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.

  


R

R-Squared

The R-Squared measure is an indication of how closely correlated a Fund is to an index or a benchmark. It can be expressed as a percentage, showing what proportion of a Fund's movements can be attributed to those of the benchmark. Values for R-Squared range between 0 and 1, with 0 indicating no correlation at all, and 1 showing a perfect match i.e. 100% correlation. Values upwards of 0.7 suggest that the Fund's behaviour is increasingly closely linked to its benchmark, whereas the relevance diminishes as R-Squared descends towards 0.5, and starts to disappear altogether below that.

R-Squared is a key ratio, in that other measures of a Fund's performance - such as Alpha and Beta - will have been calculated by reference to its benchmark. The weaker the R-Squared correlation, the more unsuitable the benchmark is, and the more unreliable these measures will be in assessing the Fund.

Real Return

The rate of return on an investment after adjustment for inflation.

This return shows the increase (or the decline) in the value of an investment in terms of its spending power. See also ‘Return’ and ‘Total Return’ and 'Nominal return'.

Recognised Funds

A Fund that is established outside the UK must be recognised by us to be promoted to retail investors in the UK. A recognised Fund may also be called a ‘recognised CIS’ or ‘overseas scheme’.

A UCITS established in another EEA country must be recognised, under section 264 of the Financial Services Markets Act 2000 (FSMA).

For further information click here.

Redemption Charge

A charge (also referred to as a withdrawal fee or exit charge) levied on the proceeds from selling Shares in certain investments, such as 'with-profit bonds'. The charge may be  levied on a sliding scale depending on the period of time for which the investment has been held.

Redemption Yield

One of the most valuable measures for a fixed interest security. The redemption yield measures the annualised return taking into account any income or capital gain or loss on the underlying securities if held to redemption.

Registrar

A quoted company usually appoints a registrar. The registrar is responsible for the administration of the Share register, distributing shareholder information on behalf of the company and the payment of dividends to shareholders.

Repurchase

The Fund Manager buys units and shares back from the investor who receives Cash.

The units or shares are sold on to another investor. If there are no buyers at the time, sufficient underlying assets in the Fund are sold in the markets to raise the Cash.

Return

Return is the money you make from your investment. This is the combination of income and growth that your investment generates.

Return on assets (ROA)

This figure is the percentage a company earns on its assets in a given year.

The calculation is net income divided by average total assets. The resulting figure is then multiplied by 100. ROA shows how much profit a company generates on its asset base. The better the company, the more profit it generates as a percentage of its assets. The company's net income is found in the annual income statement. The company's total assets are found in the annual balance sheet.

Return on equity (ROE)

This is the net income earned by a company expressed as a percentage of shareholders equity in a given year. 

Return on equity shows how much profit a company generates on the money shareholders have invested in the firm. The mission of any company is to earn a high return on equity. The company's net income is found in the annual income statement. The company's net worth is taken from the company's annual balance sheet.

Rights Issues

A rights issue is a secondary equity capital raising in contrast with an Initial Public Offering (IPO) which is a primary capital raising. It involves the issue of new Shares to existing shareholders in proportion to their holdings for a specified period and at a specified (usually discounted) price.

The term ‘pre-emptive’ rights is often used which refers to the fact that shareholders have first refusal over exercising their allotted rights. If a holder takes up their entitlement in full they will own the same percentage share of the company as they held previously. Read more

ROA (Return on Assets)

ROA shows how much profit a company generates as a percetage of its assets.

It is shown as a percentage a company earns on its assets in a given year. E.g. if ABC company's ROA is 20%, it means for every £1 of assets of the company, it produced more than £0.20 of profits.

ROE (Return on Equity)

Return on equity shows how much profit a company generates on the money shareholders have invested in the firm. The mission of any company is to earn a high return on equity. The company's net income is found in the annual income statement. The company's net worth is taken from the company's annual balance sheet.

It is shown as a percentage for a given year. e.g. if ABC company's ROE is 10%, it means for every £1 shareholders had invested in the company, it produced £0.10 worth of profit.