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Asset Management
A-CD-LM-RS-Z
D
  DEFINED BENEFIT SCHEME
This is where the rules of the scheme decide how much pension the member will get. There are different ways of working out the size of the pension, but the member will know which system the scheme uses. The most common type of defined benefit scheme is a final salary scheme. (See also Final Salary Scheme)

  DEPOSITORY RECEIPTS
Depository receipts are receipts for shares in foreign-based corporations traded on capital markets around the world. American Depository Receipts permit foreign corporations to offer shares to American citizens, Global Depository Receipts allow companies in Europe, Asia, the US and Latin America to offer shares in many markets around the world. The advantage to the issuing company is that it allows them to raise money in many markets as opposed to just their home market. The advantage to local investors is that they do not have to buy shares through the issuing company’s home exchange, which may be difficult or expensive. In addition the share price and all dividends are converted into the investor’s local currency.

   DEVIATION
This is the difference between the position that a fund holds versus its benchmark. It indicates that the fund holds more than or less than the benchmark of a particular currency, an industry sector or geographical region, or has a duration which is longer or shorter than the benchmark. As such, the fund is said to be overweight or underweight the benchmark in a stock, sector, country or duration. Govt - Government bonds are fixed income securities issued by governments, so they usually carry the highest credit ratings in developed countries.

   DEFINED CONTRIBUTION SCHEME
Also referred to as a money purchase scheme, this type of company pension scheme is increasingly replacing the financial salary version in terms of popularity. The amount of income you receive in retirement is directly related to how much you have contributed over your working life and how well your fund has performed.

  DURATION
Is a measure of the average life of a bond, weighting each repayment by the time until it will be made and reflecting the fact that money flows in the near future are more valuable than the same money flows at a later date. Duration indicates how changes in interest rates will affect the price of a bond (or bond portfolio). The longer the duration of a bond, the greater the extent to which its price is affected by interest rate changes. As such, duration is used as a measure of risk for bond portfolios.
E
   EARNINGS PER SHARE
A widely used indicator of the return on equity investments. Any figure quoted represents the total amount of a company's earnings (after deductions) divided by the number of ordinary shares it has issued. (See also P/E)
F
  FUNDAMENTALS
Usually refers to the underlying economic factors affecting a particular market, country or sector and will include such aspects as industrial output, wages and raw materials costs, currency strength or weaknesses, trade balance and so on.

  FUND
General term for any investment vehicle which pools together the money of many small individual investors and invests it in certain markets and securities according to a defined set of investment aims and objectives. Covers such investments as unit trusts, investment trusts and pension plans. Fund Manager - professional person responsible for the investment management of an individual fund; the person who takes the day-to-day decisions on what investments to buy or sell on behalf of the fund's investors. (See also Analyst)

  FUTURES
Short for Futures Contract, which is an obligation to buy or sell a specific amount of a commodity, currency or financial instrument at a particular price on a stipulated future date. The price is established between buyer and seller on the floor of an exchange, such as the London International Financial Futures Exchange (LIFFE), using an open outcry' system. The contracts themselves may be traded with third parties. (See also Options)

   FUND MANAGER
Professional person responsible for the investment management of an individual fund; the person who takes the day-to-day decisions on what investments to buy or sell on behalf of the fund's investors.
H
  HEDGING
A strategy used to offset investment risk. Usually makes use of futures or options.

   HY/EM
High yield/emerging markets bonds. High yield are sub investment grade corporate bonds, issued by companies whose credit quality is deemed to be deteriorating and default risk is high. Emerging market bonds are issued by governments of emerging economies, where political and economic instability make the risk of default higher.
I
  INFORMATION RATIO
This is the difference between the annualized average fund return and the annualized average benchmark return (calculated geometrically) divided by the annualized tracking error. The higher the ratio, the better, as it shows that the risk taken by the fund manager relative to the benchmark has been rewarded.

   INDEX
A mean of continually measuring the movement of a particular set of statistics over periods of time. Most investment trust fund managers measure their fund's performance against that of an appropriate 'benchmark' index with the aim of at least matching its progress or, better still, beating it.
L
  LARGEST DRAWDOWN
Drawdown analysis is defined as the strategy's maximum loss potential during the course of a trade. The largest intraday drawdown experienced by the strategy on a single closed out trade. This version of drawdown measures the open to the lowest unrealized low of the trade, based on a long position and reversed for a short position.