Accumulation unitsAny income earned on this type of unit is added to the price of your units (no income is distributed), increasing the value of your holding, but leaving the number of units held unchanged.
AIM (London Stock Exchange's international market for smaller growing companies)AIM (Alternative Investment Market) is the London Stock Exchange's international market for smaller sized companies. Businesses range from venture capital-backed start-ups to mature organisations looking to expand. The objective of this FTSE sector is to offer smaller companies - from any country and any sector - the chance to raise capital on a public market . The nature of these companies means that their shares are likely to go up and down more often.
AlphaA measure of the excess return of a portfolio relative to its benchmark, on a risk adjusted basis. It can be used to help work out if a portfolio is earning the proper return for its level of risk. If the value is positive then the portfolio is earning excess return.
Alternative Investment Fund Managers Directive (AIFMD)The AIFMD covers the management, administration and marketing of alternative investment funds (AIFs). Its focus is on regulating the Alternative Investment Fund Manager (AIFM) rather than the AIF. The AIFMD establishes an European Union-wide framework for monitoring and supervising risks posed by AIFMs and the AIFs they manage.
An AIF is a ‘collective investment undertaking’ that is not subject to the UCITS regime, and includes hedge funds, private equity funds, retail investment funds, investment companies and real estate funds, among others.
Annual Management Charge (AMC)A fee paid to the fund manager once a year which service and administration fees.It is calculated daily at the point of valuation. The AMC forms part of the Ongoing Charges Figure (OCF) of a fund.
Describes how your money is invested in the fund. In most cases, the fund manager will split the fund across geographic area, by individual sectors, e.g. oil & gas, financials. In order to spread risk and diversify your holdings.
AuditorAuditors are required to certify that the fund accounts produced by their client companies have been prepared in accordance with normal accounting standards and represent a true and fair view of the fund.
Authorised Corporate Director (ACD)The term used to describe the manager of an Open Ended Investment Company (OEIC). An ACD has the same role and responsibilities as their unit trust equivalents, known as a fund manager.
BearAn investor who sells a stock or share in the hope of buying it back at a lower price, as he thinks the market will go down. A bear market is a falling market in which bears would prosper.
Beneficial ownerThe beneficial owner of an asset is the person for whose benefit it is being held.
A measure of market sensitivity. The sign of the beta (+/-) indicates whether, on average, the investments/portfolio returns move with (+) or against (-) its benchmark. The value indicates the relative volatility. i.e. a fund with a beta of 1 moves in line with its benchmark, greater than 1 indicates that it moves to a greater degree than the benchmark and vice versa.
The bid price is the price at which units are sold to investors and are lower than the offer or buying price.
Bid/Offer SpreadThe standard difference between the price of buying and selling units. Usually quoted as a percentage term for unit trusts and is generally 6%.
BondA debt security issued by borrowers and sold to investors. Bonds have a stated rate of interest (coupon) at fixed dates when interest and principal must be paid (coupon date and maturity date). Bondholders have no ownership privileges as equity holders.
BullAn investor who buys a stock or share in the hope of selling it at a higher price, as he thinks the market will go up. A bull market is a rising market in which bulls would prosper.
Cancellation priceThis is the lowest possible price at which an investor can sell units back to the fund manager under FCA regulations. It excludes exit charges. The cancellation price represents the proceeds the fund would receive if the fund's assets were sold.
COLL (FCA regulations)COLL is a new set of regulations, prescribed by the FCA under the rulebook for New Collective Investment Schemes which all managers were required to adopt by February 2007. Rathbone Unit Trust Management has fully implemented these changes.
Collective investment schemesFunds which pool investors' money and invest on their behalf. This term refers to unit trusts and OEICs.
Contract notesOn completion of the investment in the fund, our dealing office despatches a contract note which contains the details of the transaction.
CorrelationCorrelation describes the extent to which the prices of different types of assets move in the same direction at the same time. The correlation measure can run between -1 and +1. It is unusual for pairs of conventional assets to exhibit significant negative correlation for extended periods.
CouponThis is a regular payment received by the bondholder over the lifetime of a bond. The coupon rate is expressed as a percentage of the face value of a bond.
Creation priceThis is the highest possible price at which an investor can buy units from the manager under FCA regulations. The initial charge is not included. The creation price represents the cost of buying the fund’s assets.
CustodianA major banking group, the custodian is appointed by the fund's trustee or depositary to safeguard the fund's assets.
DealingThe process of buying and selling investments - shares, units in a unit trust, bonds etc
Decile rankA rating, usually of performance, on a scale of 1 to 10 where 1 is best, 10 is worst, and each number corresponds to an increment of 10 percentage points.
The actual cost of purchasing or selling a fund’s investments may be higher or lower than the value used in calculating the share price – for example, due to dealing charges. Under certain circumstances (for example, large volumes of deals) this may have an adverse effect on the investors’ interest in a fund.
In order to prevent this effect, called “dilution”, the Manager has the power to charge a ‘dilution levy’ on the sale and/or redemption of shares. A dilution levy is not currently charged but could be charged:
1. where over a dealing period a sub-fund has experienced a large level of net sales or redemptions relative to its size;
2. on large deals;
3. where a fund is in continual decline or increase; or
4. in any other case where the Manager is of the opinion that the interests of investors require the imposition of a dilution levy.
It is therefore not possible to predict accurately whether dilution would occur at any point in time.
Discretionary fund managementThe investing of clients’ money by a member firm on a discretionary basis. The client leaves specific decisions to the manager’s discretion.
Distributions are paid out (if the units in your chosen unit trusts are income-paying) quarterly or half-yearly depending on the trust and represent a dividend based on the amount of income that has been accumulated from the unit trust’s underlying investments.
Diversification means owning a variety of investments that typically perform differently from one another. This helps to reduce the risk, or volatility, of the overall collection of investments.
DividendThat part of a company's profits after tax which is distributed to shareholders - usually expressed in pence per share.
Dual pricingUnit trusts and OEICs can be dual-priced. Such funds have an offer price at which you buy, and a lower bid price, at which you sell.
Ethical investingAlso known as Socially Responsible Investments (SRIs). These funds aim to avoid investing in activities which may be harmful to society, such as tobacco production or child labour. Some funds also aim to actively invest in companies which promote ethical policies such as recycling.
Ex dividend dateThe ex-dividend (also known as the ‘XD’ date) defines the date from which the dividend is excluded from the share price, thus reflecting the payment in the value of the unit.
Exit chargeWith effect from 1 November 1994, under FCA regulations, unit trust managers have been given the option to levy a charge on redemption of units in place of, or in combination with their initial charge. Rathbone Unit Trust Management have not imposed any exit charges on their funds.
FCA (Financial Conduct Authority)The Financial Conduct Authority, the successor to the Financial Services Authority is the regulator of financial services created by the Financial Services and Markets Act 2000. They are an independent body that regulates the financial services industry in the UK and have a wide range of rule-making, investigatory and enforcement powers in order to meet our statutory objectives.
Floating Rate Note (FRN)This term used to describe a collective investment scheme, into which investors’ monies is pooled and managed as a single entity with a common investment aim. These protect investors against a rise in interest rates (which have an inverse relationship with bond prices), but also carry lower yields than fixed notes of the same maturity. It's the same idea as an adjustable-rate mortgage, except FRNs are investments (not debt).
Form of renunciationIn order to sell unit trust holdings, the investor must ‘renounce’ or give up the units held by completing and signing a form of renunciation.Where part of a holding is being sold, the number or the value of the units to be sold must be entered on the form of renunciation.
Units are priced on a forward basis when they are bought or sold by the manager at a price which will be fixed at the next valuation of the unit trust.
FTSE 100 IndexArithmetic index of the UK's leading 100 shares, weighted according to the company's market capitalisation. It is a real time index calculated by the London Stock Exchange.
FTSE All-ShareA broad index based on 98% of all UK listed companies, in terms of market capitalisation, not number.
As above, but relating to the 250 shares below the top 100.
FTSE Mid 250 Index
FTSE Small CapFTSE Small Cap constitutes the 500 smallest FTSE companies with an approximate market capitalisation of £40 million to £250 million.
This term used to describe a collective investment scheme, into which investors' monies is pooled and managed as a single entity with a common investment aim.
GiltDomestic Sterling denominated government bond issued by the Treasury.
Gross redemption yieldThe Gross Redemption Yield of a bond is the return a bond earns on the price at which it was purchased if held to maturity. The calculation takes into account any capital gain or loss over the full period and assumes that all interest payments are reinvested.
A fund whose main objective is capital appreciation. This contrasts with an income fund where the main aim is to provide higher than average income from dividend payments.
Historic pricingThe opposite of forward pricing. This is where managers will buy and sell shares on the basis of prices calculated at the last valuation point - investors therefore know the price they will receive when they deal.
Income fundA fund whose objective is to provide income growth on a regular basis over time.
Index/indicesA grouping of shares or fixed interest securities on the stock market which are often similar in size or represent similar industries. For example, the FTSE 100 index represents the largest 100 UK companies by market capitalisation.
Individual Savings Account (ISA)An ISA is a scheme of investment with no tax liability on income or capital gains arising from assets held within the scheme. It is not an investment in itself but a wrapper put around one or more investments, and may comprise components which fluctuate in value, e.g. stocks and shares.
Information ratioInformation Ratio is defined as a portfolio’s excess return relative to its benchmark, divided by the active risk taken to generate the return. It is a measure of efficiency and can be regarded as a measure of the manager’s skill.
Initial chargeThe initial charge on a unit trust is made when the units are sold to the investor. The charge is a percentage of the bid price, and covers the managers' start up costs.
Investment Association (IA)The IA is a trade body for the UK investment management industry. Its members provide UK investment management services to institutions (e.g. life assurance, pension Funds) and to private investors through individual fund management and pooled products such as authorised investment funds.
Investment grade bondsThese bonds have a low risk of the company that issued them being unable to repay them. The most secure forms are known as "triple A" rated bonds.
International Securities Identification Number (ISIN). International code for a listed security.
ISIN (International Securities Identification Number )
Junk bondsThese are bonds rated 'BB' or lower because of its high default risk. They are also known as a "high-yield bond" “Non-investment grade bonds” or "speculative bonds". These are usually purchased for speculative purposes. Junk bonds typically offer interest rates three to four percentage points higher than safer government issues.
Launch dateThe date on which a unit trust or similar collective investment scheme starts investing its assets.
LipperLipper, a Reuters company, delivers mutual fund information, analytical tools, and commentary. Lipper's benchmarking provides the trusted guidepost to asset managers, fund companies, financial intermediaries, traditional media, websites, and individual investors.
Manager's reportHalf-yearly fund accounting and investment report.
Market capitalisation is used to indicate the value of a company by multiplying the number of shares in issue by the current share price.
A price between the offer and bid price. The mid price is equal to the sum of the best bid price and the best offer price divided by two, and rounded up to be consistent with the relevant price format.
Mid market price
Monetary Policy Committee (MPC)The Committee is made up of economic experts and examines all the data available and relevant to decide whether inflation is likely to rise above the Governments target rate.
Money launderingThis is the process of passing money gained illegally through the financial system to convert into legitimate funds. Since 1994, when the government introduced the Money Laundering Regulations, financial services firms have been required to have procedures in place to prevent money laundering.
Morningstar OBSRA qualitative fund ratings agency whose ratings, awarded following in-depth meetings with fund managers, are evidence that a fund is, for its type, consistently producing the returns it set out to deliver, and is likely to continue to meet its investment objectives over the long term.
Net Asset Value (NAV)The total value of a company or fund, based on quoted mid-market prices, together with other assets, less liabilities, divided by the number of shares in issue.
Where a client has bought a unit trust under advice from an adviser, the fund provider is obliged to give the client 14 days' cancellation rights. These rights are outlined in the Notice of Cancellation which will be sent with the contract note.
Notice of cancellation
OEICsNow known as ICVCs (Investment Company with Variable Capital). These are very similar to unit trusts, but are constituted as companies rather than trusts. They are the established structure in many other European countries and can be single or dual-priced.
Offer priceThe offer price is the price at which a company is looking to sell units. Usually higher than the bid, or selling, price as it includes an initial charge.
Ongoing Charges Figure (OCF)This is an overall total annual charge for owning part of a fund and includes the transaction charges for the buying and selling of investments. Details of the charges included can be found in the Investment Association’s (the investment industry's trade body) guidelines, available at www.theinvestmentassociation.org
Open-endedThese funds have no limit to the number of units (or shares) they can issue. The price of the units (or shares) remains closely aligned to the NAV of the fund. Unit trusts and OEICs are open-ended funds.
Ordinary sharesOrdinary shares are also known as equity shares and they are the most common form of share in the UK. An ordinary share gives the right to its owner to share in the profits of the company (dividends) and to vote at general meetings of the company.
A group of investments held across asset classes (stocks, bonds, real estate, gold) or within the same asset class (exposure to stocks across companies and industries).
Pound cost averagingBuying more units when prices are low and fewer units when prices are high.
ProspectusWhen a company applies for a listing of its securities which are to be offered to the public in the UK, a prospectus is required in accordance with the UKLA's Listing Rules, detailing information on the company, its accounts, directors and its securities.
Quartile rankingsQuartile rankings are a measure of how well a fund has performed against all other funds. The rankings range from 1 to 4 for all time periods covered. Mutual funds with the highest percentage returns are assigned a quartile of 1, whereas those with the worst returns are assigned a quartile of 4.
Ratings agenciesRating agencies determine the issuer’s ability to meet their debt obligations to their investors. Agencies include Standard & Poor’s (S&P) and Fitch IBCA.
Redemption yieldThe Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures.
RegistrarThe registrar is responsible for the administration of the share register, distributing shareholder information on behalf of the company and paying dividends to shareholders. Rathbone Unit Trust Management's registrar is International Financial Data Services (IFDS) (Ltd.).
Reinvestment of incomeIncome allocations can be reinvested to purchase further units in the existing investment vehicle
Risk - ex-anteThis is predicted risk (uncertainty inherent in returns) from a model or portfolio that combines historic data on volatility and correlation with the current portfolio structure.
This is risk measured directly from a realised performance track record. This may provide little insight into the risks facing a portfolio currently.
Risk - ex-post
Used to describe the income investors get from their portfolio as a percentage of market value of the securities.
SEDOLThe Stock Exchange Daily Official List number to identify any security.
SettlementUnit trust buys have to be paid for. Once units have been bought on your behalf, you have an obligation to pay for the investment before the settlement date (a number, usually 4, working days after the transaction has taken place). Most companies will accept cheques, direct bank transfers, and debit cards.
Sharpe ratioA measure of the risk adjusted return of an investment/portfolio. It is given by the excess return above the risk free rate divided by the volatility (i.e. standard deviation) of the portfolios returns. The higher the value, the better the performance, given the risk taken.
SpreadIn investment terms this is used to describe the difference between the buying and selling price, i.e. the bid-offer spread. This can vary depending on the demand for the investment and the volumes in which it is normally traded. Collective Investment schemes normally have a set spread between the buying & selling prices (bid/offer spread).
Stock lendingStock lending is the temporary transfer of securities, by a lender to a borrower, with agreement by the borrower to return equivalent securities to the lender at pre-agreed time. There are two main motivations for stock lending; securities-driven, and cash-driven. In securities-driven transactions, borrowing firms seek specific securities (equities or bonds), perhaps to facilitate their trading operations. In the cash-driven trades, the lender is able to increase the returns on an underlying portfolio by receiving a fee for making its investments available to the borrower. Such transactions may boost overall income returns.
Transferable securitiesTransferable securities are those classes of investments which are negotiable on the capital market such as shares in companies and other investments equivalent to shares in companies, partnerships or other entities or capital return and interest investments known as bonds.
Responsible for monitoring the fund manager's activities in relation to a unit trust. Usually a large bank, the trustee must be independent of the fund manager where the fund is authorised by the Financial Conduct Authority. It acts in the interests of the investors, owning the investments in the fund on their behalf. It also ensures the fund is invested according to its investment objectives and that the manager complies with the regulations. The OEIC / ICVC equivalent is known as the depositary.
TurnoverThe rate at which securities within a fund are exchanged for other securities of the same class.
UCITSA fund or directive that can be marketed in all countries in the European Union. UCITS stands for ‘Undertakings for Collective Investments in Transferable Securities’ and is a European Directive which has been adopted in the UK. UK based UCITS funds are OEICs, with unit trusts abiding by the non-UCITS Retail Schemes (NURS) rules due to trust law being unrecognisable by other European Member States.
Unit trustsThese are open-ended funds where private investors pool their money to be invested in a portfolio of securities. Unit trusts issue units to investors. Unit trusts issue units in response to demand. Being open-ended, unit price is closely aligned to the net asset value (NAV) of the fund.
UnitsA unit is a proportion of the fund for which a buying and selling price will be quoted.Your investment amount divided by the price will give the number of units that you will be allocated.These can be income-paying units (income units) or income reinvesting units (accumulation units).
Valuation pointThe name given to the time of day that unit trusts or OEICs are valued and then priced, (usually midday).
VolatilityA measure of risk or the ups and downs of performance of a fund. It shows the variability of returns over, typically, a 5 year period (where that length of historic data is available). The higher the volatility, the more uncertainty there is in the returns and the greater the risk implicit in the portfolio.
WeightingThe percentage/share of a portfolio held in a single asset or sector compared with its benchmark/another index.
XD dateSee ex-dividend date