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A
Absolute return
A fund’s absolute return shows its gains or losses over a period of time, expressed as a percentage of the starting value of the investment. The absolute return is contrasted to the relative return, which is the return compared to that from the fund’s benchmark.
Active position
A holding that is materially different to the benchmark.
Active management
Active management means investing in shares and buying and selling holdings with the aim of generating higher returns than those available from investing in the market as a whole or following an index.
Annual charge/Annual management charge (AMC)
The AMC is the ongoing fee payable to the fund’s management company for their work administeringing the fund, charged as a percentage of the net asset value of each fund.
B
Benchmark
The performance of a fund is typically measured against its benchmark, usually an index of all the shares available for the fund manager to select from.
Benchmark-unconstrained
When seeking to generate returns, the fund manager does not build the fund with reference to the structure of the benchmark.
Bottom-up stock picking
Choosing stocks based primarily on their individual characteristics and only secondarily with reference to wider market and economic conditions.
C
Capital growth
When the value of the original investment has increased (excluding income), this is described as capital growth.
Compounding returns
Compounding returns is the process by which an asset’s gains, from either capital gains or interest, are reinvested to generate additional returns over time.
Concentrated portfolio
A concentrated portfolio contains a relatively small number of investments compared to the benchmark.
Contrarian style
A fund manager investing style is said to be contrarian if it involves going against the prevailing market sentiment.
D
Denominations
Funds are available to buy in different currencies, including sterling, the euro and the US dollar.
Developed economies
See Established economies.
Discrete 12-month performance
The fund’s gains or losses from its starting value over specific twelve month periods.
Domicile
A fund’s domicile is the country in which it’s legally incorporated and under whose authority it is regulated.
E
Emerging markets
An emerging market is a country whose economy is still in the process of developing. An emerging market typically has potential for faster growth rates than an established or developed economy but is also likely to be higher risk.
Equities
Also known as shares, equities represent part-ownership of a company and are typically traded on a stock exchange
Established economies
Established economies are highly developed and have a high income per person compared to less developed economies. They typically have lower growth rates than emerging markets but are also likely to be less risky. The UK and US are examples of established economies.
ESG
ESG investing is defined as utilizing environmental, social, and governance (ESG) criteria as a set of standards for a company's operations that socially conscious investors use to screen potential investments.
F
FE Investments Approved
FE Investments is a global investment fund dtata provider. It rates funds according to various criteria, adding recommendations to their ‘approved’ list.
FTSE All-Share Total Return
The FTSE All-Share Total Return is an index managed by FTSE Russell which has roughly 600 constituents, consisting of all the companies listed on the London Stock Exchange, and includes the income from dividends along with capital gains or losses of the shares of companies in the index.
Fund size
A fund’s size shows the total value of the fund's holdings.
Fund Awards & Ratings
There are several independent companies that monitor funds, provide ratings and give awards to top performing funds.
FundCalibre
FundCalibre is an independent fund research business which awards its top-rated funds according to various criteria.
G
Global multi-cap portfolio
A global multi-cap portfolio contains companies of all different sizes, from all over the world.
Growth stocks
A growth stock is a share in a company that it is expected to grow faster than the market average over time.
H
High conviction
High conviction is when fund manager has a high level of confidence that an individual company, industry or country will outperform. A high conviction portfolio is made up entirely of such positions.
Historic yield
The historic yield reflects a fund’s dividend payments over the past 12 months as a percentage of its share price.
I
IA sector/Lipper ranking
The Investment Association is a UK entity that sets the criteria for 50 different fund sectors. An example is UK All Companies, made up of funds investing in companies listed on the London Stock Exchange. Lipper is a private company managing a separate set of sectos. The benchmark allows investors to see how a fund is doing relative to the market from which it selects its investments. A sector shows how a fund is doing relative to other funds investing in the same market.
Index
An index is a basket of shares which aims to represent a specific investment segment. An example is the UK’s FTSE 100, which includes the largest companies listed on the London Stock Exchange, weighted by their capital value. Indices are used for many purposes, such as benchmarks to measure the performance of investments or to track the health of a given market.
Initial charge
This is a one-off fee, also known as an entry charge, payable to the fund’s management company on the initial purchase of units.
ISIN (International Securities Identification Number)
All funds have unique ISIN numbers by which they can be identified for trading and reporting purposes.
K
Key Investor Document (KID)
The KID is a three-page document for EU-domiciled funds providing information about the features, risks, and costs of investment products. (It also contains forward-looking performance scenarios.) The KID was introduced by the EU regulations with the aim of helping retail investor to make more informed decision on investments.
L
Large-cap companies
There are no set definitions of what makes a company large, mid-sized or small. In the UK, FTSE Russell, a widely used provider of market indices, divides companies into three groups without regard to capital value. The 100 largest make up the FTSE 100, the next 250 make up the 'mid-sized' FTSE 250 while everything smaller is the FTSE Small Cap. Fund managers sometimes have their own definitions relative to market value.
Liquidity
Liquidity denotes how easily a stock can be bought or sold. If a stock is described as highly liquid, it means it can be bought and sold relatively easily and cheaply.
Listed shares
If a company is listed, it means investors can buy its shares through a regulated stock exchange.
M
Market capitalisation (Market cap)
A company’s market capitalisation is the total value of its outstanding shares. It is calculated by multiplying the price of each share by the total number of shares that the company has issued.
Mid-cap companies
There are no set definitions of what makes a company large, mid-sized or small. In the UK, FTSE Russell, a widely used provider of market indices, divides companies into three groups without regard to capital value. The 100 largest make up the FTSE 100, the next 250 make up the 'mid-sized' FTSE 250 while everything smaller is the FTSE Small Cap. Fund managers sometimes have their own definitions relative to market value.
Mission-driven companies
Mission-driven companies have goals beyond purely profit making. They are also trying to improve the world for the better.
MSCI AC Asia ex Japan Index
The MSCI AC Asia ex Japan is a large and mid-cap index, representing two developed economies (excluding Japan) and eight emerging economies in Asia. It is constructed and run by MSCI.
MSCI AC Asia ex Japan Small Cap Index
The MSCI AC Asia ex Japan Small-Cap Index represents small-cap companies across two developed economies (excluding Japan) and eight emerging economies in Asia. It is constructed and run by MSCI.
MSCI AC World Index
The MSCI AC World Index is a global equity index, containing hundreds of stocks from across the world. It is constructed and run by MSCI.
MSCI AC World Index NR
This is the MSCI AC World Index but measuring 'net return' rather than gross.
MSCI ACWI Investable Market Index
This is the MSCI AC World Index but including only stocks that are available to all investors. It may exclude stocks held by a sponsoring state, for example.
MSCI Emerging Markets Index
The MSCI Emerging Markets Index represents companies listed in emerging markets
MSCI Europe ex UK Index
The MSCI Europe Index represents companies listed in the developed economies of Europe, excluding the UK.
MSCI Europe Index
The MSCI Europe Index represents companies listed in the developed economies of Europe, including the UK.
N
NAV
The net asset value (NAV) of a fund is the sum of its total assets minus its total liabilities, expressed as either the total fund size or as the price per single unit.
O
Ongoing charge figure (OCF)
The OCF comprises the fund’s expenses; this charge is taken from a fund over a year and may change from year to year. Investors pay the OCF in addition to other possible management and performance charges also due.
P
Pay date
Income distributions are paid from the fund to investors on the pay date, which is usually the last business day of the month.
Performance fee
Performance fees are levied on some funds. It means investors pay the fund manager a percentage of the positive returns made on the fund, in addition to the other fees due. Performance fees are usually reset annually and may apply to either absolute returns or to returns relative to a benchmark.
Portfolio turnover
Portfolio turnover indicates the total value of the stocks that have been bought and sold in a fund over a certain period of time and is normally expressed as a percentage of the fund's asset value.
Proprietary framework
If a framework is proprietary, it is unique to and the property of the firm where it was devised.
Key Investor Information Document (KIID)/Key Investor Information (KID)
The KIID/KID is a two-page document containing basic information about a fund, including its objectives, charges, risk level and past performance.
Prospectus
Prior to launch, investment funds are required to publish a prospectus setting out their intentions, their operational basis and terms and conditions.
Q
Quartile
The performance of an investment fund is often measured against the performance of funds investing in the same market. The results are typically ranked in quartiles, each quartile being one fourth of the all the funds in the group. A fund in the first quartile is in the top fourth for the given period. See 'Sector quartile ranking'
R
R Advisor Centre
Adviser Centre is an agency that rates investment funds in the UK. Where it recommends a fund, the fund can mark its literature R Adviser Centre.
Risk and reward profile
The risk and reward profile is a way of measuring the potential gains and losses of an investment against the risk being taken. It compares the expected return of an investment with the possible risks involved in making that investment. A higher risk usually means a higher reward, but also a higher chance of failure. A lower risk means a lower reward, but also a lower chance of failure.
RSMR (Rayner Spencer Mills Research Limited)
RSMR offers independent fund research, rating its approved funds according to its particular criteria.
S
SDG taxonomy (Sustainable Development Goals)
The 17 SDG classifications were developed by the United Nations. They were agreed in 2015 and include goals relating to issues such as climate, education, health and mobility. The fund manager has developed an approach ("Taxonomy") for identifying how the SDGs can be applied to the activities of listed companies to identify those that are growing from providing solutions to underserved social or environmental needs in the global economy.
Sector quartile ranking
Sector quartile rankings show the performance of an investment fund relative to other funds in its sector. An example of a sector is the UK All Companies, administered by the Investment Association and made up of funds investing in all the companies listed on the London Stock Exchange.
Securities markets
Securities markets are financial markets in which securities, such as bonds and shares, are traded. An example is the London Stock Exchange.
SEDOL (Stock Exchange Daily Official List)
A fund is assigned a SEDOL by the London Stock Exchange, who use it as an identity for a security for trading purposes.
SFDR (Sustainable Finance Disclosure Regulation)
The SFDR requires asset managers to provide certain disclosures to communicate sustainability information on the funds they manage to investors. It aims to make it easier to compare the sustainability profile of EU-domiciled funds, ultimately making them better understood by investors.
Share class
Share class is a designation applied to a type of share in a fund. There can be several share classes within the same fund, with different fees and conditions, designed to support different types of investor.
SL (since launch)
Is the period of time elapsed since the fund was launched and is usually associated with the performance over that time period.
Small-cap companies
There are no set definitions of what makes a company large, mid-sized or small. In the UK, FTSE Russell, a widely used provider of market indices, divides companies into three groups without regard to capital value. The 100 largest make up the FTSE 100, the next 250 make up the 'mid-sized' FTSE 250 while everything smaller is the FTSE Small Cap. Fund managers sometimes have their own definitions relative to market value.
Strategy size
The strategy size is the total size of all funds and accounts run to that strategy. These may include funds registered in the UK and in other jurisdictions, such as Ireland or Luxembourg, as well as separate accounts run for specific clients.
T
Tax status
A fund’s tax status denotes which country’s tax reporting regime that fund follows.
Thematic
Thematic investing focuses on exposure to long-term global trends, rather than following certain sectors or countries. For example, a thematic fund could be exposed to companies related to artificial intelligence, environmental technology, or water and waste.
Top-down stock picking
Top-down investors construct portfolios according to the prevailing economic environment, looking at sectors and countries they believe will prosper.
U
UCITS (Undertakings for Collective Investment in Transferable Securities)
A type of EU regulated fund (which may consist of several sub-funds) with the objective of the collective investment of capital raised in securities such as shares or other liquid financial assets. UCITS operate on the principle of risk-spreading, and can be marketed and sold to retail investors
V
Valuation point
The point in time at which the NAV is calculated. This happens at the same time every working day, typically 12pm.
Value stocks
Value stocks are shares in companies trading at a lower price than what the company’s performance or financial situation may indicate. Value investors look for stocks that are undervalued by the market on a range of financial metrics and have the potential to increase in price over time.
Volatile
A security or portfolio is said to be volatile if its price moves signifcantly more in value and more frequently over time than the majority of other securities.
X
XD date
On the ex-dividend date, an investor’s entitlement to receive the most recently declared dividend with any shares bought and sold becomes invalid.
Y
Yield
Income from an investment is shown as the yield, expressed as a percentage of the value of the investment.