Glossary

Alpha

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

Asset classes

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

Beta

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

Distribution Yield

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

Fixed income

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

Historic Yield

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

Market Capitalisation ("Market Cap")

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

Mega Cap

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

Large Cap

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

Medium Cap

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

Small Cap

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

Micro Cap

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

Overweight, underweight

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

Risk appetite

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

Systemic risk

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

Sharpe Ratio

The Sharpe ratio is used to characterise how well the return of an asset compensates the investor for the risk taken. When comparing two assets each with the expected return against the same benchmark with return, the asset with the higher Sharpe ratio gives more return for the same risk.

Standard Deviation

The most commonly used measure of volatility is the Standard Deviation. It measures how widely the actual return on an investment varies around its own mean or average return. The greater the standard deviation, the greater the volatility and therefore the associated risk.

Underlying Yield

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

Volatility

The speed and magnitude of price changes measured over a certain period of time. A price that frequently moves dramatically will be considered to have a high degree of volatility