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 firstname.lastname@example.org and they will be pleased to help.
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.
A Re-Registration of Assets (also called an In Specie Transfer or Stock Transfer) is when Funds or Shares that you own are transferred to a different intermediary or provider without the need to convert them to cash. There will be a change of nominee account but you remain the beneficial owner of the assets. Read more here
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'.
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).
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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 is levied on a sliding scale where Shares are sold before the stated anniversary of their acquisition.
One of the most valuable measures of 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.
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.
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.
This sector covers two types of companies:
On 1 January 2013, new rules from the city regulator, The Financial Services Authority (FSA) came into effect which have changed the way financial intermediary companies operate. Known as the Retail Distribution Review (RDR), the objective is to raise professional standards in the industry, introduce greater clarity between the different types of service available and make the cost of advice very clear.
The changes have been a long time coming, initially launched back in 2005 by the FSA with the final Consultation Paper from the new regulator, The Financial Conduct Authority, landing in April 2013.
The way advice is given by a qualified Financial Advisor will depend on the choices made in regard to your views on the level and complexity of the advice you need. The impact on Execution Only service providers such as Willis Owen affects the pricing mechanisms on Platforms, such as Cofunds or Fidelity Funds Network. If you currently buy or hold your Funds directly with the Fund Managers, (e.g Jupiter or Invesco) you will not see much change yet.
Return is the money you make from your investment. This is the combination of income and growth that your investment generates.
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
Risk is the measurable likelihood of loss. Risk and reward have a direct relationship; the higher the potential rewards, the higher the risk that you might lose some of your money. You need to ask yourself what level of risk you are prepared to take to reach the goals you have set yourself.