Glossary

A

Accumulation shares

A fund may have accumulation and income shares. If an investor selects this share type, any income generated by the fund is automatically reinvested. The amount of the reinvested income is reflected in the increased price of each accumulation share.

Alternative assets

These are types of non-traditional investments – in other words, something other than shares, bonds or property. The term can cover anything from commodities (such as gold) to infrastructure investments (for example, companies involved in financing, building or maintaining motorways or hospitals). Alternative assets can be useful to help with diversification, as some of these investments are not expected to perform in the same way as more traditional investments.

Annual management charge (AMC)

The fee paid to Premier Miton for the different costs associated with managing your investment each year and is expressed as a percentage of your investment. The AMC does not typically change from year to year.

Asset-backed bonds

A bond collateralized by a pool of assets such as mortgages or consumer loans.

Asset Class

Different groups of investments such as company shares, bonds, commodities or commercial property.

B

Bear market

A term that (is used to describe a fall in a financial market or asset of 20% or more.

Bonds (or fixed income)
Types of investments that allow investors to loan money to governments and companies, usually in return for the offer of the pay-out of a regular fixed amount of money until the bond’s maturity date, plus the return of the original value of the bond at a set maturity date. The price of bonds will vary and the investment terms of bonds will also vary.
Bull market

A significant rise in a financial market or group of assets over a period of time. Sometimes it is defined as a rise of 20%.

C

Call options
A type of derivative. Call options can be used for a number of reasons; they can be used to generate income or to gain exposure to an asset. They give the buyer the right, but not the obligation, to buy underlying shares at a pre-agreed price, (the strike price), on a specific date in the future (the expiry date). The seller (writer) of the option therefore has an obligation to sell the underlying shares at the strike price if the option is exercised.
Capital
Describes financial assets, particularly cash, or other assets, such as shares, owned by a person or organisation.
Capital growth
The increase in value of your original investment. Investments can potentially grow with or without dividends (income) reinvested.
Closed-ended funds

A closed-ended fund is a portfolio of pooled assets that raises a fixed amount of capital through an initial public offering (IPO) and then lists shares for trade on a stock exchange. Other names for a closed-ended fund include “closed-end investment” and “closed-end mutual fund

Collective Investment Schemes
A generic term for investment funds with more than one investor, such as unit trusts, OEICs and investment trusts.
Convertible bonds
A type of bond that the holder can convert into shares of the issuing company.
Commodities
Investments linked to raw materials such as metals (including gold and copper), energy (including oil and gas) and agriculture (including livestock and forestry).
Commercial paper
Investments linked to raw materials such as metals (including gold and copper), energy (including oil and gas) and agriculture (including livestock and forestry).
Convertible bonds
A bond that can be converted into shares in certain circumstances or at certain times.
Contingent convertible bonds (CoCos)
A form of debt security that can either convert into equity or have the principal value written down, resulting from certain events relating to regulatory requirements.
Credit rating
A score awarded by an independent rating agency, to indicate the financial strength of the issuer of a corporate bond, and the potential for a default on payments. Bonds issued and backed by developed market governments are generally considered to have the highest rating. As the financial strength or quality of the issuing entity diminishes so does the credit rating. Higher quality issues are considered investment grade. Lower rated bonds may be considered to be ‘sub-investment grade’ or ‘high yield’. Not all bonds are rated and these are ‘non rated bonds’ which may vary in quality.
Credit spread
The difference in yield between two different bonds. It is typically used to describe the additional risk of owning a corporate bond (or group of corporate bonds) over government bonds.

D

Dividends
The portion of its capital that a company chooses to return to its shareholders. For a fund, this is the payment of fund’s income to its shareholders.
Diversification

Investing in a number of different investments, which can include different assets, funds and geographic areas, to help spread investment risk.

Duration
A measure of the price sensitivity of a fixed income investment to a change in interest rates.
Duration times spread (DTS)
Duration times spread measures the price sensitivity of a bond to duration and credit spread risks. Duration is a measure of the price sensitivity to a change in interest rates and credit spread is the additional yield of a bond over the equivalent government bond. DTS is calculated by multiplying the duration by the credit spread. The weighted average for the fund can then be calculated.

E

Emerging markets
Countries with less developed financial markets and which are generally considered riskier than investing in developed markets.
Emerging market debt

Bonds issued by less developed countries and corporations within those countries.

Equities
Another name for shares (or stock) in a company.
Exchange Traded Funds (ETF)

An exchange-traded fund is a type of security that involves a collection of securities, such as stocks, that often track an underlying index, although they can invest in any number of industry sectors or use various strategies.

F

FTSE 100 Put Option
A FTSE 100 Put Option is a type of derivative contract in which the underlying value is based on the level of the FTSE 100 index which tracks the performance of the top 100 largest companies by market value listed on the London Stock Exchange. Such contracts can be used to protect the value of an underlying investment or group of investments against a fall in the value of those 100 largest companies and can be thought of as an insurance policy.
Frontier Markets

A frontier market is a country that is more established than the least developed countries (LDCs) but still less established than the emerging markets because it is too small, carries too much inherent risk, or is too illiquid to be considered an emerging market. Frontier markets are also known as “pre-emerging markets

Futures

Futures are financial contracts that obligate the parties to transact an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date.

G

Gearing

The level of a company’s debt in relation to its capital. A company with significantly more debt than capital is considered to be highly geared.

H

Hedge
An investment which aims to reduce the risk of adverse price movements in an asset or group of assets.
Hedge fund
A portfolio of investments that uses advanced investment strategies to generate high returns either in an absolute sense or over a specified market benchmark. Investing in hedge funds is usually only suitable for sophisticated experienced investors.
High yield bonds
A bond that provides a higher income, (or yield) but is rated below investment grade bonds as it has a higher risk of default.

I

Investment Association (IA)
The IA is the trade association that represents the UK investment management industry.
IA sectors
To help with comparisons between the thousands of funds available, funds are categorised into different groups or sectors, organised and reviewed by the Investment Association (IA).
IA Europe excluding UK
Funds which invest at least 80% of their assets in European equities and exclude UK securities.
IA Flexible Investment sector

The funds in this sector are expected to have a range of different investments. However, the fund manager has significant flexibility over what to invest in. There is no minimum or maximum requirement for investment in company shares (equities) and there is scope for funds to have a high proportion of shares. The manager is accorded a significant degree of discretion over asset allocation and is allowed to invest up to 100% in equities at their discretion.

  • No minimum equity requirement
  • No minimum fixed income or cash requirement
IA Global sector
Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region.
IA Global Equity Income sector
Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographical region and intend to achieve a historic yield on the distributable income in excess of 110% of the MSCI World Index yield at the fund’s year end. Income shares: if you select this type of share, any income made by the fund is paid out to you.
IA Mixed Investment 20-60% Shares sector

Funds in this sector are expected to have a range of different investments. The fund must have between 20% and 60% invested in company shares (equities). At least 30% of the fund must be in fixed income investments (for example, corporate and Government bonds) and/or “cash” investments. “Cash” can include investments such as current account cash, short-term fixed income investments and certificates of deposit.

  • Maximum 60% equity exposure (including convertibles)
  • Minimum 20% equity exposure
  • Minimum 30% fixed income and cash
  • Minimum 60% investment in established market currencies (US Dollar, Sterling & Euro) of which 30% must be Sterling
  • Sterling requirement includes assets hedged back to Sterling
IA Mixed Investment 40-85% Shares sector
Funds in this sector are expected to have a range of different investments. However, there is scope for funds to have a high proportion in company shares (equities). A fund must have between 40% and 85% invested in company shares.
  • Maximum 85% equity exposure (including convertibles)
  • Minimum 40% equity exposure
  • No minimum fixed income or cash requirement
  • Minimum 50% investment in established market currencies (US Dollar, Sterling & Euro) of which 25% must be Sterling
  • Sterling requirement includes assets hedged back to Sterling
IA Sterling Corporate Bond sector
Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) BBB minus or above corporate bond securities (as measured by Standard & Poors or an equivalent external rating agency). This excludes convertibles, preference shares and permanent interest bearing shares (PIBs).
IA Sterling Strategic Bond sector
Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. This excludes convertibles, preference shares and permanent interest bearing shares (PIBs).
IA UK All Companies sector
Funds which invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.
IA UK Equity Income sector
Funds which invest at least 80% in UK equities and which intend to achieve a historic yield on the distributable income in excess of 100% of the FTSE All Share yield at the fund’s year end on a 3 year rolling basis and 90% on an annual basis.
IA Specialist sector
Funds that have an investment universe that is not accommodated by the mainstream sectors. Performance ranking of funds within the sector as a whole is inappropriate, given the diverse nature of its constituents.
IA Standard Money Market sector
Funds which invest their assets in money market instruments and comply with the definition of a ‘Money Market’ fund set out in the COLL Sourcebook.
Income shares
A fund may have accumulation and income shares. If an investor selects this share type, any income generated by the fund is paid out to the investor.
Index
A group of shares, used to give an indication of a sector, exchange or economy. For example, the FTSE 100 Index is made up of the 100 biggest companies on the London Stock Exchange.
Infrastructure
These are typically companies involved in the movement and storage of goods, people, water, energy and include regulated utilities, telecommunications and transport companies.
Investment grade bond

A bond which has a higher credit rating than ‘high yield’ bonds. They are considered to have a lower risk of default and therefore pay a lower yield.

ISA
This stands for Individual Savings Account and is a type of tax-free scheme, set up by the government, designed to help people make the most of their savings and investments. All income and gains from an ISA investment are exempt from UK Income Tax and Capital Gains Tax. HM Revenue and Customs sets the maximum amounts that you are allowed to invest into an ISA each tax year.

L

LIBOR
London Interbank Offered Rate (LIBOR) is the interest rate benchmarks used to calculate the average rate at which banks would offer a short term loan to each other.
Leverage

Where a company borrows money to invest in its business or assets in the expectation that the profit made will be greater than cost of the borrowings.

Liquidity

Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price – it can also be known as market liquidity. When there is a high demand for an asset, there is high liquidity, as it will be easier to find a buyer (or seller) for that asset

M

Market capitalisation

The total value of the shares of a company, often referred to as ‘market cap’. For example, large companies are referred to as “large cap”.

Maturity
The set date on which a bond or similar loan will be repaid by the borrower.
Money markets
Buying and selling of debt, loans and similar investments which are usually repayable within one year.
Multi-asset
A fund that invests across a combination of different asset classes, such as commercial property, company shares, bonds and alternative investments with the aim of increasing diversification and reducing risk, and achieving specific investment objectives such as paying an income.

N

Net Asset Value (NAV)
The total of a company’s assets minus its liabilities. The net asset value per share is the total of a company’s assets minus its liabilities divided by the number of shares in issue.

O

Ongoing Charges Figure (OCF)

A measure of what it costs to invest in a fund over a year. It includes the fee paid to Premier Miton for the management of the fund (known as the annual management charge), with the remainder covering costs that have to be paid to external companies for other services relating to the ongoing administration and management of a fund, such as the fees paid to the depositary, custodian, regulator, auditor and administrator. The fee is deducted from the value of the fund and reflected in the fund’s share price. The OCF is typically published once a year and can change from year to year.

Open ended funds

An open-end fund is a diversified portfolio of pooled investor money that can issue an unlimited number of shares.  These shares are priced daily based on their current net asset value (NAV). Some mutual funds, hedge funds, and exchange-traded funds (ETFs) are types of open-end funds

P

Private Equity Trusts

A private equity trust is an alternative investment and consists of companies that are not listed on a public exchange.

Put-options

A type of derivative. Put-options can be used for a number of reasons. For example, they can be used to protect the value of an underlying investment or group of investments against a fall in value. They can be thought of as an insurance policy. These can make a fund or trust more volatile from time to time.

R

Real estate investment trust (REIT)
A company that owns and manages property on behalf of shareholders. A REIT can contain commercial and/or residential property.
Rights issue

When a company offers its existing shareholders the chance to buy additional shares for a reduced price. Usually the discounted price will stand for a specified time frame, after which it is returned to normal.

S

Safe Haven Assets
Assets that investors perceive to be relatively safe from suffering a loss in times of market turmoil. The types of asset that are considered to be safe havens can vary depending on the specific nature of the market turmoil and the wider economic circumstances.
Standard money market funds
These funds are subject to less restrictive investment rules than short-term money market funds. Standard money market funds must be variably priced, and are therefore all classified as Standard VNAV funds. VNAV is where the net asset value (NAV) is variable (V) because it changes in line with the value of the underlying assets the fund holds.
Structured investments

These investments are built around a derivative and have specific criteria that need to be met to deliver a positive return.

Sub investment grade bonds

Bonds with a credit rating below investment grade bonds (these have a lower risk of default and therefore pay a lower yield) as judged by the bond ratings assigned by one of the major rating agencies.

SONIA

The Sterling Overnight Index Average, abbreviated SONIA, is the effective overnight interest rate paid by banks for unsecured transactions in the British sterling market. It is used for overnight funding for trades that occur in off-hours and represents the depth of overnight business in the marketplace.

T

Total return
A way of showing how an investment has performed, and is made-up of the capital appreciation or depreciation and includes any income generated by the investment. Measured over a set period, it is expressed as a percentage of the value of the investment at the start of that period.

U

Unicorn stock

A term used to describe a privately owned start-up company that is not traded on a stock exchange and, due to its success, has a valuation of $1 billion or more. They are referred to as unicorns as historically these types of company have been rare, but are more common today.

V

Volatility
A measure of the frequency and severity with which the price of an investment goes up and down.

W

Weighted Average Life (WAL)
The weighted average amount of time remaining until the securities held in a fund’s portfolio are scheduled to be repaid.
Weighted Average Maturity (WAM)
The weighted average amount of time until the securities in a portfolio mature. The higher the WAM, the longer it takes for all of the holdings in the portfolio to mature.

Y

Yield
The dividend per share divided by the stock’s or fund’s price per share and expressed as a percentage. The historic yield is the dividend income distributed during the past year and expressed as a percentage of the share price on a particular day.

Z

Zero dividend preference shares (ZDPs)
Issued by investment trusts. ZDPs have a maturity date, pay no income but pay a set amount at maturity.

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The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

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The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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Disclaimer

This section of the website and the content it contains is for retail clients only and by persons who are resident in the United Kingdom [who are not US persons]. Professional advisers should refer to the Professional Advisers site.

The content of the pages of this website is for your general information only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell or purchase shares in the funds or portfolios or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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