, funds in the top decile are ranked in the top 10% of funds in their peer group. |
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| Deposit account |
A bank or building society account that earns a steady rate of interest in which your capital is secure. (up to FSCS limits) |
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Derivative |
A financial instrument the change in value of which is linked in some way to the movement in the price of one or more underlying instruments (e.g. individual securities currency exposure or financial indices). Such instruments can be used to give exposure to, or to hedge against, movements in the price of the underlying asset in a more economical way than investing in the asset directly. Top |
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| Discretionary investment |
Where a fund manager has complete discretion (within the investments prescribed limits) as to where he or she invests clients' capital. |
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| Distribution |
The income paid out to investors from a unit trust in the form of interest or dividends. |
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| Diversification |
A strategy designed with the aim of reducing exposure to risk in a portfolio by combining a variety of asset classes which are unlikely to move in the same direction at the same time. |
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| Dividend |
A share of a company's profit distributed to shareholders. Dividends provide an income in addition to any capital growth, and generally increase as the profitability of the company increases. |
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| Dividend yield |
The income a company pays out to its shareholders in the form of dividends, expressed as a percentage. It is calculated by dividing the dividend payment of a share by the current market price of a share. |
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| Emerging market |
A financial market of a developing country with high growth expectations and typically a higher level of volatility. |
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| Equities |
Another name for shares in a company. |
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| Equity exposure |
The proportion of a fund invested in stocks and shares. |
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| Ex Dividend Date |
The date between a fund's accounting date and when it pays out its income. If an investor does not own units in the fund during this period, they will not be eligible for the income. |
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| Economic Growth |
An increase in an economy's ability to produce goods and services over time. |
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| Fettered |
The manager of a fettered fund of funds can only invest in the funds of the investment house that employs him or her. |
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Financial Services Authority
(FSA) |
The Financial Services Authority is the UK regulator for the financial services industry. |
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| Fixed Interest |
An asset class which carries a fixed rate of interest, normally payable for a pre-determined period. Issuers of such investments can be governments, local authorities and corporations. |
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| FTSE All-Share |
An index of all the UK companies listed on the London Stock Exchange. |
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| FTSE Mid 250 Index |
An index of the 250 largest UK companies below the top 100 listed on the London Stock Exchange. |
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| FTSE Small Cap |
An index of the 500 smallest UK companies listed on the London Stock Exchange. |
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| FTSE 100 Index |
An index of the 100 largest UK companies listed on the London Stock Exchange. |
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| Fund |
A form of collective investment where an investors' individual or group money is pooled and invested in a wide spread of stocks and shares as well as fixed interest securities. Investors receive units in the fund and the fund is managed by a fund manager who aims to achieve maximum returns based on the investment objectives and policy of the fund. |
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| Funds of funds |
Funds comprising a portfolio of underlying Unit Trusts or Open-Ended Investment Companies (OEIC). |
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| Fund size |
The total value of assets held within a fund. |
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| Fund Supermarket |
A company which enables investors to buy, sell and manage their investments with different fund management companies through a single account. |
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Future |
This is a contract to buy or sell a commodity or a financial instrument such as shares or an index, at a future date, at a fixed price which is agreed now.
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| Gilts |
Bonds issued by the UK government. The bonds are issued with a promise to pay the money back at a fixed time along with interest at a fixed rate. Also known as fixed interest securities. |
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| Global fund |
A fund which invests in stocks and/or bonds in any region of the world. |
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Gross Exposure |
This illustrates the total of the funds "long" and synthetic "short" positions in relation to the overall assets of the fund. For example if the fund in 60% "long" and 50% "short" the fund is 110% Gross invested. Top |
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| Gross Income |
Dividends and interest paid out before income tax is deducted.
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| Growth Fund |
A fund designed to provide capital appreciation by investing in companies with the potential to grow their earnings over time. Such companies typically reinvest earnings into the business to fund future expansion. The aim is that the shares in the selected companies will increase in value, allowing the fund to reap the benefits of capital gains. |
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| Growth Investing |
An investment approach that seeks capital appreciation by selecting stocks which the fund manager believes will go up in price. |
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| Growth stocks |
Companies expected to grow their earnings over time. |
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| High yield bond |
Bonds which offer high rates of interest. Generally a high yield bond has higher risk of default. |
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| Holding |
The amount a fund has invested in a company or the amount of units/shares an investor owns. |
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| I |
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| Income fund |
A fund that seeks a regular income in the form of dividends. Such funds invest in high-quality, cash-generative companies, judged capable of delivering sustainable growth in dividends over the long-term, and/or fixed interest securities. If the income is not needed immediately, investors can reinvest the income enabling them to buy more dividend paying units and accumulate a higher income for when they do eventually need it. |
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| Income investing |
An investment approach that seeks a regular income in the form of dividends by selecting stocks judged capable of delivering sustainable growth in dividends over the long term. |
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| Income tax |
Payable on any income received from earnings, investments and savings. |
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| Income units |
Payout of any dividends or interest an investment makes, usually on set dates each year. |
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Independent Financial
Adviser (IFAs) |
A professional individual or firm authorised by the Financial Services Authority to provide financial advice and sell investors financial products. |
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| Individual Savings Account (ISA) |
An Individual Savings Account (ISA) is essentially a wrapper in which you can place your savings and investments to protect them from capital gains tax. If you are a higher rate tax-payer, you will also enjoy a tax benefit of 22.5% on dividend income. ISAs do not have to be declared on tax returns. The maximum investment into an ISA is £10,680. |
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| Initial Charge |
The sales charge payable by investors on the purchase of units in a fund. This charge covers expenses like administration and dealing costs. |
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| Institutional Investor |
Large financial institutions that invest, such as pension funds, unit trusts or investment companies, and insurance companies. |
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| Investment Companies |
Has similar objectives and characteristics to unit trusts but like companies, has a fixed share capital and is listed on the London Stock Exchange. Investors are able to buy shares in investment companies openly on the stock market. The money raised from the sale of shares is used to buy a range of underlying investments. |
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| Junk Bond |
A high-risk bond with a low credit rating. These bonds often offer a high yield reflecting the increased risk of the issuer defaulting. |
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| K |
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| Key Features Document (incorporating the Simplified Prospectus) |
A document which must be offered to an investor before purchase. It includes key information about the fund including charges, level of risk involved, and what the fund aims to deliver. |
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| Launch Date |
The date on which a unit trust starts investing in assets and is introduced to the marketplace |
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| Lipper Leaders |
Scores which have been developed to guide investors and their advisers to select funds that best suit the investor's individual needs. Funds awarded Lipper Leader status have excelled when compared to similar funds. Lipper's scoring system is built on three years of historical performance and is based on two main elements: 'preservation', the ability of the fund to preserve capital, even during any market downturn and 'consistent return', the ability of a fund to provide consistently superior returns when compared to similar funds. Both measures are scored on a 1 to 5 basis (with 5 being the highest). Funds that score 5 for either measure are awarded 'Lipper Leader' recognition. |
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| Listed Company |
A company whose shares can be bought or sold on a stock exchange. |
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Long Only |
An investment strategy that involves the purchase of equities and other securities with the aim of generating capital gains and income for positive performance of those assets. Top |
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| Lump Sum |
An amount of money paid as a single payment instead of periodic payments. |
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| M |
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| Management Group |
The name of the fund management house that runs and/or promotes funds. |
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| Net Asset Value |
The total value of a company or fund less its liabilities. Net asset value per share is calculated by dividing this figure by the number of ordinary shares/units in issue. |
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Net Exposure |
This illustrates the difference between the 'long' and 'short' positions in relation to the overall assets of the fund. For example if the fund has 60% exposure to 'long' positions and 50% exposure to 'short' positions the fund is 10% 'net long'. Top |
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| Net income |
Dividends and interest paid out after income tax has been deducted. |
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| O |
| Offshore Portfolio | A fund established outside the UK, which is not registered for sale to individuals in the UK.
Top | | | | | Old Broad Street Research (OBSR) Fund Ratings | Ratings determined on the premise that the fund selection process should, while taking past performance into consideration, place greater weight on identifying factors which will affect future performance. 'AAA' ratings are given to funds that demonstrate powerful investment processes believed to translate into exceptional long-term performance. 'AA' rating is an indication of highly superior quality based on process/track record. An 'A' rating signifies a highly commendable fund. |
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| Open Ended Investment Company (OEIC) |
An alternative structure for a collective investment scheme, similar to unit trusts, but constituted as companies rather than trusts. |
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| Open Ended Fund |
A fund whose number of units can be increased or decreased according to demand. Unit trusts and OEICs are examples of open-ended funds. |
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Over the counter |
A trade in financial instruments between two parties which does not make use of the facilities of recognised exchange. Top |
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| Passive Managed Funds |
An investment strategy that aims to match the performance of a stock market index through tracking its progress by buying and selling shares in the same proportions as the index. These funds are also known as tracker funds or index (tracker) funds. |
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| Pay date |
The date on which a dividend is paid to shareholders / unitholders. |
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| Performance |
The results of an investment over a given period of time. |
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| Portfolio |
A collection of investments held by an institution or an individual. |
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| Quartile ranking |
A ranking in percentiles that are multiples of 25. For example, top quartile funds are ranked in the top 25% of funds in their peer group, while second quartile funds are ranked between 26% and 50%. |
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| Quoted company |
A company whose shares can be bought or sold on a stock exchange. |
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| Recovery shares |
Shares which have fallen in value but are thought capable of returning to their former price. |
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| Redemption date |
The repayment date/maturity date for bonds and other fixed interest securities. |
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| Reinvestment of income |
Income from a fund reinvested to purchase further units to increase the value of the holding. |
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| Retail Investor |
A private investor (ie. member of the general investing public) who buys units in a fund for his or her personal portfolio. |
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| Return |
The amount of capital growth or income an investment generates. |
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| Risk profile |
An assessment of the degree to which an investor is prepared to accept losses at the expense of potential gain. |
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| Sector |
A term used to differentiate investments from each other by way of country, market or prime source of business. The Investment Management Association divides unit trusts and OEICs into a variety of sectors to keep together funds of a similar type. Investors can then compare funds with similar objectives and investment strategies. |
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| Sector Weighting |
The proportions of a fund held in industry sectors. |
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| Shares |
A stake in the ownership of a company. Also known as equities. |
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Short Selling |
If a fund manager believes a stock is likely to fall in price, they can aim to benefit from this fall by borrowing an amount of this stock from a broker and selling them on the open market. The Manager must eventually return the borrowed stock by buying it back from the open market. If the stock has fallen in price as hoped the manager can buy it back for less than they sold it, making a profit. For the time the fund manager has borrowed the stock before returning it, this is described as a "short position" UCITS regulations prohibit the short selling of physical securities but allow the creation of synthetic short positions through the use of cash settled derivatives, e.g. CFDs, as long as any exposure created is covered by the assets of the fund. Top |
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| Shareholder |
The owner of shares in a company. |
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| Simplified Prospectus |
The Simplified Prospectus builds on the existing UK regime for investment product information - the Key Features document - by adding new information requirements only where it is necessary to meet the revised EU standards. |
| Socially Responsible Investment (SRI) | Investment in companies providing solutions to environmental and social issues. Jupiter's SRI team focus on six green investment themes - clean energy, water management, green transport, waste management, sustainable living and environmental services - when selecting companies in which to invest. |
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| Standard & Poor's Fund Ratings |
An independent company that provides ratings on funds to help investors evaluate the performance of a fund and the consistency of that performance relative to other funds in the sector. Standard & Poor's have two methods of fund classification; Standard & Poor's Star Ratings and Standard & Poor's Fund Management Ratings. |
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| Stock Exchange |
A market where stocks and shares are bought and sold. |
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| Stock selection |
The process by which a manager selects favoured stocks or shares for a portfolio. |
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Swap |
A contractual agreement between two parties to exchange future cash flows resulting from two different baskets of assets according to a pre-arranged formula. For example one party may contract to exchange the future profit or loss from an equity share in return for the interest on a cash balance of equivalent value. Top |
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| Switching |
When an investor transfers his or her investment from one unit trust to another with the same provider. |
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| Tax efficient investments |
Investments that offer tax relief on contributions, income or capital gains. |
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| Tax year |
The 12-month period commencing 6 April and ending 5 April of the following year. |
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| Tied Agent |
A Financial Adviser who can only sell products from one company, such as a high street bank. |
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| Top down |
An investment approach where the fund manager bases portfolio construction on the managers view of the general economic outlook. Holdings likely to benefit from the current environment are then selected for the portfolio. |
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| Total return |
The return on an investment which includes both capital appreciation and reinvested income. |
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| Trustee |
A trustee oversees the fund manager's activities and must be independent of the fund manager. He or she acts in the interests of the unitholders and looks after the assets on their behalf, ensuring the fund is invested according to its investment objectives and that the fund manager is complying with regulations. |
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| U |
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| Underlying funds |
The individual funds that make up a portfolio within a fund of funds.
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| Undervalued stocks |
Shares priced below their perceived value. |
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Volatility |
Volatility is the relative rate at which the price of a security moves up and down. If the price of a stock moves up and down significantly over the period of measurement it is said to have high volatility. If the price moves smoothly upwards or downwards over the period it is said to have low volatility, and in the extreme if the price movement leads to a straight line progression over the period it has zero volatility.
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