Glossary

Term	Definition
Average company-issuer rating	is a forward-looking opinion about an obligor's overall creditworthiness and their capacity and willingness to meet its financial commitments.
Average coupon	is the average yield paid by a fixed-income security. The coupon rate is the yield the bond paid on its issue date.
Average life	is the average length of time the principal of a financial obligation is expected to be outstanding.
Average maturity in years	Average maturity calculates the average maturity period for all the bonds in a portfolio.
Average security rating	is forward-looking opinion about an obligor's overall creditworthiness with respect to a specific security obligation.
Distribution yield	is the estimated annualised distribution percentage for the current financial year based on a snapshot of the portfolio at the calculation date. It is calculated by annualising the sum of the current year-to-date distributed & un-distributed income per share and dividing by the current net asset value per share.
Effective duration	calculates the expected price decline for a bond when interest rates rise by 1%. When all other factors are equal, the longer the maturity of a bond, the larger the effective duration.
Expected shortfall	is a risk measure to evaluate the market risk or credit risk of a portfolio.
Gearing	expressed as a percentage it shows the ratio of debt to the value of its equity capital.
High water mark	the high water mark principle establishes a cap on or allows for a potential rise in performance fees. According to this principle, the investment fund manager only receives the relevant remuneration when the fund exceeds the highest level of return that it has ever achieved.
Modified duration	a risk indicator that measures the effect of price fluctuations on a bond issue or a portfolio of bond issues.
Ongoing charge	the ongoing charge is a measure of the annual expenses incurred by a fund and is expressed as a percentage. It allows an accurate comparison of the costs of funds from different companies to be made.
Risk rating	The synthetic risk and reward indicator is based on the volatility of the Fund’s performance over the last 5 years. Where 5 years’performance history is not available the data is supplemented by proxy fund, benchmark data or a simulated historical series as appropriate. This profile is determined using historical data, as such may not be a reliable indication for the future risk profile. It is not guaranteed and may shift over time. The lowest category does not mean ‘risk free’.
Risk rating (SRI)	The summary risk indicator is a combination of a market risk measure and credit risk measure. The market risk measure is based on an annualized volatility measure , calculated over the last 5 years of history if available. Where 5 years' performance history is not available the data is supplemented by proxy fund, benchmark data or a simulated historical series as appropriate. This profile is determined using historical data, as such may not be a reliable indication for the future risk profile. The credit risk measure is assessing credit and concentration risk within the portfolio. The indicators are not guaranteed and may shift over time. The lowest category does not mean ‘risk free’.
Total Expense Ratio (TER)	The TER is a measure of the total annual expenses incurred by a fund (excluding certain fees) and is expressed as a percentage. It allows an accurate comparison of the costs of funds from different companies to be made.
Value at risk (VaR)	an estimate of the maximum potential loss that a portfolio could incur, within a given time period and with a given level of probability. In this report, VaR is calculated using the Monte Carlo methodology with a 99% confidence level.
Yield to maturity (%)	the yield to maturity is the average yield generated by an investment each year if it is held until expiry.
Benchmark	an index that can be used by an investment fund as the basis of comparison for assessing the performance achieved.
Index for Comparison	is only used for comparison purposes and is shown for indicative purposes only, to enable investors to compare the performance of the Fund against the value or price of an index or indices or any other similar factor. The index is not used as part of the Fund's/Master Fund's investment process.
Alpha	The excess return of an investment (fund) compared to a benchmark.
Beta	a measure of the volatility of the performance of an investment relative to the performance of the underlying market. An investment with a beta of 1 indicates that its performance will move up or down in line with the performance of the market. An investment with a beta of more than 1 means that its performance rises and falls more than that of the market; beta of less than 1 means that its performance rises and falls less than that of the market.
Tracking error	the tracking error measures the divergence between the return of a fund in relation to its benchmark.
Sharpe Ratio	the Sharpe ratio (risk-adjusted performance) is generated by calculating the difference between the average annualised return and the risk-free return. The resulting figure is divided by the annualised standard deviation of the returns. The higher the Sharpe ratio, the better the fund performance in relation to the risk potential of its portfolio.
Correlation	a statistic measurement which shows the linear relationship (or degree of parallel movement) between two series of figures, for example the performance of two equity investments.
Standard Deviation	measures the dispersion of a set of data around its mean. In investment terms, it is a measure of the dispersion of a fund’s performance around its mean and therefore, the volatility or risk associated with the investment. The higher the standard deviation of an investment, the greater the variability of performance over the period.
Active Investment	A strategy where a fund manager makes active decisions about where, when and how to buy, sell, or hold equities, bonds or other financial instruments. It is distinct from passive investment, by which a benchmark is mirrored and tracked.
Bottom-up	Refers to an investment approach used by fund managers. Stocks are selected by analysing companies based on their investment quality and potential, regardless of wider industry and macro-economic conditions.
Commodities	Commodities are natural resources and raw materials, ranging from oil to precious metals.
Coupon	Is the term used for the interest paid periodically on a bond, expressed as a percentage of the bond’s par value (the value at which it was bought).
Corporate bond	A debt, issued by firms to raise cash. Corporate bonds, like government bonds, pay interest and usually have a set maturity period.
Diversification	Investing in a spread of assets to reduce risk. A portfolio invested in one company for example risks losing all its assets if that company goes bankrupt.
Derivative	A complex financial instrument that is a contract between two or more investors. Its value is determined by the fluctuating prices of underlying assets. Typically, these assets are stocks and bonds, but they can be linked to currencies, commodities and interest rates.
Default risk	The probability that a borrower, including individuals, countries or companies, cannot pay a debt.
ESG	Environmental, Social and Governance are the widely recognised criteria used to assess the ‘sustainability’ of an investment.
Futures	A type of derivative normally used in relation to commodities, currencies and stock markets. They involve purchasing an asset at an agreed price for delivery on a future date.
Investment grade bonds	Corporate bonds that are issued by large, financially stable businesses, where the likelihood of default on the loan is deemed to be the lowest of all corporate bonds.
Junk bonds	A term used for high-yield or non-investment grade corporate bonds. They are viewed as far higher risk than many investment grade bond investments as their issuer carries a greater chance of default.
Liquidity	How easily an asset can be converted into cash. Shares can usually be bought or sold quickly on the stock market and are considered to be liquid assets.
Multi-Asset	A fund or portfolio that invests across various asset classes to diversify sources of return and risk. As well as investing in other funds, multi-asset products can also invest in individual shares, bonds, property, cash and commodities.
Private equity	Shares held in a company that is not listed on a public stock exchange.
Redemptions	The process by which an investment can be converted back to cash. The ease with which this can be done is often dictated by the liquidity, i.e. the number of potential buyers and sellers in the market for a specific asset pertaining to the underlying investments.
Risk	The probability that an investment will deliver a negative return. Many factors can contribute to risk, such as inflation, the wider economy environment and the personal qualities of a firm’s management.
Responsible investing	An approach to investment that integrates Environmental, social and governance (ESG) considerations within the decision-making.
Sustainable investment	An approach to investment that integrates Environmental, Social and Governance (ESG) considerations within the decision-making.
Swap	A derivative contract in which two parties agree to swap the investment returns from two instruments. Common swaps include currency and interest rate swaps.
Target risk	An investment approach, commonly used in multi-asset, where a fund or portfolio focuses on the level of volatility or risk taken (normally within set parameters) and then looks to produce the best return possible within these parameters.
Total return	A percentage measure of the performance of an investment, including the returns from both income and capital growth.
Volatility	Volatility is sometimes used interchangeably with risk but ultimately refers to how much and how quickly an asset class moves up and down within a certain time period. The more and the faster it moves, the more volatile an investment is considered to be.
Yield	Is the income received from an investment, such as a fund, bond or dividend-paying share.

Glossary

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