Active Management

Investment strategy in which the fund manager re-balances the portfolio on a periodic basis, based on defined criteria such as earnings, price, gearing, free cash flow etc. Typically, the objective is to outperform an index or benchmark

Alpha

The excess return, if any, over a prescribed benchmark or index. It represents the ability of an active manager to generate returns superior to that of the market

Alternative Investment

Also known as "Alternatives" are investments in non-traditional assets and includes private equity, venture capital or hedge funds

Benchmark

Is usually an index, market or group of securities that a portfolio or investment is compared against, in order to gauge relative returns. That is, a comparison of the performance of an investment or portfolio against the benchmark

Bespoke Portfolio

Portfolio based on specific needs of an investor. It can be based on a combination of factors, including but not limited to the risk profile of the investor, a type of investment strategy, a desired return or a specific type of investment

Beta

Measures the systematic (non-diversifiable) risk of a stock/portfolio compared to the risk of an entire market or index. It describes the sensitivity of a security's or portfolio's returns relative to changes in a market/index

Bond

Type of fixed income security in which a buyer becomes a creditor of the issuing company, with the par amount to be repaid at the maturity date. Bonds typically pay a coupon at defined periods. The most common types of bonds are government, municipal and corporate bonds

Broker

Is the organisation that facilitates the purchase and sale of assets, such as financial securities, in return for a commission

Call Option

Provides the holder/owner with the ability to buy an underlying asset at a predetermined price, on or before a specified future date

Capital gain

The excess in market value of an asset, over its net cost price

Cash and cash equivalents

Includes demand deposits, time deposits and other assets that can be realised for cash at short notice such as money market funds

Commodities

Are economic goods and they may be hard or soft commodities. Examples of the former are copper, lead, zinc and aluminium. Examples of the latter are coffee, cocoa, sugar and wheat

Compound Interest

Interest paid on the both the original principal amount and the accumulated interest from previous periods. Thus, it can be regarded as interest on interest

Credit

Refers to a sub-asset class that includes bonds, loans and other debt instruments

Credit Rating

Quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation

Credit Spread

Is the difference in yield between a risk free debt instrument, such as US Treasuries, and another debt security, with a similar maturity date. It measures the (credit) risk premium for non-sovereign bonds

Custodian

Bank or institution who holds the actual asset on behalf of the investor

Dashboard

High level breakdown of certain performance and profit and loss

Derivatives

Are financial instruments that derive their value from an underlying instrument. The underlying instrument can be a security, index, interest rate or other asset. They are used for a number of purposes, including hedging, speculation or gaining leveraged exposure to underlying instruments

Distressed Debt

Typically refers to debt instruments issued by an entity for which subsequently becomes under financial duress, subject to bankruptcy proceedings, in default or some other form of re-structuring or re-scheduling

Dividends

Proportion of a company's after tax profit paid out to common and preferred shareholders

Equities

Represents an ownership stake in the company. This may be in form of ordinary equity or preferred equity. Equities are also known as shares

Fixed Income

Also known generically as bonds, is an asset class that comprises debt obligations of different types of issuers. Includes debt instruments which pay fixed or floating coupons, may be senior, secured, subordinated, unsecured or perpetual in nature

Forward looking

Projected outcomes based on a set of assumptions. For example, an estimation of the change in the value of an investment portfolio as a result of changes in equity prices

Fund

A legal entity which pools investment moneys from many individual investors. A fund is typically managed by a dedicated fund manager and will have a specific investment strategy such as global equities, high yield bonds etc

Fungibility

Is a property of a good or service whose individual units are essentially interchangeable

Futures

Is a contractual agreement to buy or sell an underlying asset at a predetermined price at a specified time in the future

FX

The price at which one currency can be exchanged for another

Gross Cost Price

The original price paid for the asset excluding any transaction costs and commission

Hedge Fund

A type of fund which typically has a broad investment mandate, offering un-correlated returns and focussed on delivering alpha to investors

Historic Events

Macroeconomic events from the past, which are used to facilitate scenario analysis based on five variables: interest rates, credit spreads, asset price, volatility and FX, to understand what impact they would have on the investor's portfolio

Income

Cash received from fixed income and equity holdings in the form of interest and dividends, rent receipts from real estate investments or distributions from mutual funds

Income tax

Tax payable on investment income such as dividends, interest, rental receipts, fund distributions (income) etc

Index

An index tracks the change in value of a collection of securities or assets. Securities may range from stocks, bonds and funds. Assets may comprise real estate or commodities. Index methodology can differ significantly which therefore requires thorough assessment of how they are compiled

Interest

Income received from fixed income instruments, based on a pre-determined rate, known as the coupon. It is paid by the issuer to the investor at set periods

Investable Wealth

Investable wealth includes (but is not limited to) cash, equities, fixed income and mutual funds. Investable wealth is to be distinguished from non-investable wealth, which typically comprises less liquid assets such as real estate, artwork, jewellery etc

Market Capitalisation

Is equal to the total market value of all shares issued by a company. It is calculated by multiplying current share price by the number of shares on issue

Market Price

Current value of an asset or security. Some market prices have high price transparency, such as listed equities whereas others have less transparency such as private equity

Net Cost Price

The original price paid for the asset after deducting any transaction costs (eg. stamp duty) and commission/brokerage

Options

Are a type of derivative instrument which gives the holder the right but not the obligation, to buy or sell an underlying asset, at a pre-determined price at a future date

Ordinary Stocks/Shares

See Equities

Passive Management

Investment strategy in which a fund manager seeks to earn a return similar to that of a benchmark index. This strategy is employed by index mutual funds and many ETFs

Performance

The return on your portfolio or individual assets or securities, expressed as a percentage. Return may be positive or negative and can be calculated over different time periods

Performance against Benchmark

Measures performance relative to a benchmark, typically a broad market equity index such as the S&P 500. The rationale for this comparison is to facilitate an analysis of whether or not a fund manager or investor has outperformed or underperformed the benchmark and therefore determine their ability to add alpha

Physical

Typically refers to commodities. A commodity held in its physical form may be gold bullion as opposed to holding gold through an ETF which represents a claim on gold bullion and not the metal itself

Portfolio

Is a collection of investments held by an institution or individual and typically consists of many different instruments across single or multiple asset classes

Portfolio Risk

Can mean different things, but typically would refer to the variability of portfolio performance. That is, the more variable the performance, the more risk that that portfolio entails

Portfolio structure

Refers to the composition of a portfolio in terms of asset classes, geographies, currencies or custodian

Position

Representation of the current value of a security holding either in percentage terms, or total value, in relation to the total portfolio value of the investor.

Preference Shares

Preference shares confer rights and entitlements different to ordinary shares. This may be in the form of a fixed dividend which may or may not be cumulative. Holders of preferred shares typically do not hold any voting rights, however, in the event of liquidation, they would be entitled to repayment of their investment ahead of ordinary shareholders

Principal

Original sum of money invested, borrowed or subscribed into an investment and can be used to determine amount of exposure one may have to that security or asset

Private Equity

Alternative investment class, which refers to the investment in companies that are not listed on public exchanges

Profit and Loss (PnL)

Current gains or losses on the net acquisition value of the asset. It is equal to the difference between current value of the asset and its net acquisition value and can be aggregated across the asset class and/or the entire portfolio. P&L can be calculated over different time periods

Projected Income

Estimate of interest, dividends and other receipts expected to be received from fixed income and equity holdings, rent from real estate investments or distributions from mutual funds

Put Option

Provides the holder/owner with the ability to sell an underlying asset at a predetermined price, on or before a specified date

Real Asset

Assets that have intrinsic worth due to their substance and physical properties, such as real estate, commodities, land etc

Real Estate

Either a direct financial investment in property, or an investment in a fund/trust that invests in property

Return

Gain or loss on an investment over a certain period. Return is expressed as a percentage gain or loss with respect to the Net Acquisition Cost

Risk

There are many different types of risk, however, the most commonly understood type is that which refers to the variability of performance, also known as volatility

Scenario Analysis

Iterative process of changing the expected value of different assets, variables or benchmarks, to determine the impact on your portfolio. This may comprise credit spreads, interest rates, equity prices, volatility and FX to understand their potential impact on the investor's portfolio

Security

An instrument of ownership, such as a share or an instrument of obligation, such as a bond. It is a universal term that refers to different financial instruments

Simple Interest

Interest that is calculated as a percentage amount on the principal amount based on a certain number of days

Stress Test / Shock

An assessment of the theoretical change in the value of a portfolio as a result of making assumptions about interest rates, FX rates, equity prices, volatility, credit spreads etc. It provides insight into the sensitivity of the portfolio to those different variables

Systematic Risk

Systematic Risk is the risk inherent in the market and cannot be removed through diversification

Total Return

A measure of performance that includes both changes in the value of the asset and any income distributions

Total Wealth

Represents the value of all assets beneficially owned by the Investor, both investable and non-investable

Unsystematic Risk

Unsystematic risk or specific risk is unique to a company or industry and can be reduced by portfolio diversification

Venture Capital

Type of alternative investment which involves investing in start-ups, early stage and emerging companies that have high growth potential

Volatility

Is the measure of the variability of performance (returns) of a portfolio, asset class or instrument/security. The higher the variability, the higher the volatility and vis-a-versa

Weighting

Is the value of a particular asset in a portfolio compared to the total value of all assets in that portfolio, expressed as a percentage

Yield

Refers to the return on an investment which could be realised or unrealised

Yield Curve

Is a chart that plots interest rates (yields) for bonds across different maturities. Typically, the interest rates will relate to bonds that have a similar credit quality such as US Treasuries, corporate bonds etc. It also represents the future expectation of interest rates, term premium and demand/supply factors