Glossary

An asset class is a broad group of investments that have similar financial characteristics. Traditionally, there are four main asset classes:

• Equities - One of the oldest and most traditional ways to invest is to buy shares in a company. And as a shareholder, you have an equity stake in a business, which is why shares are also known as equities. An investment in an  equity fund will hold stocks in many businesses / companies. Overseas Equities means holding stocks and shares in a particular geographical area outside the UK.
• Property – as the name suggests the fund invests in property, usually commercial (shops and offices). This could either be directly into property or into companies that invest in property.
• Cash – as the name suggests  the fund holds cash  – this could be Sterling / US Dollars / Euros etc. it depends upon where in the world the fund might invest. Cash can be held as a part of a low risk strategy or pending whilst a decision where to invest is taken.
• Bonds / Gilts – These are provided by Companies / Governments as a means to raise cash. In return for investing, the fund will receive a level of income usually over a fixed term. The income can be either be level of indexed linked with increases linked to, for example, the retail price index (RPI). 

Capital growth - This is an increase (or profit) in value of any investment, excluding any income paid out.

Cash means money held in bank accounts or on deposit. The amount deposited remains stable, although is subject to inflation which can reduce its value and you receive a rate of interest that will vary according to rates available in the market or from the bank or building society. Within investments, a Fund Manager may choose to hold cash as part of their strategy or while waiting for the right time to purchase new investments such as shares or property.

A fund that is operated by a trust company or a bank and handles a pooled group of trust accounts. Collective investment funds combine the assets of various individuals and organizations to create a larger, well-diversified portfolio.

Are issued by Companies to raise capital. These investments tend to be issued over set periods during which a yield or interest is paid to the holder of the bond. This type of investment tends to pay a higher rate of interest than Government Bonds (or Gilts) as the risk associated is generally seen as higher. These investments can be sold or traded at any time and may not have a set term.

Derivatives is the collective name for financial contracts such as warrants and options. Derivatives can be used for a number of purposes - including insuring against price movements (hedging), increasing exposure to price movements for speculation or getting access to otherwise hard to trade assets or markets.

This is a process of investing across a range of investments with the aim of smoothing out the ups and down of investment growth as not all investments may perform well at the same time. Should one investment perform poorly, better performance from the rest of the portfolio helps to reduce the overall risk of loss.

An emerging market is a country that is experiencing rapid growth and industrialization. Investment in these countries has the potential to deliver greater growth but with additional risk.

Equities are company shares. Limited companies can sell their shares to raise capital, paying a share of their profit (known as a dividend) to the buyer in return. Shares are bought and sold on the stock market, and their prices fluctuate based on a number of factors including the company’s potential profitability. As a result, they tend to be too volatile for short-term investors. However, it’s widely accepted that equities have the potential for better returns over medium and longer terms. It’s also worth bearing in mind that equities traded on some overseas stock exchanges can be more volatile than UK equities. They are also affected by fluctuations in currency exchange rates.

The Financial Times Stock Exchange (FTSE) is a company owned by the Financial Times and London Stock Exchange which specializes in the production of indices to measure the performance of a group of Shares. There are a number of indices with the most famous being the FTSE 100 which basically measures the share performance of the largest 100 companies listed on the London Stock Exchange.

In investment terms a fund is a pool of money collected from many investors and managed by a professional fund manager. Funds give you the opportunity to invest in a range of companies even if you have quite small amounts to invest. The composition of the fund is decided by the fund manager from time to time. The money in funds is invested in stocks and shares and other types assets such as corporate bonds, Gilts, Property etc. The amount of each asset held will vary.

Refers to the British pound – it’s a term that is used by the financial markets when referring to the UK currency.

GBX is the currency abbreviation used when fund prices are quoted in pence, e.g. GBX 128 = £1.28.

This is when a fund manager borrows money, through the use of derivatives, in order to buy new holdings within a fund, with the hope of enhancing returns. It gives the fund managers freedom to take advantage of a opportunities, without having to sell existing investments to raise the necessary cash. There is potential for higher losses if things go badly as any borrowings will have to be repaid even if the investment performs poorly.

These are Government Bonds issued by the British Government.

A government bond is an investment vehicle issued by a Government to raise capital to support spending. These investments tend to be issued over a set period of time during which, the government pays a fixed yield or interest to the holder. These investments can be sold or traded at any time.

Commonly referred to as “junk bonds”, high yield bonds are bonds on the opposite side of the rating scale to “investment grade bonds”. These bonds are rated lower by rating agencies and are considered low credit quality. Because of this these bonds will usually provide a higher rate of return however there is a greater chance that these bonds will default.

Holdings is the name given to different investments within a fund. The number of holdings a fund contains depends on the particular theme or investment policy of a fund. Some funds for example will invest in a concentrated portfolio of 25 or less holdings.

‘Investment grade’ bonds are bonds that are highly ranked by rating agencies. Rating agencies will rate each new bond issue based on its security and likelihood to default, i.e. not pay what was promised. Bond rating firms, such as Standard & Poor’s, use different designations consisting of upper- and lower-case letters ‘A’ and ‘B’ to identify a bond’s credit quality rating. ‘AAA’and ‘AA’ (high credit quality) and ‘A’ and ‘BBB’(medium credit quality) are considered investment grade. Credit ratings for bonds below these designations (‘BB’, ‘B’, ‘CCC’, etc.) are considered low credit quality, and are commonly referred to as “junk bonds” or “high yield bonds”.

ISA is short for 'Individual Savings Account'. There are two main types of ISA - cash and stocks & shares. Stocks & shares ISAs are simply a tax efficient umbrella under which you can invest in our unit trusts - meaning you have no further tax to pay on your investment returns.

(International Securities Identification Number) – This is an international standard that uniquely identifies a security. It is a 12 digit alphanumeric with the first two digits identifying the location (country) of the headquarters of the company that issued the security, the next 9 identify the security and the final digit is a check – this ensures authenticity and prevents errors.

(Key Investor Information Document) – This is usually a 2 sided document that is provided to investors  detailing information on an investment’s objectives, risks, costs and historical performance. KIIDS are fund specific documents with one produced for each fund. 

Money market is the name used to describe cash (deposits), or near cash investments. Typically such investments produce a lower return with lower volatility than other asset classes. However, some money market investments are higher risk than a deposit investment. Money market investments include:

Call deposits: A short-term deposit facility offered through banking institutions allowing investors immediate access to an interest-earning account.

Time deposits: An interest-bearing savings account held at a financial institution for a fixed period of time. The depositor can only legally withdraw their funds by giving written notice and may be liable for a penalty payment as a result. Also known as ‘Fixed Deposits’.

Certificates of Deposit: A low risk money market instrument purchased through a bank. The issued certificate is evidence that the investor has deposited a sum of money for a specified fixed rate of interest, redeemable on a specified maturity date.

UK Treasury Bills: A short-term promissory note obligation issued by the UK Treasury (therefore backed by the UK government) that is not interest-bearing, but which trades at a discount to its face value. The investor earns the difference between the face value and the discounted purchase value at maturity, typically being for a period of three months. Also known as ‘T-bills’.

Short dated Gilts: UK government bonds with very short time to maturity; generally less than 2 years.

An option is a contract which gives the buyer (the owner) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified price on or before a specified date. The seller has the corresponding obligation to fulfil the transaction – that is to sell or buy – if the buyer (owner) “exercises” the option.

This is a group or collection of investments held by an individual, investment company or financial. A portfolio can comprise of Shares, Cash, Property, Bonds and other types of investments. The aim of holding a portfolio is spread of risk by means of diversification. A portfolio differs from a 'fund' as described above as it will hold a number of quite separate investments.

There are two main types of property fund: Direct property funds invest in bricks and mortar properties such as retail outlets, industrial sites and office buildings. One proviso: because the property in a fund may not be readily saleable, it’s possible that you might not be able to cash in your investment in a property fund when you want to. Also the value of property is generally a matter of a valuer’s opinion rather than fact.

Property security funds invest in Real Estate Investment Trusts and shares in property companies. These funds typically experience short-term price movements similar to equity funds but would be expected to have characteristics similar to direct property funds over the longer term. They are also less likely to place restrictions on cashing in your investment than direct property funds.

This is a broad historic term used for investments;  Equities, Bonds/Gilts are examples of an security. However not all investments are securities. An example being if you buy and hold a gold bar, this could be done for investment purposes but it isn’t a security as you physical can hold it. However if you invest in a fund that invests in precious metals, this can be considered a security as you’ll receive a piece of paper/certificate to indicating your investment. 

(Stock Exchange Daily Official List)  - This is a seven-character identification code assigned to securities that trade on the London Stock Exchange and various smaller exchanges in the United Kingdom. SEDOL codes are used for unit trusts, investment trusts, insurance-linked securities, and domestic and foreign stocks.

The authorised share capital of a company is divided into a number of equal parts. Each part is called a share.

(Supplementary Information Document) – This provides details on the how a company transacts business, details on what investments are available, how to complain, details on investor protection and includes the terms and conditions of the investment. This should be read in conjunction with the KIID. 

The market in which shares of publicly held companies are issued and traded.

Unit trusts are collective investments - meaning your money, along with other investors' monies is pooled together in a fund referred to as a unit trust. This is then managed on your behalf by a professional investment manager who is responsible for investing the money to achieve the funds particular objectives. Please remember that your investment is subject to the usual Capital Gains Tax rules.

A warrant is a security that entitles the holder to buy a stock at a fixed price until an expiry date. It’s essentially a promise you will be able to buy at a set price up until the date of expiry.