Glossary

The profit or loss on an investment without comparing it to how other investments have performed. Absolute return investing aims to produce a profit over time regardless of what the stock market does. Even when markets are falling, an absolute return fund can still make money, although this is never guaranteed.

Interest earned on a security but not yet paid to the investor.

An accumulation share ('Acc') does not make income payments to shareholders but instead accrues the income daily in the net asset value of the share class. Please refer to our guide for an explanation of the various GSF share classes here and OEIC share classes here.

Investors who aim to have a positive influence on the companies in which they invest by, for example, promoting better governance, sustainable practices and long-term value creation and alignment with shareholder interests.

Where the fund manager uses their expertise to pick investments to achieve the fund's objectives.

A measure which describes whether an actively managed portfolio has added value in relation to the amount of risk taken relative to the benchmark. Alpha can be positive or negative.

These are non-traditional financial instruments that provide exposure to non-mainstream asset classes such as commodities, property, private equity, private credit and infrastructure.

Shares that represent ownership in shares of a non-US company that doesn't trade directly on US exchanges. They are purchased by US banks, denominated in US dollars and traded on US exchanges as if they were US securities.

The annual charge paid by a client to an asset management company for managing their investments.

The annual interest rate that is charged for borrowing, expressed as a percentage of the total balance to be paid.

This is the amount of money earned by an investment on an annual basis, often expressed as a percentage. It accounts for the compounding over an investment period, while the average annual return does not. So, if an investment of £100 grew by 10% in year 1, any growth in year 2 is based on a starting investment of £110 (the initial invested amount plus the 10% growth in investment in year 1). A further 10% rise in year 2 results in the investment growing to £121, which means the annualised return over the period would be 10.5% per year.

As global markets are sometimes inefficient, this is a trading strategy to take advantage of the pricing differential in different markets between two very similar assets, such as stocks, bonds, and currencies.

Dividing the money invested in the fund across different investments ('assets'), e.g. in different geographic areas or by industry sectors such as oil and gas or financial companies.

A group of investments with similar characteristics (e.g. shares, bonds, alternatives).

Securities (e.g. tradable investments) backed by the income stream of income-producing financial assets. These assets enable investors to gain exposure to instruments they might not otherwise be able to access, such as loan repayments.

The total market value of the financial assets which a financial institution (e.g. an Investment Manager) manages.

Authorised Corporate Directors (ACDs) are responsible for the running of an investment fund. They have a duty to act in the best interests of the fund's investors, and ensure that the fund is well managed in line with regulations and with the investment objectives and policies set out in its prospectus.

A fund that is authorised and regulated by the financial markets authority in a fund's home jurisdiction, so that it can be marketed to the general public.

An AFM is the entity authorised and regulated by the Financial Conduct Authority (the FCA), the UK financial regulator, to manage or operate approved funds in the UK.

A period of prolonged market weakness when prices fall consistently. A 20% fall in value is usually regarded as the threshold for a bear market.

A standard to represent the wider market, such as an index, more than one index or a market average, that can be used to measure a fund's performance or risk. The benchmark is selected as it is deemed to be a good representation of the fund's investable universe and is widely used, independently calculated and readily available. Where the investable universe represents different asset classes, the benchmark may be formed by multiple indices or benchmarks.

A measure of a security's volatility (fluctuation in value) relative to the overall market. A beta greater than 1 means a security is more volatile than the market, while a beta less than 1 means it is less volatile. The higher the beta, the more the expected returns but the greater the risks.

The price at which a trader will buy a security or the price received when redeeming a security.

This is fuel produced from biomass, which is material from plants and algae or from animal waste. As alternatives to fossil fuels which are created through slow geological processes, biofuels are considered a renewable energy source as they can be readily replenished, unlike fossil fuels, which are a finite resource.

A well-known, financially strong, and highly regarded company.

Activities designed to lure investors into an investment scam, often using high-pressure sales tactics. 

A portfolio investing primarily in bonds and other debt securities, this may concentrate its investments in a particular type of bond or debt security — such as government bonds, municipal bonds (bonds issued by local governments), corporate bonds (bonds issued by companies), convertible bonds (bonds which can be converted into a different type of security, typically company shares) - or a mixture of types. 

Tradable contracts issued by governments or companies to repay borrowed money which typically pay interest at fixed times.

The original price paid for an investment.

An investment approach that concentrates on the analysis of individual companies (or countries when investing in government bonds) and considers factors such as its history, management, and potential as more important than macroeconomic trends (e.g. inflation, price levels, gross domestic product (GDP), changes in unemployment etc). Contrast with top-down investing below.

Used to describe financial markets when prices continue to rise over a long period of time. Investors are referred to as 'bullish' if they have a positive view of future prices.

A type of fee where multiple services are combined and offered as a package for a single, all-inclusive fee.

The CAPM describes the relationship between the expected risk and return of investing in a security. The higher the risk the more an investor expects to earn. By helping investors calculate the expected return on an investment, the CAPM can help determine how appropriate a particular investment may be.

This is the profit generated when an investment is sold for more than the price the investor paid.

Markets that raise money from those who want to invest and make those funds available to businesses or governments.

A permit (or tradable certificate) allowing the holder to emit a certain amount of carbon dioxide (CO²) or other greenhouse gas. Companies whose emissions exceed the limit set by governments or regulators must purchase additional carbon credits; those with unused credits (likely because they have introduced efficiency measures) can sell them. Usually traded in units of one tonne of CO² equivalent.

The total amount of greenhouse gases generated. Usually reported as 'CO² equivalent'.

A market where carbon offsets or credits can be traded. There are two types: compliance carbon markets are mandatory national, regional, or international markets; voluntary carbon markets are those in which companies or individuals can choose to participate.

When a company or country absorbs as much CO² (or equivalent) as it emits.

A mechanism that compensates for the emission of CO² or other greenhouse gas by providing for an emission reduction elsewhere. Carbon offset credits can be bought, sold or traded as part of a carbon market.

The most liquid form of storing capital. While this is regarded as a safe asset class, over time the purchasing power of cash is eroded by inflation.

The net amount of cash that a business receives and pays out, usually over a standard reporting period (monthly, quarterly, annually). Cash flow is not the same as profits. A profitable business will eventually go out of business unless it has positive cash flow, but an unprofitable business can continue operating if it generates positive cash flow.

The basic rate of interest set by a central bank that determines the cost of borrowing.

Shares of mainland China-based companies trading on the Shanghai and Shenzhen Stock Exchanges.

The change in average global temperatures and the impacts on weather patterns. Usually used in reference to the impacts arising from the release of greenhouse gasses.

This is a type of investment company that sells a fixed number of shares at one time to invest in stocks, bonds, or other financial instruments. The shares then trade on a secondary market, with the share price trading either at a premium (higher) or a discount (lower) to its net asset value (NAV).

Assets provided by a borrower to a lender to secure a loan. If the borrower defaults on a loan payment, the lender is entitled to take ownership of the assets provided as collateral.

A pooled fund in which investors hold units. Unit Trusts and Open-Ended Investment Companies (OEICs) are examples of these pooled funds.

Service charge levied by a broker for handling the purchase and/or sale of investments.

An asset class which comprises physical assets such as oil, base and precious metals, and agricultural produce.

A type of benchmark hat may be used to compare a fund's performance.

The process of generating earnings on an asset's reinvested earnings. This is the interest calculated on an initial investment, which includes the accumulated interest from previous periods. So, for a £100 initial investment that is earning interest at 10% per annum. The next annual interest payment will be based on £110 (being the initial £100 plus £10 income earnt) and result in the investment's value growing to £121.

New rules introduced by the Financial Conduct Authority, which aim to improve consumer protection within financial services.

A measure of inflation based on a basket of common goods and services.

Investing in securities that are out of favour with the market.

A financial instrument that allows the holder to convert it into another asset, usually a share, at a discount to the market price at the time of conversion.

A debt obligation issued by a company, essentially an IOU. By buying corporate bonds, investors are lending money to the bond issuer. In return, the company commits to pay interest on the principal (the initial amount borrowed), and in most cases returns the principal when due for repayment. Purchasing a bond does not equate to ownership in a company, unlike equity. Bondholders are only entitled to the interest and principal on the bond. A company has a legal obligation to pay interest and principal to its bond holders.

The decision-making processes by which a company is managed and how its management is supervised. Businesses should have appropriate processes in place so that the interests of stakeholders (shareholders, employees, suppliers and customers) are balanced.

The way of doing business that aims to increase a company's social impact while also meeting business objectives such as growth and revenue goals. Examples include increasing workforce diversity, reducing the company's carbon footprint and donating to charities.

A measure of how asset classes move in relation to each other. Highly positively correlated investments imply two assets move in the same direction, while highly negatively correlated investments move in opposite directions. With lowly correlated securities, the price movement of one asset has no impact on the movement of the other. A combination of the latter is deemed to provide diversification benefits. Correlation is measured between 1 (perfect correlation) and -1 (perfect opposite correlation). A correlation coefficient of 0 suggests there is no correlation.

The interest rate applied to the nominal value (the amount borrowed or 'principal') of a bond, paid on an annual or semi-annual basis.

A credit cycle means the economic conditions over which the cost of borrowing initially increases, then decreases and then stabilises (typically 3-7 years).

A financial derivative providing protection against a bond default. So, if a bond issuer cannot meet its contractual obligations (e.g. scheduled interest payments) and defaults, the CDS acts as a type of insurance policy.

A measure of a company's creditworthiness, or the ability to repay its debt.

A score awarded by an independent rating agency to indicate the financial strength of the issuer of a bond, and the potential for a default on interest and principal payments. The top credit rating is 'AAA'. The lowest rating to be considered 'investment grade' is 'BBB'. Below 'BBB', bonds are termed 'sub investment grade' or 'high yield'. Average credit ratings are based on the individual bond ratings issued by the ratings agencies. For each bond, the ratings issued by each agency are combined to form a single rating based on the methodology that most closely matches the benchmark, otherwise median is typically used where there is no benchmark.

Companies that rate the ability of the issuers of bonds to repay borrowed money.

The risk that a bond issuer or borrower will be unable to meet its contractual obligations.

The differences in yield between 'risk-free' bonds, such as gilts or US treasuries, and non-treasury (or gilt) bonds. Corporate bonds tend to offer an additional yield to compensate investors for the higher potential risk of default.

A digital currency system with no central issuing or regulating authority. There are many different cryptocurrencies - Bitcoin was the first and remains the most well-known.

The total change in the price of an investment over a set period.

The potential for a fund that invests overseas to lose or gain money purely because of changes in the currency exchange rate.

The risk of incurring the loss of foreign assets due to adverse movements in exchange rates between domestic and foreign currencies.

Fees and expenses for oversight and safekeeping of the fund's assets by a reputable third-party.

A high-risk strategy which involves the intra-day buying and selling of shares with the expectation of making a quick profit from the daily fluctuations in share prices.

A bond supported by the general credit of a company, but which is not secured by collateral or any assets. While a debenture is a type of bond, not all bonds are debentures.

A company's borrowings divided by the market value of its equity. It is a measure of the level of gearing (or 'leverage') in a company and is an indicator of financial strength.

The process of reducing greenhouse gas emissions.

Companies whose products, technologies and/or services produce and/or use less carbon emissions relative to their industry peers. These companies are typically committed to renewable energy, resource efficiency and/or electrification (the process of powering by electricity by switching from other power sources).

This is the risk that a bond issuer or borrower will not be able to meet their debt payments. To mitigate the impact of default risk, lenders often charge rates of return that correspond to the debtor's level of default risk: the higher the risk, the higher the required return.

An employer and employee both contribute to the employee's pension scheme which is then invested in a range of investments. Depending on how long the employee has been a member of the scheme and the salary at the time of leaving, the employee will receive a specified monthly benefit on retirement.

The employer and employee both contribute to a pension scheme during the employee's employment, which is then invested in a range of investments. On retirement, the employee's pension will be based on the value of the investments.

The fall in the price of goods and services, which occurs when the rate of inflation dips below zero.

Financial contracts whose value is linked to the price of an underlying asset.

Industrialised countries with relatively high levels of economic productivity, high standards of living and stable economies.

This estimates the current value of an investment or business based on its expected future cash flow. The discount rate is often the weighted average cost of capital, or the hurdle rate that investors expect to earn relative to the risk of the investment.

Refers to a slowing down in price growth, as opposed to deflation, where prices are already falling.

Bonds whose issuers are in financial difficulty and trading significantly below face value.

A risk management strategy that creates a mix of various investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt to limit exposure to any single asset or risk. The rationale behind this technique is that a portfolio constructed of different kinds of assets will, on average, yield higher long-term returns and lower the risk of any individual holding or security.

The portion of company net profits paid out to shareholders.

The annual percentage return earned by a share or a fund, calculated by dividing the dividend per share distributed annually by the share price.

Investing money at regular intervals regardless of the market's performance. By committing to a set schedule, more shares are purchased when prices are low, and fewer shares when prices are high. This helps to provide some protection against volatility after the money is invested.

The country where an individual, company or investment vehicle is based for tax purposes.

The peak-to-trough decline for a market or investment over a specific time period, expressed as a percentage.

When a company has separate legal identities which are listed on two different stock exchanges, though it functions as one economic entity.

With dual priced funds, there is a separate price for buying and selling shares in the fund. The difference between the buying and selling prices is the bid/offer spread. This broadly comprises the initial charge plus the difference between the buying and selling prices of the underlying investments, plus any other costs involved in buying or selling the underlying investments. This means that when investments are bought or sold as a result of other investors joining or leaving the fund your investment is sheltered from the costs of these transactions.

Expressed in years, this measures how much a bond's price will rise or fall when interest rates change. The longer the duration, the more sensitive it is. The higher the duration, the greater the potential return (and the greater the risk).

The percentage change in a company's earnings per share between reporting periods.

The profit of a company attributed to each ordinary share (common stock). It is calculated by dividing a company's net income (minus dividends payable to preference shares) by the average number of outstanding shares during the period.

Cost advantages that arise as a result of assets under management (AuM) increasing.

Managing a fund in a way that is designed to reduce risk or cost and/or generate extra income or growth.

A low or low-medium income country that is economically less developed than major economies.

Debt (e.g. Bonds) issued by governments and companies in emerging markets.

Factors that may be analysed to inform an investment decision. Examples include:

An equity investment is buying shares in a company, providing an investor with part ownership.

A classification system introduced by the European Union to establish a list of environmentally sustainable economic activities. Other similar taxonomies exist.

Short for European Interbank Offered Rate, this is the 3-month rate at which European banks borrow from each other.

The market in which currencies are borrowed and lent outside the countries in which they are legal tender, e.g. a bank outside the US borrowing or lending US dollars.

A fund which trades on a stock market, allowing investors to gain exposure to a wide selection of equities or bonds.

Buying a stock ex-dividend means the purchaser is not entitled to the upcoming dividend payment.

The date when a stock goes ex-dividend. Shareholders who purchase shares before the ex-dividend date are entitled to the next dividend payment. Shareholders who purchase shares on the ex-dividend date, or after, are not entitled to that dividend but will be eligible for the subsequent dividend if they remain shareholders.

An executive director is a member of a board or company who is also employed by the company and typically has management responsibilities. A non-executive director is a member of a board who is not employed by the company and can provide independent views.

A fund's total annual operating expenses, including management fees, distribution fees, and other expenses, expressed as a percentage of average net assets. Fees and expenses for oversight and safekeeping of the fund's assets by a reputable third-party.

The costs a company imposes, or the benefits it confers, on people, society and the environment.

This is an investment approach which targets investments that exhibit certain 'factors'. There are two main types of factor investing - style and microelectronic. Over 600 factors have been identified which could influence risk and return, but there are five style factors widely regarded as the most important: - Value - Stocks that trade at a discount to similar companies often outperform more expensive ones - Quality - High quality companies (those generating strong cash flow and/or high profitability) will generally perform better than lower quality companies - Size - Smaller companies will tend to offer a higher return than larger companies - Momentum - The belief that stocks that have recently outperformed an index will continue to outperform, and vice-versa - Volatility - The propensity for low volatility stocks to outperform higher volatility stocks By capturing or avoiding certain factors, the aim is to improve portfolio returns.

This is the central interest rate in the US, set daily. It is the overnight interest rate charged by depositary banks' lending their excess Federal Reserve balances to other depositary institutions. It influences other interest rates such as the prime rate, and also longer-term rates used for mortgages, loans and savings.

A professional who helps individuals manage their finances by providing advice on money issues, such as investments. In the UK, there are two types of financial advisors - independent financial advisors (IFAs), able to consider and recommend all types of retail investment products from all firms across the market; and restricted financial advisers, who can only recommend certain products and providers.

The regulator for the UK financial services industry.

The taxation and public spending plans of a government.

A guaranteed income for a set period of time, which can be up to 40 years. The annuity provider invests the money and at the end of the term, the amount paid in plus the accumulated growth is distributed, minus the income received so far.

An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity.

Describes a yield curve where short-term and long-term bonds are offering equivalent yields.

A debt security (or note) with a variable interest rate. The adjustments to the interest rate are usually made every three to six months and are tied to a money-market rate.

When a company first offers shares to the public on an exchange. It is also referred to as an initial public offering (IPO).

A market that trades currencies.

A measure showing the amount of cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that may enhance shareholder value.

Countries that, because of demographics, development, politics and liquidity, are less mature than emerging markets but are more established than least developed countries. Many Middle Eastern markets are frontier markets, as are Bangladesh and Vietnam.

Funds that invest in other funds rather than investing directly in the underlying financial securities (e.g. shares and bonds).

Investment managers can offer multiple funds. Often these funds are grouped together (e.g. if they have the same domicile or use the same regulation). These groups of funds are often referred to as a Fund Range.

Analysing an asset using macroeconomic (a branch of economics that looks at factors affecting an economy as a whole such as interest rates, taxes and government spending) and microeconomic (a branch of economics that looks at individual markets, sectors or industries rather than the economy as a whole) factors, usually to find its intrinsic value.

An obligation to buy or sell an asset on a specific date in the future at an agreed price. A futures contract has standardised terms and is traded on an exchange whereas a forward contract is a private and customisable agreement between two parties.

In accounting terms, gearing (also known as leverage) is the amount of a company's total borrowings divided by its share capital. High gearing means a proportionately large amount of debt, which may be considered riskier for equity holders. However, gearing also entails tax advantages. In investment analysis, a highly geared company is one where small changes in sales can produce big swings in profits.

Charges which relate to the management and administration of funds in a Fund Range.

A bond that is issued by the British government which is generally considered low risk.

Similar to an American depository receipt, this is a bank certificate relating to the ownership of a foreign company's shares that is issued in more than one country.

The long-term increase in the Earth's average air temperatures. Often used to describe the impact of humankind on climatic conditions.

An attractive management and corporate culture, alongside strong company board practices, capital allocation and remuneration policies.

A good-till-cancelled (GTC) order to purchase securities (e.g. shares or bonds) is one that remains in the market until it is completed or cancelled.

Debt instruments (e.g. bonds) whose proceeds are used exclusively to finance projects that have a positive environmental impact, such as renewable energy, energy efficiency, clean transportation and green buildings.

Any gas (including carbon dioxide and methane) that contributes to the greenhouse effect (i.e., they trap heat in the atmosphere).

Making false or misleading claims about the environmental sustainability of a company, product or business practice.

The total return you could receive on a bond including the interest or coupon plus any capital.

A fund that concentrates on companies within rapidly rising sectors of the economy.

A company enjoying a rapid rise in earnings and revenue. Usually pays little/no dividend.

Globally traded major currencies (e.g. the US Dollar or Euro).

An alternative investment vehicle available only to sophisticated investors, such as institutions and individuals with significant assets. Hedge funds target absolute returns and can invest using a broad array of strategies ranging from conservative to non-traditional investment strategies, such as short selling, gearing, arbitrage and tools such as options, futures, swaps and forwards.

An investment technique which aims to protect the value of an investment against currency movements.

An unconventional monetary policy tool, whereby money is printed and distributed to the general public in order to stimulate the economy.

A company which has generated consistently high levels of returns on invested capital and free cash flow.

A below investment grade rated bond, providing the investor with greater potential returns due to its higher default risk.

Technically regarded as an asset that cannot be sold within seven calendar days. The lack of ready buyers can lead to larger discrepancies between the asking price (from the seller) and the bidding price (from a buyer) than would be found in an orderly market with daily trading activity.

A sustainable investment style aiming to deliver a quantifiable and beneficial social and/or environmental impact.

This is when an option has value, or its strike price is favourable compared to the market price of the underlying asset.

The distribution of income to unit holders of pooled funds.

An income share will distribute all or part of the income accruing in that share class, net of the share class' expenses. Please refer to our guide for an explanation of the various GSF share classes here and OEIC share classes here.

A measure of the quality of a fund's management and investment process undertaken by third parties such as Morningstar or FE Trustnet.

A financial index produces a numeric score based on inputs such as a variety of asset prices. It can be used to track the performance of a group of assets in a standardised way. Indices typically measure the performance of a basket of securities (e.g. shares or bonds) intended to replicate a certain area of the market.

An index fund is a type of pooled fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the FTSE 100. An index fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. These funds are passively managed and follow their benchmark index regardless of the state of the markets.

Bonds whose coupons and principal payment are linked to movements in inflation.

People who buy and sell securities for their personal account, and not for another company or organisation.

A tax-free savings account in the UK. There are two main types, a Cash ISA and a Stocks and Shares ISA. You can put money into a Cash ISA and you don't pay tax on any interest you receive. Invest in a Stock and Shares ISA, and you don't pay tax on any further dividends or capital gains.

The rate at which the price of goods and services rise over time. The official measure in the UK is the Consumer Price Index (CPI).

A measure of a portfolio manager's skill against a benchmark. The over or underperformance of the fund relative to its benchmark index is divided by the tracking error. In this way, we arrive at the value, per unit of extra risk assumed, that the manager's decisions have added to what the market would have delivered anyway. The higher the Information Ratio the better.

The upfront expenses an investment company charges an investor when purchasing a fund. This covers the costs of setting up the investment, such as administration and distribution costs.

The first public sale of a company's equity resulting in a quoted stock price on a stock exchange.

The latest market and investment views from across our investment teams aimed to help you navigate changing investment landscapes.

An investor, such as a pension fund, insurance company or charity who trades and manages large investments on behalf of clients.

The return earned on funds which have been deposited, loaned or invested.

Intrinsic value is a measure of what an asset is worth. This measure is arrived at by means of an objective calculation or complex financial model. Intrinsic value is different from the current market price of an asset. However, comparing it to the current price can give investors an idea of whether the asset could be undervalued or overvalued.

When a yield curve flattens to the point that short-term bond interest rates are higher than long-term rates. A relatively rare occurrence, an inverted yield curve often precedes a recession as investors will often tolerate low interest rates if they believe they are set to fall even further.

Many funds sold in the UK are grouped into sectors by the Investment Association (the trade body that represents UK investment managers) to facilitate comparison between funds with broadly similar characteristics.

Bonds considered of the highest quality by credit rating agencies (typically BBB or higher).

The Investment Manager is responsible for making investments (i.e. buying and selling investments such as shares and bonds) in a fund.

A description of what a fund aims to achieve and how it will be managed to attain this.

A closed-ended collective investment scheme which trades as a company in its own right on an exchange. The number of shares in issue is fixed and the share price of the trust is not directly linked to its assets (as opposed to an open-ended fund). This means the share price can trade at a premium (higher) or discount (lower) to the value of its portfolio of assets.

The total range of investments from which a fund manager can pick - as defined by a fund's stated investment objective.

The International Securities Identification Numbering (ISIN) system. The ISIN code is a unique 12-digit code given to a security and is used worldwide.

A lowly-rated bond, providing the investor with greater returns due to its higher default risk.

A document that must be distributed to potential and existing clients which provides details of a fund. It should be easily understood and contains information about the fund's investment objectives, notable risks, past performance and fees.

The Synthetic Risk Reward Indicator (SRRI) which appears in the Key Investor Information Document (KIID). A number on a scale of 1 to 7 based on how much the value of a fund has fluctuated over the past 5 years (or an estimate if the fund has a shorter track record). A rating of 1 represents the lower end of the risk scale with potentially lower rewards available whilst a rating of 7 reflects higher risk but potentially higher rewards.

Generally taken to be the market capitalisation of a listed company with a value of more than US$10 billion.

The proportion of a company's funding from debt, compared to the proportion from equity capital (e.g. issued shares).

Financial obligations that must be met.

A pension fund strategy designed to help pensions manage their pensions more efficiently so that they can pay future retirees. An LDI manager will buy a range of financial instruments (e.g. bonds and shares) to hedge against the risk that adverse moves in interest rates and inflation will increase their future obligations (or liabilities), reducing the amount that can be paid out to retirees. LDI strategies can get into difficulties during times of market stress. When the value of financial instruments falls rapidly, the institutions that issue these instruments (typically banks) may require extra payments - called a collateral call - from pension funds. These collateral calls may require pension funds to sell the instruments to meet these extra payments which further drives down their value and triggers further collateral calls. An example of such a scenario occurred in September 2022 during the market turbulence caused by the UK Government's mini-budget.

The degree to which an investment can be quickly bought or sold on a market without affecting its price.

Having a "long" position in a security means that you own the security. Investors maintain "long" security positions in the expectation that the stock will rise in value in the future. The opposite of a "long" position is a "short" position.

A bond with usually 15 years or more remaining before redemption, at which point the principal (initial amount borrowed) is paid to the holder.

Commonly used by hedge funds, this strategy involves holding both long positions (seeking to benefit from rising investment values) and short positions (seeking to benefit from falling investment values) in order to maximise returns or hedge risks.

Holding an asset for an extended period of time. Depending on the security, a long-term asset may be held for as little as one year or for as long as 30 years.

Refers to the big trends in an economy, such as inflation and unemployment.

The total value of a company's equity, calculated by the number of shares multiplied by the market price.

Also referred to as systematic risk, it refers to the risk which is inherent within an asset class or broader market and cannot be eliminated by diversification.

With regards to bonds, maturity refers to the time at which the principal (the initial amount borrowed) of the bond is repaid and it ceases to exist. In terms of a pension fund, it conveys the average age of the membership and the time until benefits are payable.

The study of individuals, households and firms' behaviour in decision making and the allocation of resources.

The market capitalisation of a listed company with a value between US$2 billion and US$10 billion.

The price of an asset calculated as the mid-point between its offer and bid price. Most newspapers use mid-market prices in their stock data tables.

The Markets in Financial Instruments Directive is a European Union law that standardises regulations for investment services across member states of the European Economic Area. .

This is a measure of risk for funds which invest in bonds as it predicts the sensitivity of the value of a fund's portfolio given changes in interest rates. The higher the value the greater the volatility of the fund's performance resulting from changes to interest rates.

An investment strategy based on the belief that the recent (3-12 months) stock market outperformers will continue to perform well in the short-term, and conversely that weaker stocks will continue to be weak

The market for short-term fixed income instruments (typically with less than one year to maturity).

A money market fund is a kind of pooled fund that invests in highly liquid, short-term instruments. These instruments include cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term maturity (such as U.S. Treasuries). Money market funds are intended to offer investors high liquidity with a very low level of risk.

Investments usually issued by banks or governments that are a short-term loan to the issuer by the buyer. The buyer receives interest and the return of the original amount at the end of a certain period.

In a company context, the NAV is the sum of the total assets minus the total liabilities.

The performance of a fund, an index or a benchmark after charges such as fees and taxes.

Achieving a balance between the carbon emitted into the atmosphere, and the carbon removed from it..

Plans to reduce greenhouse gas emissions through various means such as adopting renewable energy source, improving energy efficiency and implementing sustainable practices, amongst others.

The price at which a dealer will sell a security to an investor. In a dual priced fund, this is the cost of buying a share or unit.

All costs, charges, fees or expenses that can be charged to a fund over the course of a year.

A collective investment scheme that can issue an unlimited number of units or shares, meaning the number of units fluctuates as a result of inflows and outflows.

An open-ended investment company is a type of investment fund domiciled in the United Kingdom that is structured as a company in its own right to invest in securities (e.g. shares or bonds). The price of the shares is based largely on the underlying assets of the fund. These funds can mix different types of investment strategies such as income and growth, small cap and large cap, and can adjust their investment criteria and fund size. OEICs are called "open-ended" because they can create new shares to meet investor demand. Also, the fund will cancel the shares of investors who exit the fund.

The right to buy or sell a particular asset at an agreed price (the strike price), at a specific point in time.

The return of a fund in excess of its benchmark index.

The Secured Overnight Financing Rate is an interest rate based on overnight transactions in the US Dollar Treasury market.

Financial contracts which are traded directly between two parties, usually with minimal regulation, rather than on an exchange.

When a fund has greater exposure to an asset than its benchmark index.

A legally binding international treaty on climate change adopted in 2015. Signatories must take action to prevent global temperatures from increasing more than 2°C above the pre-Industrial Revolution benchmark, while aiming to limit the increase to 1.5°C.

The fund manager aims to track the performance of a stock exchange index or another investment.

A group of funds that can be compared with one another for performance purposes. A peer group will usually be based on the funds' investment scope, for example, UK equities.

The returns (either positive or negative) of an investment over a given period.

A fee, which has been stipulated in advance, which is sometimes paid on top of a management fee if a fund outperforms its benchmark index or meets other conditions stipulated in advance.

For funds that do not use a benchmark, the performance reference is an explanation or a return number provided against which performance may be compared based on current market conditions and the principal asset types available for investment.

An online service that allows you to buy and sell shares and funds and see your investments in one place.

A fund, such as a mutual fund (US) or OEIC (UK), which invests the assets of many different individuals or institutions collectively.

A grouping of financial assets, such as equities, bonds and cash equivalents. Portfolios are held directly by investors and/or managed by financial professionals.

A class of share, which like a bond, pays income at fixed periods of time.

A measure used to gauge the relative value of a share, calculated by dividing the share price by its book value per share. A firm's book value is the net value of its assets which isn't always reflected in its market value (which is what people are willing to pay for the company's shares).

A measure used to gauge the relative value of a share, calculated by dividing the share price by the latest (or forecast) earnings per share.

The prime rate is the interest rate that US commercial banks charge their most creditworthy customers.

Refers to investments whose shares are not traded on a public exchange.

A comprehensive legal document which outlines important information (e.g. the fund's investment objective and policy, available share classes and annual management charges) regarding the funds in a Fund Range.

Examining the non-numeric characteristics of an investment, such as management and process.

Understanding how a fund has performed based on qualities, characteristics and descriptions of the funds, rather than numbers.

Examining the statistical and numerical relationships between securities and their returns. By assigning a numerical value to variables, quantitative analysts try to replicate reality mathematically.

Understanding how a fund has performed using numbers, often shown in graphs or charts.

A measure of how an investment is performing in its peer group. A top-quartile performing fund would be in the top 25% of funds in its peer group.

A swift rise in an asset.

An asset class comprising buildings and land.

The return on an investment minus the effect of inflation. Therefore, if the return on an investment is 6% and inflation is 2%, then the real return is 4%.

In a bond context, the repayment of a bond's principal (initial money invested) at maturity. In a fund context, when an investor sells (or redeems) their shares.

A measure of the return that an investor will earn on a bond if held to maturity.

The profit or loss on an investment compared to how other investments have performed.

Energy from replenishable sources such as the sun (solar), rivers (hydroelectric), tides (tidal) and hot springs (geothermal).

Individual investors who buy and sell securities for their personal account, and not for another company or organisation. (See individual investor).

The money made or lost on an investment.

Essentially capturing how effectively management is using shareholder funds, it is a measure of company profitability.

A form of capital raising where existing shareholders are given rights to purchase newly used shares in proportion to their existing holding.

The extra return expected by an investor in compensation for holding a risky asset.

The performance of a security or investment relative to its risk. There are several ways to calculate risk-adjusted performance: measuring the investment's volatility (fluctuating value) or comparing its performance to the performance of the market as a whole or relative to securities or investments with similar levels of risk.

A performance return measured over a 12-month period, no matter which day you start on.

Categories of greenhouse gases emission: - Scope 1 - All direct emissions from activities of a business or under its control. This includes fuel combustion on site such as heating boilers and vehicles. - Scope 2 - Indirect emissions from energy purchased and consumed by a business. Emissions are created during the production of the energy which is eventually used by the business. - Scope 3 - All indirect emissions not in Scope 2 i.e., from a business's activities, but from sources that it does not own or control. Also known as value chain emissions, this is often the greatest proportion of the carbon footprint and covers emissions associated with business travel, procurement, waste and water.

Where existing securities are bought and sold in transactions between investors, rather than from the company.

A broad economic segment that contains various industries e.g. manufacturing. In a fund context, a grouping of funds with broadly similar characteristics to facilitate comparison.

The SOFR is an interest rate based on overnight transactions in the US dollar treasury market.

A general term for a tradable financial instrument or asset, such as shares or bonds.

Portfolios managed by an investment manager for a specific investor based on a written agreement specifying how the investor wants their investments to be managed. These portfolios are not part of a fund in the Fund Range.

The Sustainable Finance Disclosure Regulation seeks to strengthen and standardise disclosures on the Environmental, Social and Governance ('ESG') characteristics of EU financial products.

When a company buys some of its own shares in the market, which leads to a rise in the share price. It changes the company's debt-to- equity ratio and is a tax-efficient alternative to paying out dividends.

Different groups of shares in the same fund. This means they have the same investment objective and policies, but the fees and investment minimums may be different, and they may be restricted to particular types of investors.

An equal portion representing part ownership of a company.

A measure of risk-adjusted performance in a portfolio which captures the average additional return per unit of risk. The higher this ratio, the better the returns relative to the amount of investment risk taken. A ratio above 2 is regarded as very good, while a ratio less than 1 is viewed as poor.

Generally, a bond with 5 years or less to maturity.

A "short" position is generally the sale of a stock you do not own. Investors who sell short believe the price of the stock will decrease in value. If the price drops, you can buy the stock at the lower price and make a profit.

Investments that are held for or mature in 12 months or less.

A Luxembourg-domciled pooled fund vehicle. Short for 'Société d'Investissement à Capital Variable' which translates as 'investment company with variable capital'.

The difference between two prices, rates or yields. For example, the gap between the price a dealer paid for a security and the price the buyer pays.

A measure of risk, deriving from the historic volatility (fluctuating values) of a particular asset.

A share trading link between the Hong Kong Stock Exchange and mainland Chinese equity markets.

This provides the holder with the right, but not the obligation to 'exercise' their option to purchase a set number of shares in a company at an agreed (strike) price after a vesting period.

Physical assets recorded on a corporate balance sheet but whose investment value cannot be recouped and must be written off. Their loss of value could be due to new government regulations (limiting the use of fossil fuels), changing demand (the shift to renewables) or legal action.

Similar debt obligations such as loans and mortgages are pooled and the resultant cashflows are distributed to investors. For issuers, the advantages include the potential off-balance sheet treatment of assets and lower financing costs while investors in structured credit products can potentially earn higher returns. The most commonly created structured credit instruments include securities backed by residential property mortgages (RMBS), those backed by commercial properties (CMBS), while asset-backed securities (ABS) comprise packages of consumer products (car loans, credit card receivables) and collateralised loan obligations (CLO) represent a pool of corporate loans.

A segregated pool of assets and liabilities managed to a different investment objective than other sub-funds within the same umbrella fund.

Aiming to promote sustainable investment across the EU, the Plan has three main objectives: - Reorient capital flows towards sustainable investment, to achieve sustainable and inclusive growth. - Mainstream sustainability into risk management. - Encourage transparency and long-termism in financial and economic activity.

Our sustainable investments comprise: 1) Sustainable solutions investments, which are investments in entities that make an intentional, measurable and material impact*. 2) Sustainable companies investments, which are in investments companies that produce their products and services, and manage their operations, in a sustainable way. * 'Sustainable solutions' investments are equivalent to the EU Sustainable Finance Disclosure Regulation (SFDR) definition of a sustainable investment: "An investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices".

In an economic context, sustainability is the condition in which companies or other entities actively consider the needs of people and the planet to support sustainable development - namely, development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

An agreement between investors to exchange future cashflows of different assets.

Risk inherent to the entire market, attributable to a mix of factors including economic, socio-political, and market-related events.

Risk caused by an event that may trigger a collapse in an industry or economy.

A statement of the financial return a fund seeks.

Using price charts, this is the study of statistical patterns to forecast share price behaviour.

In contrast with bottom-up investing, a top-down approach to investment analysis begins with an assessment of macroeconomic factors, then business cycles, before moving on to analyse individual sectors and companies.

The full performance of a fund, an index or a benchmark taking into account capital growth (i.e. an increase or decrease in the value of investments) and income (e.g. interest or dividends received).

A measure of how much a fund's returns deviate from those of its benchmark index. The lower the number the closer the fund's historic performance has followed that of its benchmark index.

Measures the performance of an investment over specific time periods, such as 1 year, 3 years, 5 years or since inception.

Transaction costs are the costs associated with buying and selling underlying investments in a fund, e.g. spreads, commissions and taxes.

Financial instruments, such as shares or bonds, which are tradable on capital markets.

Potential financial loss or disruption that arises from the process of changing from one state to another. For example, transitioning from a state of a global economy that relies on greenhouse gas emitting energy sources to one that relies on non-polluting energy sources.

Debt securities issued by the US government. Treasuries fall under three categories: treasury bills (T-bills), treasury notes (T-notes) and treasury bonds (T-bonds).

These are collective investment schemes that can be sold in any EU country.

When a fund has less exposure to an asset than its benchmark.

Companies that appear to trade at low prices relative to their fundamentals (key metrics for a company, such as cash flow and return on assets).

An investment philosophy of investing in assets believed to be undervalued by the market.

Private equity investing in young, and therefore riskier, companies.

The pace or amount of change in value of an aspect such as an investment, an asset class or a fund.

A derivative security - usually issued with a bond - that gives the holder the right to buy ordinary shares at a fixed price. The main difference between warrants and call options is that warrants are issued and guaranteed by the company.

An index in which each component is weighted relative to its total market capitalisation (the value of a company's shares multiplied by the current share price), so companies with a larger market capitalisation will account for a greater proportion and exert a greater effect.

The ex-dividend date of a share is the day on which the share begins trading without the subsequent dividend value. Investors who purchased the share before the ex-dividend date are entitled to the next dividend payment while those who purchased the share on the ex-dividend date, or after, are not.

Refers to the period extending from the beginning of the current calendar year to the present date.

The income from an investment, typically stated as a percentage of the value of the investment.

The yield curve is used to gauge bond investors' sentiment towards risk, with the US yield curve acting as a global benchmark.

The difference in yield between different bonds.

The annualised return (internal rate of return) that would be earned on a bond if held to maturity (the point at which the bond becomes repayable) and all interest and coupon payments are made on schedule.

Issued at a deep discount to face value, this is a bond which does not pay interest (or 'coupons'). Instead, investors receive the full value when the bond matures (the point at which the bond becomes repayable).