Please Select your Investor Type to Continue
Glossary

Term Definition

Absolute performance

 

Any gain or loss in the amount invested. Relative performance is performance relative to a chosen benchmark such as the FTSE 100 Index.

Alpha

A manager's contribution to return performance that cannot be attributed to market performance. How the manager performed if the market has no gain or loss.

Asset classes

The main asset classes are equities, bonds and cash (and equivalents). Other asset classes include hedge funds, commodities, real estate and private equity.

Basis points (bps)

One hundredth of one per cent (50 basis points = 0.5%).

Bear or Bull market 

A bear market is a prolonged market period where investment prices fall, usually accompanied by widespread pessimism as a result of economic recession, high unemployment, or rising inflation.

A bull market is a prolonged period where investment prices rise faster than their historical average, as a result of economic recovery, boom, or investor psychology.

These terms are most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

Beta

 

The ‘beta’ of a stock or a market index is the percentage by which the price of that stock or index changes if the general price level of the market as a whole changes by 1%. For example, Asian markets’ betas have been greater than 1, indicating that for a given 1% change in global equities, these Asian indices gained (or lost) more than 1%.

Capital Gains

 

The amount that an asset’s selling price exceeds its initial purchase price; a realized capital gain is an investment that has been sold at a profit, while an unrealized capital gain is an investment that has not been sold yet, but would result in a profit if it were to be sold.

Capital Loss

 

A decrease in the value of an investment or asset from the initial purchase price; (opposite of Capital Gain). A realized capital loss is an investment that has been sold at a loss, while an unrealized capital loss is an investment that has not been sold yet, but would result in a loss if it was to be sold.

Distribution Yield

Reflects the amounts that may be expected to be distributed over the next twelve months as a percentage of the unit price of the fund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminary charge and investors may be subject to tax on distributions.

Dilution Adjustment / Swing Factor

 

Single priced funds

For funds operating a single pricing policy we reserve the right to charge a dilution levy/adjustment to protect your investment from the costs of buying or selling investments that result from other investors joining or leaving the fund. The amount of any such levy/adjustment is calculated by reference to the estimated cost of dealing in the underlying investments, including any dealing spreads, broker commissions (and, where applicable, transfer taxes and stamp duty). When we impose a dilution levy on a particular investor or group of investors, this is paid into the fund and helps to protect your investment from the costs of the resultant transactions.

Dual priced funds

With dual priced funds, net contributions take place at the issue price and net withdrawals take place at the cancellation price. The issue price is calculated by reference to the buying prices of the underlying investments, plus an allowance for broker commissions (and, where applicable, transfer taxes and stamp duty). The cancellation price is calculated by reference to the selling prices of the underlying investments, less an allowance for broker commissions and transfer taxes. This means that, when investments are bought or sold as a result of other investors joining or leaving the fund, your investment is fully protected from the costs of these transactions.

 

 

Diversification

 

Spreading money among several investments or asset classes for the purpose of reducing risk in a portfolio; combining a variety of investments (stocks, bonds, real estate, etc), which are less likely to all move in the same direction at the same time or at the same rate; reduces both upside and downside potential but allows for more consistent performance under a wide range of economic conditions.

Duration

Duration, also known as 'effective' or 'Macaulay' duration, is the weighted average term to maturity of the cash flows from a bond, it is expressed as a number of years. The bigger the duration number, the greater the likely changes in the price of the fund should market interest rates fluctuate.

Exit charge

 

This is the maximum charge that may be taken out of your money before the proceeds of your investment are paid out. We do not impose an exit charge on our funds at present.

Fair value

An estimate of the potential market price of an asset.

Fixed income

 

A debt instrument paying a regular fixed or variable coupon until its maturity date, at which date it pays principal.

Historic Yield

Reflects distributions over the past twelve months as a percentage of the unit price, as at the date shown. It does not include any preliminary charge and investors may be subject to tax on their distributions.

Liquidity 

The ability of an investment to be easily converted into cash with little to no loss of capital, no price discount and with a minimum of delay.

Loan to Value Ratio

In some circumstances, we may be prepared to lend against the value of securities. The loan to value figure indicates the maximum percentage of an investment that we may be prepared to consider as collateral.

Market Capitalisation (“Market Cap”)

The value of a company calculated by multiplying the number of outstanding shares by the stock price of a single share.

Mega Cap

Equity stocks where the total market capitalisation exceeds £50 billion.

Large Cap

Equity stocks where the total market capitalisation is greater than £3 billion but less than £50 billion.

Medium Cap

Equity stocks where the total market capitalisation is greater than £1 billion but less than £3 billion.

Small Cap

Equity stocks where the total market capitalisation is greater than £50 million but less than £1 billion.

Micro Cap

Equity stocks where the total market capitalisation is less than £50 million.

Modified Duration

Modified duration measures the price sensitivity of a bond in a response to a change in interest rates.

Ongoing Charges (OGC)

This is calculated based on the actual expenses incurred by the fund. In some cases, such as a new fund, an estimate based on future charges may be used. It covers all aspects of operating the fund over a 12 month period, including fees paid for investment management, administration and the independent oversight functions. Where the fund includes investment in other funds, the figure includes the impact of the charges imposed in those other funds.

Option Adjusted Duration

The Option Adjusted Duration (“OAD”) is similar to Duration, it is a measurement of sensitivity to changes in interest rates but also takes account of any special features of the bonds held such as the right of the issuer to change the terms of the bond under certain circumstances. Together, the Duration and OAD are guides to the sensitivity of the fund to changes in market interest rates which are typically, in particular, affected by changes in expectations about future inflation.

Overweight, underweight

 

The relative importance of a single asset class in a portfolio compared to a pre-specified benchmark. To be overweight in bonds and underweight in equities implies that you believe bonds will outperform equities.

 

Performance Fees

 

A performance fee may be charged by some funds where a fund performs better than (outperforms) a defined performance benchmark. Where this happens, a performance fee is charged based on the percentage of this outperformance. For further information on the calculation of any performance fee, please see the Key Investor Information Document (KIID) or the Prospectus for your fund.

Portfolio Transaction Costs

 

A fund will incur broker commissions and transfer taxes as a necessary part of buying and selling the underlying investments to meet its objective. A significant proportion of these costs are recovered from investors joining and leaving the fund through the swinging price. The adjustment applied is designed to reflect these costs. The effect of these costs is one part of the ongoing charges figure. In the case of shares, broker commissions and relevant taxes are paid on each transaction. In addition, there is a dealing spread between the buying and selling price of the underlying investments. Unlike shares, other types of investments such as bonds, money market instruments and derivatives do not have separately identifiable transaction costs but are included in the dealing spreads. Dealing spreads may vary considerably depending on the transaction value and market sentiment. Comparing transaction costs may also give a false impression of the relative costs of investing in funds for the following reasons:

  • Transaction costs do not necessarily reduce returns. The net impact of dealing is a combination of the costs of investment and the effectiveness of the manager’s decisions.
  • Historic transaction costs are not necessarily an indicator of future impact on performance.
  • Transaction costs from buying and selling investments may be recovered from investors joining or leaving the fund.
  • Transaction costs vary from country to country.
  • Transaction costs vary depending on investment type.
  • As a manager’s decisions are not always predictable, transaction costs may also be variable

 

Pricing methodology

 

 

 

We operate a single pricing methodology for our funds and reserve the right to adjust our funds’ prices to protect your investment from the costs of buying or selling investments that can result from other investors joining or leaving a fund. The amount of any such adjustment is calculated by reference to the estimated costs of dealing in the underlying investments including any dealing spreads, broker commissions and transfer taxes such as stamp duty. We usually adjust the price to the maximum extent possible whether net contributions and withdrawals take place. Details of the maximum adjustment that may be charged is shown in the Pricing and Performance section for each fund and further detail is included in the Key Investor Information Document or Prospectus for your fund.

Risk appetite

The willingness of investors to take on financial risk, e.g. by investing in riskier assets.

Stamp Duty Reserve Tax (SDRT)

UK Funds may be required to pay SDRT as a result of investors joining and leaving the fund, in proportion to the amount that the fund has been invested in UK Equities. Details of the SDRT incurred in the most recent annual accounting period are shown in the Pricing and Performance section for each fund.

Systemic risk

The risk that an entire market, or the whole financial system, will collapse.

Underlying yield

 

Reflects the annualised income net of expenses of the fund (calculated in accordance with relevant accounting standards) as a percentage of the unit price of the fund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminary charge and investors may be subject to tax on distributions.

Yield spread

The yield differential between bonds, often a risky bond and a similar maturity benchmark security.

Yield-to-Maturity

Yield to Maturity ('YTM') is an estimate of the average annual percentage return that will be received should all the bonds in the fund be held until their maturity dates and assuming they all make the promised payments.

The main difference between this yield measure and the more familiar running yield is that it takes account of the fact that, at maturity, any bond should pay out at its face value, even though it may currently be trading above or below that face value. The YTM does not account for the risk that the issuers of the bonds may fail to meet their obligations, in which case the returns will be lower.

 

Yield-to-Worst

Yield-to-Worst (“YTW”) is an estimate of the lowest yield that will be received on the bond holdings without the issuers actually defaulting. The YTW is calculated by making worst-case scenario assumptions and calculating the return that would be received if each issuer uses provisions, including prepayments, calls or sinking funds. It is not the actual worst yield that will be received, as the true worst case will be in the event that one or more issuers fail to meet their obligations to the investors in a bond.