Glossary

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Passive (active) management: Management style that aims to reproduce a benchmark index, as opposed to active management, where specific benchmark constituents are over- or underweighted in an attempt to outperform an index.

Performance history: Review of a financial instrument's price trend over the longer term to study its positive and negative cycles.

Performance: Trend in the market value of a fund unit (in absolute terms, or relative to another instrument or benchmark).

Performance/volatility ratio: Ratio between potential returns and the volatility of a fund unit. If the volatility is too high, the investment is over-exposed to risk.

PER; P/E (price/earnings ratio): The ratio between a company's share price and its earnings per share (EPS) – an important equity valuation metric.

Position: Securities of a given company held in an investment fund.

Position building: (For a fund) locating and buying the securities required to implement the investment policy defined initially. Position building can prove difficult for small-capitalisation stocks, owing to their reduced availability or lack of liquidity.

Premium: Positive price difference between the face value and market value of a security, expressed in percentage terms. In a real-estate fund, the difference between market value and redemption value.

Reference currency: The currency in which a product's performance is calculated.

Risk: The potential for loss on a security or portfolio.

Risk-free rate of interest: In general, the risk-free rate of interest is defined as the money-market rate closest to the rate of interest for a savings account.