Glossary

Funds are divided into portions called shares or units. In accumulation shares/units, the income earned by the fund is paid into the fund and reflected by an increase in the value of each share/unit.

Authorised Corporate Director

Where a professional money manager or a team of professionals manage a strategy which deliberately diverges from the overall market’s averages. The goal of the active manager is to outperform the overall market.

A measure of the percentage of stock holdings in a fund that differ from the benchmark index.

Annual General Meeting

A term used in investing to describe an investment strategy's ability to outperform the market. Alpha is also often referred to as “excess return”. A positive Alpha indicates that a manager has added value beyond the market’s average return.

Annual Management Charge

An ongoing fee paid to the management company for managing the fund, usually charged as a percentage of the investment.

The average annual return over a period of years, taking into account the effect of compounding. Also called compound growth rate.

Classification under the EU’s Sustainable Finance Disclosure Regulation (SFDR) for disclosure of investment funds’ sustainability characteristics.

The division of money invested in the fund across different investments i.e. different industries or asset classes.

A generic group of financial assets that exhibit similar characteristics, such as equities (e.g., companies), fixed income (e.g., bonds), cash and cash equivalents, real estate, commodities, and currencies are common examples of asset classes.

The sum of all investments, including cash, which are managed and administered by a fund manager on behalf of itself and its customers.

A type of performance analysis which compares a portfolio’s performance to a benchmark to identify sources of returns that are different from the benchmark and the impact that this has on a portfolio’s performance.

Assets Under Management

The accounting currency for an investment or fund.

A statistical measure summarising the percentage of periods where a fund performs better than a benchmark index. A Batting average greater than 50% is good and 100% is the theoretical maximum. E.g., A Batting average of 100% means the fund return has exceeded the index return over every period.

A market that experiences significant price declines, usually a decline of -20% or more from recent highs with business recession and growing unemployment.

Any index or measure of return used as a reference for comparison purposes, typically performance or the asset allocation of a portfolio.

A measure of volatility which expresses the volatility of one asset in relation to another. The beta of a market is 1. A fund with a beta of more than 1 moves on average to a greater extent than the market. A fund with a beta of less than 1 moves on average to a lesser extent.

A fixed -income instrument that represents a loan made by an investor to a borrower. Bonds are typically corporate (i.e., issued by companies) or governmental. A bond could be thought of as an I.O.U. between the lender and borrower that includes details of repayment and any interest income.

The original cost of an investment. While market prices may go up and down, the book cost remains the same.

An investment approach that focuses on analysing individual companies rather than economies and stock markets (‘top -down’ investing).

A market in which prices are advancing in an upward trend. In general, someone is ‘bullish’ if they believe the value of a security or market will rise.

Business cycles are the "ups and downs" in economic activity, defined in terms of periods of expansion or recession.

The exchange rate between the U.S. dollar (USD) and the British pound sterling (GBP) is officially quoted as GBP/USD.

A broad term for the raising of capital from investors to fund entities, typically businesses or governments, that require it.

A statistical measure summarising fund performance relative to an index during different market conditions (i.e., rising or falling). Capture Ratio is calculated as Upside Capture divided by Downside Capture. Up (Down)side Capture is calculated as the cumulative fund return divided by cumulative index return during positive(negative) index return periods. A Capture Ratio greater than 1 is good, as this implies the fund has exhibited an asymmetric tendency to outperform the index across different market conditions. E.g. Upside Capture greater than 1 means the fund outperformed the index during rising markets. Downside Capture less than 1 means the fund outperformed (fell by less than) the index during falling markets. Upside Capture greater than Downside Capture yields a Capture Ratio greater than 1.

CDP is a not -for-profit charity that, over the past 20 years, has created a survey system for the corporate disclosure of carbon emissions, climate risks and mitigation strategies.

The calculation of the total greenhouse gas emissions caused by a product or an organisation. The research provider MSCI define it as tons of carbon dioxide emitted per US$1million invested.

An entity’s carbon emissions relative to their activity. Typically calculated as the entity’s carbon emissions divided by its revenues, though the denominator can also be square metre, per employee, unit of production, etc.

Achieving parity between carbon emissions and removals. Easier to achieve than ‘net zero’ as it allows others to emit less CO2 on your behalf (known as an offset).

Reductions in CO2 or other greenhouse gasses made to compensate for emissions made elsewhere. They are measured in tonnes of carbon dioxide -equivalent (CO2e).

The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended.

Climate Action 100+ is a leading collaborative engagement platform aimed at addressing systemic climate risk.

An engagement that an investor conducts jointly with other investors. This might include: groups of investors working together without the involvement of a formal investor network or other membership organisation; or groups of investors working together with the support of a formal investor network or other membership organisation.

This is a fund usually formed of several/many investors combining a portion of their wealth – sometimes known as a ‘pooled investment ’.

Shows the extent to which a firm ’s operations are funded by lenders versus shareholders. When the proportion of debt -to-equity is high, then a business may be thought of as being ‘highly geared’, or ‘highly leveraged’. The use of gearing/leverage is generally considered to be higher risk.

The CAGR represents the annual growth of an investment over a specific time period. It is important to note that the CAGR does not reflect investment risk (i.e. volatility).

A company’s commitment to carrying out their business while taking account of their social, economic and environmental impact.

A company’s commitment to carrying out their business while taking account of their social, economic and environmental impact.

A statistical term describing the degree to which two securities (e.g., companies) or asset classes move in relation to one another. If they move in the same direction, then they are said to have a positive correlation. If they move in opposite directions, then they have a negative correlation. Highly correlated investments tend to move up and down together while low correlated investments tend to perform differently in different market conditions.

A credit rating is an independent assessment of a company’s or government  entity’s   creditworthiness  in general terms or with respect to a particular debt or financial obligation. Credit ratings are issued by organizations such as S&P Global, Moody’s or Fitch Ratings. They differ from credit scores, which are assigned to individuals. Credit ratings represent an attempt to estimate the level of risk involved in investing in or lending money to a particular business or other entity, including national and state governments and government agencies. A high credit rating indicates that, in the rating agency's opinion, a bond issuer is likely to repay its debts to investors without difficulty. A poor credit rating suggests it might struggle to make its payments or even fail to make them.

The ownership of assets denominated in foreign currencies. There is potential for a fund that invests overseas to lose or gain money purely because of changes in the currency exchange rate.

Currency hedging aims to manage the impact of foreign exchange fluctuations through the use of derivatives such as forward contracts.

In economics, a country ’s current account records the value of exports and imports of both goods and services and international transfers of capital. A nation ’s current account balance may be either a deficit or a surplus, depending on whether its total receipts from other countries are less than or greater than its total payments to other countries.

The annual income (interest or dividends) of an investment expressed as a percentage of its current price.

A stock (i.e., company) whose price is affected by macroeconomic or systematic changes in the overall economy. Cyclical stocks can be companies that make or sell discretionary items and services that are in demand when the economy is doing well.

De-rating refers to a decline in a company’s valuation .  For instance, a stock that traded on a price -to-earnings multiple of 20x but now trades on 15x is said to have de-rated.

Debasement refers to the intrinsic devaluation of money, that money is worth less.

An institution that principally performs oversight duties such as the safekeeping of fund assets and cash monitoring.

Investments whose value is linked to another investment, or to the performance of some other variable factor, such as interest rates.

Countries with relatively high levels of income per capita (i.e. per person).

An amount an investor may pay to cover the dealing costs incurred by the fund when it buys or sells investments following an investor’s purchase or sale of shares/units in the fund. It is normally only charged when those costs are significant.

Discrete performance is the percentage performance of an investment over specific defined time periods.

A variety of different investments held together, typically for the mitigation of individual risks.

A dividend is a distribution of a portion of a company's profit paid to shareholders. Companies are not required to pay dividends.

Dividend cover, otherwise known as dividend coverage ratio, indicates an organisation’s capacity to pay dividends from the profit attributable to shareholders. It is calculated by dividing the net income generated over a specified period by the dividends declared for the same period.

The date that a dividend is paid by an investment such as a company or fund.

The geographical location where a fund is incorporated.

The down-market capture ratio is a statistical measure of an investment manager's overall performance in down-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped.

The percentage decline in the value of an investment (or a market) from a peak to a subsequent low point. Unlike maximum drawdown, this term can refer to any fall during a period, not just the largest.

Dry powder refers to cash reserves but may also encompass other liquid assets, such as money market funds, that are available to be reinvested into risk assets when opportunities present themselves.

Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. The higher the duration the higher the sensitivity.

A company's profit divided by the number of shares outstanding.

A company’s earnings yield represents its last 12 -month earnings divided by its share price. Essentially, a company’s earnings yield shows how much earnings per share it generates from every dollar (for example) invested in the company’s stock.

An economic downturn, or a downturn, occurs when the value of stocks, property, and commodities fall, productivity either grows more slowly or declines, and GDP (gross domestic product) shrinks, stands still or expands more slowly. An economic downturn is part of the economic cycle, i.e., the natural fluctuation of the economy between periods of growth and contraction.

Countries that are progressing toward becoming advanced, typically measured by economic output per capita.

The process of dialogue between a company and other relevant stakeholders, with the aim of influencing corporate behaviour on environmental, social or governance practices.

The process of dialogue between a company and other relevant stakeholders, with the aim of influencing corporate behaviour on environmental, social or governance practices.

Enterprise Value (EV) is basically the total value of a company, considering not just its shares, but also its debts and cash. Enterprise Value gives a more accurate picture of what a company is worth than just its share price.

An up -front fee paid to the management company when an investor buys shares/units.

Earnings per share

Environmental, Social, and Governance refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies.

Explicitly including environmental, social, and governance factors during the investment process, specifically with the goal of long -term performance growth and risk mitigation.

Exchange Traded Commodities

Enterprise Value Including Cash

EVIC refers to the total value of a company, which includes the market value of its ordinary and preferred shares, the book value of its total debt, and any non -controlling interests, without subtracting any cash or cash equivalents.

Ex-dividend describes a stock that is trading without the value of an upcoming dividend payment. The ex -dividend date is the day the stock starts trading without the value of its next dividend payment.

An approach that restricts investment in certain sectors or companies that operate in controversial sectors, such as armaments or gambling.

An approach that restricts investment in certain sectors or companies that operate in controversial sectors, such as armaments or gambling.

Financial Conduct Authority

A government-issued currency that is not backed by a physical commodity, such as gold or silver.

This refers to government spending and taxation policies to influence economic conditions.

Fast-moving consumer goods

Foreign Exchange

This represents the projected earnings yield of a company for its current financial year.

The cash a company generates after accounting for cash outflows that support its operations and capital base. It is calculated by deducting capital expenditures from operating cash flow.

A profitability ratio that measures a business’ cash from operating activities, less capital expenditure, as a percentage of its revenue over a given period.

A financial valuation ratio that divides the free cash flow a company earns against its market value.

An investment vehicle that invests in other funds, rather than investing directly in financial instruments. Also known as a multi-manager fund.

General Data Protection Regulation

The geographical location in which the holdings of the Fund are listed. Exposure represents the relative risk particular to the percentage of investment in that particular geographic location.

This is the emission of gases such as carbon dioxide which cause global temperatures to rise. These emissions can be classified as: Scope 1 – direct emissions from the burning of fuels; Scope 2 – indirect emissions from heat and electricity used; and Scope 3 – all other indirect emissions.

Broadly speaking, “greenwashing ” is the process of conveying a false impression or misleading information about a firm’s ESG analysis or integration into the investment process.

The total rate of return on an investment before the deduction of any fees, commissions, or expenses.

The increase in value of investments.

A growth stock is a loose classification for any share in a company that is anticipated to grow at a rate significantly above the average growth for the market. These stocks generally do not pay dividends.

Hedging is a risk management strategy employed to aim to offset losses in investments by taking an opposite position in related assets. Hedging can be viewed as a form of insurance. It cannot prevent a single negative event from happening, but if a fund is properly hedged. It can lessen the impact of a negative event such as currency devaluation.

The historic dividend yield reflects distributions declared over the past twelve months as a percentage of a fund’s price. It does not include any preliminary charge and investors may be subject to tax on their distributions. This yield is not guaranteed and will fluctuate.

Implied Temperature Rise is an intuitive climate-focused metric that can be used to assess the net-zero alignment of a company or portfolio. It translates the projected greenhouse gas emissions of the companies a portfolio comprises into an estimated rise in average global temperatures over the coming decades.

Money paid out by an investment, such as interest from a bond or a dividend from a share.

Funds are divided into portions called ‘shares’ or ‘units.’ In income shares/units, the income earned by the fund is paid out to investors.

A type of bond where its principal value and coupon payments are linked to an inflation indicator, such as the Consumer Price Index (CPI) or Retail Price Index (RPI).

The increase in prices of goods and services in an economy.

The IIGCC is a European membership body for investor collaboration on climate change.

Investment grade refers to the quality of a company's credit. To be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or 'Baa" by Moody's. Generally, investment grade bonds have a low risk of default. Anything below these 'BBB' or 'Baa" ratings are considered non -investment grade.  If the company or bond is rated 'BB' or 'Ba" or lower it is known as junk grade, in which case the probability that the company will repay its issued debt is deemed to be speculative.

An investment trust is a closed -ended investment company meaning it has a fixed number of shares in issue at any one time. Investment trusts are traded on the stock market.

Investment trusts have the flexibility to borrow money (known as gearing/leverage) in order to purchase investments. Through gearing, the investment trust may magnify gains and/or losses of the underlying portfolio. The use of gearing/leverage is generally considered to be higher risk.

Initial Public Offering

International Securities Identification Number

A quantifiable measure of performance over time for a specific objective.

Key Information Documents

A high -risk investment strategy of using borrowed money - specifically, the use of various financial instruments or borrowed capital to aim to increase the potential return of an investment.

The ease with which an investment can be converted into cash without impacting its market price.

The additional return investors demand for holding an investment that is not easily bought or sold without affecting its price.

M2 is a measure of the money supply in an economy, including cash and certain bank deposits.

Refers to the total market value of a company's outstanding shares of stock. Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share.

Materiality is a measure of the importance of specific topics and information during the investment process. The more significant a topic is, the more material it is, and vice versa.

A measure of the importance of specific topics and information during the investment process. The more significant a topic is, the more material it is, and vice versa.

The maturity date is the date on which the principal amount of a fixed income instrument must be repaid to investors.

The percentage decline in the value of an investment/market from its highest point (peak) to its lowest point (trough) over a given period. A measure of potential loss, focusing on the worst decline rather than average performance.

Monetary policy is the control of the quantity of money available in the economy and the channels by which new money is supplied. Monetary policy is used to control macroeconomic factors such as inflation, unemployment, and economic growth.

Money market instruments are debt instruments (i.e., a Treasury Bill) that have very short maturities (from overnight to 397 days).

The market value of a fund’s underlying assets minus liabilities. This is generally reported on a per share basis.

A ratio measuring the amount of income generated and available to pay down debt before covering interest, taxes, depreciation, and amortisation expenses.

The return after costs, such as management fees, taxes, and other fees.

The Net Zero Asset Managers Initiative is an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees celsius; and to supporting investing aligned with achieving net zero emissions by 2050 or sooner

Net zero refers to achieving a balance between the amount of greenhouse gas emissions produced to the amount removed from the atmosphere by a company.

The nominal interest rate refers to the interest rate before taking inflation into account, i.e. the stated/fixed interest rate.

A type of investment fund, structured as a company. OEICs are called “open-ended” because they can create new shares to meet investor demand and also cancel shares of investors who exit the fund.

A measure of what it costs to invest in a fund. It includes the fee paid to the management company and other operating costs.

Trading of equities, bonds, commodities or derivatives directly between two parties (typically via an inter -dealer -broker network), rather than through an exchange.

Profit and Loss

The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015. Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre -industrial levels.

An investment management style that aims to track the performance of a desired benchmark.

A fee charged by an investment manager for generating positive returns. This is generally in addition to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways i.e. as a percentage of the investment profits or the by the outperformance relative to an index/benchmark.

Physical risks are outcomes from disruptive events caused by climate change, such as extreme weather that have a direct impact on society and the economy.

An online service that allows an investor to buy and sell shares and funds and see their investments in one place.

Percentage of holdings in a fund that are sold in a specified period. Measured by the lesser of purchases or sales divided by the average Net Asset Value (NAV) over the period.

Purchase Power Parity

Price discovery is setting the spot price or the ‘proper’ price of an asset, security, commodity, or currency. The process of price discovery looks at a number of tangible and intangible factors, including supply and demand, investor risk attitudes, and the overall economic and geopolitical environment.

A valuation metric that compares a firm's market capitalisation to its book value. It is calculated by dividing the company's stock price per share by its book value per share.

A valuation metric that compares a firm’s stock price to its earnings per share.

A ballot cast by a single person or firm on behalf of a corporation's shareholder who may not be able to attend a shareholder meeting.

The measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies.

Quantitative easing is a form of unconventional monetary policy in which a central bank purchases longer-term securities (i.e. government bonds) from the open market in order to increase the money supply and encourage lending and investment.  Buying these securities adds new money to the economy and also serves to lower interest rates. It also expands the central bank's balance sheet.

Re-rating refers to an increase in a company’s valuation.  For instance, a stock that traded on a price -to-earnings multiple of 15x but now trades on 20x is said to have re-rated.

The real interest rate is the rate of interest an investor /saver receives after allowing for inflation. This interest rate gives investors a more accurate measure of their return after inflation is acknowledged.

Refers to a decline in general economic activity in a designated region, defined by economists as at least two consecutive quarters of decline in a country's gross domestic product.

Real Estate Investment Trust

The performance of an investment compared to a particular benchmark.

A philosophy that includes ESG factors during the investment selection, portfolio construction, and monitoring processes, with the goal of maximising opportunities, ensuring high performance, and mitigating risks.

The money made or lost on an investment.

A measure of financial performance that calculates how efficiently a company’s management is utilising its shareholders’ capital.

A measure of financial performance that calculates how efficiently a company’s management is utilising all forms of capital available.

The money generated from normal business operations.

A measure of an investment’s return relative to the risk taken to achieve it. Used to compare investments with different levels of volatility or risk.

Any period, no matter which day an investor starts on.

A process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty. Scenarios are hypothetical constructs and not designed to deliver precise outcomes or forecasts. Instead, scenarios provide a way for organisations to consider how the future might look if certain trends continue or certain conditions are met.

Targets adopted by a company to reduce its Greenhouse Gas emissions are considered science -based if they are in line with the level of decarbonisation required to achieve the goals of the Paris Agreement.

The application of filters to lists of potential securities, issuers, investments or sectors to rule investments in or out based on an investor’s preferences, such as ethics and values.

An equal portion representing part ownership of a company. Can also apply to an OEIC.

There are different types of shares that have different rights and entitle an investor to different cash flows e.g. Accumulation shares do not pay out a dividend while Income shares do.

A measure of risk-adjusted return, showing how much excess return an investment has generated for each unit of risk (volatility) taken. The higher this ratio, the better the fund returns relative to the amount of investment risk taken.

Short selling, also known as 'shorting' or taking a 'short' position is an investment strategy based around aiming to profit from a falling share price. It's the opposite to the more conventional 'long' position, where investors traditionally aim to profit from a rising share price. In short selling, an investor borrows shares of a stock, bond, or other asset that they believe will decrease in value. The investor then sells these borrowed shares to buyers willing to pay the market price. Before the borrowed shares must be returned, the investor is essentially betting that the price will continue to decline and they can purchase the shares at a lower cost. The risk of loss on a short sale is theoretically unlimited since the price of any asset can climb to infinity.

Soft landing' implies a deceleration from growth to slower growth or stagnation, steering clear of recession.

A soft market is a market with more potential sellers than buyers.

Stagflation is the simultaneous appearance in an economy of slow growth, high unemployment, and rising prices.

A measurement of investment volatility. An investment with a higher standard deviation is considered more volatile than one with low standard deviation.

The use of influence by investors to maximise overall long -term value including the value of common economic, social and environmental assets, on which returns and clients' interests depend. Troy defines this as ESG integration within the investment process and active ownership of holdings, which includes engagement and voting.

The use of influence by investors to maximise overall long -term value including the value of common economic, social and environmental assets, on which returns and clients' interests depend. Troy define this as ESG integration within the investment process and active ownership of holdings, which includes engagement and voting.

A process whereby those holding investments lend them to other parties who pay a fee for borrowing the investments. The borrowed stock must be returned to the holder at a pre-determined date.

An asset that once produced value or profit, but no longer does due to changes such as technological advancements, market shifts, societal habits, and more.

The Sustainable Development Goals are a set of 17 global integrated goals, launched by the United Nations in September 2015 as a universal call to action to end poverty and protect the planet.

A set of European Union rules that came into effect on March 10, 2021, with the goal of making the sustainability profile of funds more comparable and easier for investors to understand.

The risk of breakdown of the entire financial system rather than a failure of individual parts.

The Task Force on Climate-related Financial Disclosures develops recommendations for more effective climate -related disclosures to enable market participants to better understand and price climate-related risks and opportunities.

The Task Force on Nature-related Financial Disclosures develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks, which aims to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.

An investment style that focuses on certain themes generally related to long-term trends.

An investment style that focuses on certain themes generally related to long-term trends.

An investment approach that primarily uses macro factors (i.e., through reviewing economies and stock markets) to make asset allocation decisions instead of looking at individual assets.

The total annual cost of running an investment fund, expressed as a percentage of its assets. Includes the management fee and other operational costs. A lower TER is reflective of more of an investor’s money staying invested.

Tracking error is a measure of financial performance that determines the difference between the return fluctuations of an investment portfolio and the return fluctuations of a chosen benchmark.

Transition risks relate to major societal and economic shifts, such as moving towards a less polluting, green economy. These paradigm shifts can have major impacts on various industries and sectors of the economy.

A short -dated government security, yielding no interest but issued at a discount on its redemption price and redeemed at par.

Triple bottom line is an accounting framework with three main components: social, environmental, and financial. Companies incorporating this framework believe that, instead of a single bottom line, there are three: people, planet, profit.

This refers to a regulatory framework that allows for the sale of cross -Europe mutual funds.

An equal portion representing part ownership of a unit trust fund (note: ‘share’ has a similar meaning but for funds structured as corporate entities such as an open -ended investment company.

The UNGC is an initiative to promote responsible corporate citizenship and encourage businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.

The PRI is a UN -supported network of investors who work to promote sustainable investment through the incorporation of environmental, social and governance factors into investment practice.

United Nations Sustainable Development goals

Valuation refers to an understanding of a company’s worth using recognised financial metrics, e.g. price -earnings ratio, when compared to the wider market.

Refers to shares of a company that appear to trade at a lower price relative to its fundamentals. Investors in value stocks are assuming that the price of the stock will eventually rise, reflecting the true health and potential of the company.

A measure of the size of short -term changes in the value of an investment.

Weighted Average Carbon Intensity

A portfolio’s exposure to carbon-intensive companies expressed in tonnes CO2e (carbon dioxide equivalent) / $M revenue. This is in line with the TCFD’s definition.

A measure of the average length of time to maturity of all of the underlying instruments in the portfolio weighted to reflect the relative holdings in each instrument.

The yield curve plots the interest rates of bonds having equal credit quality but differing maturing dates.

Year-to-date return on an investment including capital appreciation and dividends or interest.

Yield-to-Maturity