Glossary

The total return of an asset, portfolio or fund over a given period of time OR an investment approach that attempts to achieve a return which is not benchmarked against an index.

Units of a fund in which any interest earned or dividends paid are automatically reinvested into the fund.

Where a fund manager actively selects investments for a portfolio with the goal of performing better than a benchmark index. See also passive funds.

Active Share is a measure of the stock holdings in a portfolio that differs from the benchmark index.

A measure of fund performance that compares the return of a fund with that of its benchmark, taking account of the risk taken by the fund. Alpha is often considered to represent the value that a fund manager adds to or subtracts from a fund's return.

Investments outside of traditional asset classes of stocks and bonds. Alternatives include commodities, hedge funds, private equity and unlisted companies.

An annual fee paid to a fund management company for the management and administration of a fund. The fee accrues daily and is reflected in the published unit prices of the fund.

The price at which an investor is willing to sell a security. See bid price funds.

How a fund manager spreads the investments of a fund, for example between different industry sectors, countries or different kinds of investment such as shares and bonds (depending on what is appropriate for the remit of the fund). The purpose of asset allocation is to improve risk-adjusted returns through diversification.

A wide category of investment e.g. shares, bonds, cash, where a market exists for the objective of trading these assets.

A fund typically investing in both stocks and bonds.

The interest rate at which the Bank of England lends to financial institutions.

Where a fund manager actively selects investments for a portfolio with the goal of performing better than a benchmark index. See also bull market.

An index of securities against which an investment trust can compare performance.

Beta is a measure of the volatility of a fund's returns in comparison to the performance of the market as a whole. If a fund has a beta of less than one it is less volatile than the market, while a beta of more than one means it is more volatile.

The lowest Bid price foris the price at which a selleran investor is willing to sellbuy a security. See ask price.

Indicates large, well-established companies.

A debt instrument (‘I Owe You’) issued by a company (corporate bond), government (sovereign/government bond) or other institution in order to raise money. In most cases, bonds pay a fixed interest rate (coupon) over a fixed period of time and will be repaid on a particular date. See coupon.

An investment approach in which a fund manager analyses individual companies in terms of such factors as the strength of its management, growth prospects, balance sheet and operating models, to select companies for a portfolio. Market conditions and economic issues are taken into consideration but are of lesser importance.

A period during which the stock market rises.

When an investment is sold for a higher price than it was purchased.

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)

An increase in the value of an investment excluding any income that may have been received.

The amount of debt and/or equity employed by a company to fund its business.

A measure of the amount of greenhouse gasses, primarily carbon dioxide, released into the atmosphere.

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 rather than solely the fund's underlying assets. Investment trusts are examples of closed-ended funds.

A raw material that can be bought or sold, including industrial items such as iron or oil, as well as agricultural items like milk or coffee.

A share of ownership of a company, often with voting rights.

A portfolio that holds a relatively small number of investments.

An investment style that often goes against the consensus in terms of current market trends or opinion.

A bond that can be converted into shares at certain times during its life, usually at the discretion of the bondholder.

A debt instrument (‘I Owe You’) issued by a company in order to raise money. In most cases, bonds pay a fixed interest rate (coupon) over a fixed period of time and will be repaid on a particular date.

Using shareholder power to influence corporate behaviour through direct engagement with a company’s board and senior management.

The system of rules and principles by which a company is organised.

The regular interest in % paid on a bond.

An assessment of a borrower's creditworthiness, i.e. the likelihood of the borrower to repay its debts.

A company that conducts analysis on governments, companies or other institutions with the aim of assigning them a credit rating. Moody’s Investors Service and S&P Global Ratings are among the most prominent.

The detailed study of the financial situation of companies. Credit research is done to give data and information about a company’s ability to meet its financial obligations.

The difference in yield between two types of bonds with the same maturity date but different credit quality.

A description for investments that generally rely on a positive economic background in order to perform well. They can likewise be expected to perform poorly when the economy is weak.

The risk that a bond issuer may fail to meet its contractual obligation by failing to pay their debts.

A financial instrument that derives its value from its underlying assets. Common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indices. Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives can be purchased “on margin”, i.e. at a fraction of the value of the underlying asset. Thus, they are ‘leveraged’ instruments where the risk of loss can be greater than the initial outlay. Derivatives can be used like insurance contracts (i.e. to hedge market risk) or for investment purposes.

A reduction in the price of an asset. For example, the amount, expressed as a percentage, by which the share price of an Investment Trust is less than its net asset value per share. Discounting is the process of determining the present value of a future payment.

Where a fund manager has complete discretion (within the investments prescribed limits) as to where he or she invests clients' money.

Distressed bonds are those issued by companies or governments which are experiencing financial or operational problems, or may be in default or under bankruptcy.

The income that has either been paid out to investors or reinvested into a fund.

The distribution yield is the amount that may be expected to be distributed over the next twelve months as a percentage of the 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. It is equal to total interest paid divided by the fund’s value.

The spread of different types of investment within a portfolio in order to reduce risk.

The sale or disposal of securities based on corporate behaviour that is not aligned with an investor’s objectives.

A share of a company's profit distributed to shareholders.

The income a company pays out to its shareholders in the form of dividends, expressed as a percentage. It is calculated by dividing the per share dividend payment (per share) by the market price of a share.

The recorded location of a company or fund for tax purposes.

A dual-priced fund has two prices, one at which an investor can buy units/shares and one at which they can sell. The buying price (also called the offer price) is typically higher than the selling price (also called the bid price); the difference between them is known as the “spread”.

Duration: Duration estimates the sensitivity of a bond or bond fund to changes in interest rates. It is measured in years. The longer a bond's duration, the more sensitive it is to interest rate movements.

The earnings of a company divided by the number of shares in issue.

An increase in an economy's production of goods and services over time.

Effective duration estimates the sensitivity of a bond's price to changes in benchmark interest rates. Effective duration is required for the measurement of interest rate risk for complex types of bonds.

A term used to describe a developing country, or its financial market.

A share representing an ownership interest in a company. "Equity market" means stock market.

The proportion of a fund invested in shares.

In investment, a framework used to understand how a company is managing risks and opportunities related to environmental, social and governance factors.

A cut off date after which holders of a share or fund will no longer be entitled to the next subsequent dividend payment or income distribution.

A fund vehicle that is traded like a stock on a stock exchange. It is used to track and mimic the performance of a specific market index.

Describes the level of risk to a particular asset, asset type, sector, market or government. Also, the directional market exposure of a (absolute return) fund.

In bond investing, face value, or par value, commonly means the amount paid to a bondholder at the maturity date, given that the issuer does not default. Investors should note that the market value of traded bonds differs from their face value.

A professional individual or firm authorised by the Financial Conduct Authority to provide financial advice to the public.

The Financial Conduct Authority is a regulator of the financial services industry in the UK.

The FSCS is the UK's statutory fund of last resort for customers of regulated financial services firms. This means that FSCS can pay compensation (up to certain limits) to consumers if a UK authorised bank or building society is unable, or likely to be unable, to pay claims against it.

Assets such as shares or bonds issued by financial institutions such as banks, building societies, insurance companies.

Denotes debt securities that pay a fixed interest rate (e.g. bond, commercial paper). Also, a universal term for bond or debt investing.

A bond with a variable interest rate. The interest rate is variable as it is tied to a benchmark such as LIBOR (London Interbank Offered Rate).

When units in a fund are bought or sold, the price is fixed at the next valuation point.

Stock markets that are typically smaller and less developed compared to emerging markets.

A form of collective investment where investors' money is pooled and invested in a variety of securities.

The total value of assets held within a fund.

The qualitative and quantitative information that contributes to the economic well-being and the subsequent financial valuation of a company, security or currency.

An exchange traded contract between two parties to buy or sell a commodity or a financial instrument at a pre-determined price at a future date.

Growth at a Reasonable Price. An investment strategy that combines the principles of growth investing and value investing to find individual shares.

A measure of a company’s borrowings (debt) as a proportion of assets.

Bonds issued by the UK government.

Bonds issued by governments.

A fixed income security developed to fund a project that has positive environmental and/or climate outcomes.

Falsely giving the impression that a company’s products or services provide greater environmental or ‘green’ benefits than is the case.

Before tax.

Dividends and interest paid out before income tax is deducted.

An investment style that focuses on companies with the potential to grow their earnings significantly over time. – usually growing faster than the market average. Such companies typically reinvest earnings into the business to fund future expansion.

An investment designed to reduce the risk of adverse price movements in an asset by taking an offsetting position. Derivatives are usually used as hedging tools.

The highest level that a fund’s net asset value (NAV) has reached at the end of any 12-month accounting period.

A bond with a high coupon (interest payment) and typically a low/no credit rating (below investment grade, e.g. BBB-). See also investment grade bond.

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

The minimum level of return required before a fund can charge a performance fee.

I Class Shares are typically offered to institutional investors and have high minimum investment requirements. Third party investment platforms such as fund supermarkets may provide access to this share class with lower minimum investment limits.

The Investment Association (or IA) classifies all of the funds on sale in the UK into a broad range of groups or 'sectors'.

An investment approach that seeks investments that pay a regular income, for example in the form of dividends, by selecting stocks judged capable of delivering sustainable growth in dividends over the long term.

Units of a fund in which any interest earned or dividends paid are distributed to the investors.

An index is a collection of shares or bonds that represents a particular part of the investment market (for example, the largest companies listed in the UK, or financial companies listed in any developed market).

A wrapper in which you can place your savings and investments to protect them from some forms of taxation.

Increase in prices of goods and services over time.

The charge payable by investors on the purchase of units in a fund. This charge covers expenses like administration and dealing costs.

A unique code identifying a fund or security.

Investment grade refers to the quality of a company's credit. In order to be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor'sS&P or Moody's (two large credit rating agencies).

A closed-ended vehicle (i.e. with a fixed number of shares) which invests in a diversified portfolio of assets. Investors buy and sell their shares in the investment trust on a stock exchange.

A document that includes important information about a fund, including risk factors and details of charges.

Stocks issued by companies with a large market value or market capitalisation, as measured by the total value of their outstanding shares. These are generally the bigger companies within a given market. Definitions based on market cap value can vary.

Refers to a finite time period at the end of which a security/debt instrument is due to be repaid.

Stocks issued by companies with a mid-size market value or market capitalisation, as measured by the total value of their outstanding shares. Mid caps occupy the middle ground between large and small-cap. Definitions based on market capitalisation value can vary.

The mid point between the ask and bid prices. It is often used for the valuation of the securities within an investment company’s portfolio.

Markets in which short-term (less than one year) debt instruments are traded.

A fund that invests in a number of other funds.

A company that pools assets from many investors to invest in stocks, bonds and other securities.

The market value of itsan investment fund’s assets less its liabilities. The market value is usually determined by the price at which an investor can redeem shares.

After tax.

A company’s net profits, calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses.

The amount an investor should receive if they hold a security to its maturity date minus taxes and other expenses.

Bonds that are not rated by ratings companies such as S&P Global Ratings, Moody’s or Fitch.

Non-UCITS Retail Schemes (NURS) are UK funds that do not comply with all the UCITS rules and, therefore, cannot be promoted across the EU. They can, however, be sold to UK retail investors. NURS can invest in a wider range of eligible investments than UCITS.

The total ongoing charges deducted from the assets of a fund, which includes the annual management fee charged by the investment manager.

A fund whose number of units can be increased or decreased according to demand. Unit trusts and OEICs are examples of open-ended funds.

Open-ended Investment Company (OEIC): a fund vehicle, which can issue a limitless number of shares whose value is directly linked to the value of its underlying investments. OEICs normally list a single price based on the NAV. See net asset value.

A share which represents equity ownership in a company and represents full voting rights and dividend entitlements if they are available.

A trade in financial instruments between two parties which does not make use of the facilities of a recognised exchange.

When a portfolio or fund holds an asset in excess of its representation within a comparable index or benchmark it is said to be ‘overweight’. Active fund managers use this strategy where they believe these assets could generate superior returns.

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 funds.

The date on which a dividend is paid to shareholders / unitholders.

The results of an investment over a given period of time.

A fee paid to an asset manager for generating positive returns above an agreed target.

A collection of investments held by an institution or an individual.

Shares with dividends that are paid to shareholders before ordinary share dividends are paid out. In the event of a company bankruptcy, preferred stock shareholders have a right to be paid company assets first. Preference shares typically pay a fixed dividend, whereas ordinary shares do not. And unlike ordinary shareholders, preference share shareholders usually do not have voting rights.

Shares with dividends that are paid to shareholders before ordinary share dividends are paid out. In the event of a company bankruptcy, preferred stock shareholders have a right to be paid company assets first. Preference shares typically pay a fixed dividend, whereas ordinary shares do not. And unlike ordinary shareholders, preference share shareholders usually do not have voting rights.

A legal document giving full details of a fund so investors can make an informed investment decision.

A ballot cast on behalf of a corporate shareholder that is unable to, or prefers not to, attend a shareholder meeting.

A way of ranking funds that breaks the peer group into four sections, or ‘quartiles’. For example, funds in the first quartile are among the top 25% in their peer group.

The record date is the cut-off date established by a company in order to determine which shareholders in a particular company are eligible to receive a dividend or distribution.

The repayment date/maturity date for bonds and other fixed interest securities.

An investment approach used to filter companies based on pre-defined criteria before investment.

A term used to differentiate investments from each other by way of country, market or prime source of business.

The proportion of a fund invested in a particular sector.

A general term used to describe a number of financial instruments, such as shares and bonds.

A code, comprised of seven alphanumeric characters, assigned to many securities as a unique identifier.

Funds that are typically managed on behalf of a single large client.

A unit of ownership interest in a company or financial asset. Also known as Equity.

A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance.

Short selling involves the sale of an asset that has been borrowed from a third party with the intention of buying the asset at a lower price at a later date. It is a way of making a profit if the price of the asset falls in the meantime, although if the price rises the investment will make a loss.

A type of open-ended fund widely used in Europe.

A single-priced fund is one where you pay the same price whether you're buying or selling units/shares in the fund.

Stocks issued by companies with a smaller market value or market capitalisation, as measured by the total value of their outstanding shares. These companies are smaller than large caps and mid caps. Definitions based on market capitalisation value can vary.

Investment in companies that may provide solutions to environmental and social issues.

The difference between the bid selling price and the ask buying price offer a single security. It can also refer to the difference in price between two securities.

Synthetic Risk and Reward Indicators. A way of broadly categorising investments based on their risk. It is measured on a scale of 1 to 7, with 1 being the lowest risk and 7 being the highest risk.

The use of influence by investors to maximise overall long-term value including the value of common economic, social and environmental assets, on which returns and clients' and beneficiaries' interests depend.

The process by which a manager selects favoured stocks or shares individual investment for a portfolio.

A contractual agreement between two parties to exchange future cash flows (or profit/ loss) resulting from two different assets according to a pre-arranged formula. Swaps can be contracted for stocks and shares, currencies and commodities. 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.

An investment approach where the fund manager bases investment decisions primarily on their view of the general economic outlook for the particular sector, country or region in which they invest. Securities that the manager believes are likely to benefit such an environment are then selected for the portfolio.

The capital gain or loss plus any income generated by an investment over a given period.

A trustee oversees the fund manager's activities and must be independent of the fund manager. It 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.

Undertakings for The Collective Investment Of Transferable Securities. These funds can be marketed within all countries that are a part of the European Union, provided that the fund and fund managers are registered within the country. The regulation recognises that each country within the European Union may differ on their specific disclosure requirements.

When the fund manager has the freedom to invest according to their own strategy, without being unduly restricted by a benchmark.

Reflects the amounts that may be expected to be distributed, net of expenses, over the next twelve months as a percentage of the price of a fund as at a particular date. 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.

When a portfolio or fund holds less of a particular asset than its comparable index or benchmark it is said to be ‘underweight’. Active fund managers use this strategy where they believe excluding these holding fewer of such assets could help generate superior returns.

A term used to describe a privately held startup company with a value over $1 billion.

Unit Trust: A type of fund vehicle which can issue a limitless number of units whose value is directly linked to the value of its underlying investments. Jupiter Unit Trusts are single priced, which means they have one price for buying and selling.

A mathematical way of measuring the maximum expected loss of an investment over a period of time.

Measures how much the price of an investment moves up or down over a period of time. An investment that experiences big price swings has high volatility, while one which moves up or down in smaller increments has low volatility.

The average duration of a fund, with each bond within the portfolio being weighted according to its size.

The proportion of the total portfolio represented by an investment in a security or sector.

The date on which an investment trust expects to wind up.

The rate of interest or income on an investment, usually expressed as a percentage.

Measures the annual return an investor can anticipate for holding a particular bond until it matures. When considering an entire bond portfolio, an average yield is used based on the weightings of individual bonds within that portfolio.