Morningstar divides stocks into 11 sectors according to their primary business, grouped into three larger Super Sectors. The Communication Services, Energy, Industrials and Technology sectors make up the Sensitive Super Sector; Healthcare, Consumer Defensive and Utilities make up the Defensive Super Sector; and Basic Materials, Consumer Cyclical, Financial Services and Real Estate form the Cyclical Super Sector.
Because sectors can differ greatly in their characteristics, comparing a Fund with its sector rather than the market as a whole is generally a better way of putting it in the proper context.
A Sector Fund is one which invests in a specific industry. For example a Global Healthcare Fund invests in healthcare companies around the world.
Instruments traded on the stockmarket. These are usually Shares or government bonds.
Stock Exchange Daily Official List numbers issued for Unit Trusts, OEICs and Shares. SEDOL numbers are unique numbers allocated to UK (and Irish) securities which enable them to be easily identified by stockbrokers and market makers. The numbers are allocated by the UK Stock Exchange. SEDOL numbers (and ISIN numbers) are also quoted in the Financial Times.
An OEIC sub-Fund can have a range of share classes. Each class can have different characteristics such as charging structures, currencies or choice of distributions.
A scheme enabling investors to exchange existing holdings for Shares in an OEIC. These schemes can often be of great benefit as some Shares can be sold without paying dealing expenses.
Either income shares or accumulation shares.
These are stakes in the ownership of companies. Shares traded on the stock market are also known as equities. Dividend income is usually paid to shareholders twice a year, although it is not guaranteed (overseas dividend income may be paid more or less frequently). There is no maturity of redemption date and shareholders not wishing to hold the Shares any longer must sell in the market. Shares have tended to provide greater returns than bonds or deposits over most periods of five years or more.
This is a commonly-used measure which calculates the level of a Fund's return over and above the return of a notional risk-free investment, such as cash or Government Bonds. The difference in returns is then divided by the Fund's standard deviation - it's volatility, or risk measurement. The resulting ratio is an indication of the amount of excess return generated per unit of risk.
Sharpe is useful, when comparing similar portfolios or instruments. There is no absolute definition of a 'good' or 'bad' Sharpe ratio, beyond the thought that a Fund with a negative Sharpe would have been better off investing in risk-free government securities. But clearly the higher the Sharpe ratio the better: as the ratio increases, so does the risk-adjusted performance. In effect, when analysing similar investments, the one with the highest Sharpe has achieved more return while taking on no more risk than its fellows.
Short dated government stock (gilts), i.e. with a life of less than five years.
SICAV - Société d’Investissement à Capital Variable
This is the European (offshore) version of an 'OEIC' – it is an investment company that is 'open-ended’ (i.e. its Shares can be bought or sold on any dealing day).
Instead of having an Authorised Corporate Director (ACD), a SICAV tends to have a board of individual directors, which may or may not appoint an investment manager.
For each OEIC Fund there is one single (mid) price for buying and selling Shares.
A single price is calculated by taking the average of the buying and selling prices of each of the assets held in a Fund (their mid market prices). With the single pricing system, any initial charge the manager may take is charged separately, rather than being included within the difference between the buying and selling prices (the spread) which is the case with dual pricing. An effect of the single pricing system is a possible dilution in the value of a Fund when investors buy and sell Shares.
Socially Responsible Funds
This group includes any Fund that invests according to noneconomic guidelines. Funds may make investments based on such issues as environmental responsibility, human rights, or religious views
For example, socially responsible funds may take a proactive stance by selectively investing in environmentally-friendly companies or firms with good employee relations. This group also includes funds that avoid investing in companies involved in promoting alcohol, tobacco, or gambling, or in the defense industry.
Socially Responsible Investment Fund (SRI)
A Fund that avoids investing in assets that are seen as harmful to society. See also 'Ethical Funds'.