Financial jargon explained

Here you’ll find a simple explanation of some of the most commonly used investment terms. If there is any other financial jargon you want translated, please call our Customer Service Team free on 0800 597 2525 or email us at enquiries@willisowen.co.uk and they will be pleased to help.

     


P

Package Unit

Package Units are held in investment trusts/investment companies and can contain a mix of Income Shares, Capital Shares and Zero Dividend Preference Shares, although this is dependent on the capital structure of the Investment Trust/investment company in question. Package Units are quoted on the Stock Exchange and holders receive a certificate for their holding.

Pairs Trading

This a market neutral strategy which aims to make a profit regardless of the direction of the overall stock market. Investors take a long and a short position in two highly correlated stocks (this could be, for example, two companies in the same sector engaged in similar activities). The proposition is to purchase shares in the company that has under- performed and sell short one that has out-performed in the expectation of mean reversion which is when their correlation returns to more normal levels.

Passively Managed

A Fund that mirrors the performance of a specific index by holding the components of that index.

It aims to “track” the progress of an index, eg. the FTSE 100, by buying and selling Shares in the same proportions as represented on the index or by partially replicating the index.

These are also called tracker or index-tracker Funds.

Payment Date

The date on which the income distribution is paid to the investor.

Personal Equity Plan (PEP)

Introduced in 1986 as a tax incentive to invest in stocks and shares. You can no longer add to a PEP investment, although any existing PEPs will have been converted into ISAs.

Platform

Internet-based service that offers information on and dealing in a range of authorised investment Funds offered by different firms.

Portfolio

A portfolio is the total of an investor’s different investments.

Pound Cost Averaging

Investors who allocate a fixed sum of money (such as £50) in a Fund on a monthly or other periodic basis. When prices fall, the fixed amount will buy more units. Conversely when the prices rise, fewer units are bought.

Property Authorised Investment Funds (PAIFs)

PAIFs are open ended investment companies (OEICs) with the potential for tax-efficient property investment. At least 60% of net asset value and income must consist of assets deemed to be ‘Property Investment Business’ and they distribute 3 different streams of income for tax purposes:

  • Income from the sub-Funds 'Property Investment business'
  • Dividends received by the sub-Fund
  • Interest comprising the net amount of any other income received by the sub-Fund

Most PAIFs have Unit Trust feeder Funds for investors who are unable to invest in the PAIF. PAIFs are authorised and regulated by the UK Financial Conduct Authority (FCA).