Glossary

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Security: A certificate representing a fraction of a company's capital or debt (share, participation certificate, bond, etc.).

Shareholders' equity: Assets that a company is entitled to use without borrowing.

Sharpe ratio (risk-free rate): The annualised returns of a portfolio, minus the returns on a risk-free asset (normally the short-term interest-rate), divided by the portfolio's annualised volatility. The Sharpe ratio outlines the real rate of return on a risky asset in comparison with those of a risk-free asset (e.g. the rate of interest on a savings account).

Short selling: Investment decision involving selling a security that is not held in a portfolio. In order to do this, the fund manager borrows the security from a third party. The purpose of short selling is to take advantage of any fall in the value of the security.

Small cap: A company with a low market capitalisation (relative to the exchange on which it is listed).

Smoothing effect: A smoothing effect is produced when two investment strategies, whose effects oppose each other, are used at the same time.

Spin-off: This happens when a company divests itself of a division or business unit by selling it as a legally and economically independent company.

Standard deviation: See volatility.

Start-up: Newly created company in its launch phase.

Stock picking: The process of selecting individual stocks in the market.

Swap: Agreement between two parties to swap cash flow amounts at predefined dates and conditions. The most common forms are interest-rate and cross-currency swaps.

TER (Total Expense Ratio): All fees deducted on the subscription of fund units, including fixed costs, administration costs, management fees, etc. An investment fund's real performance can only be calculated net of the TER.

Term (short/long): The length of an investment or performance observation period.

TID: Taxable Income per Share at Distribution

TIS CH: Taxable Income per Share in Switzerland

TIS EU: Taxable Income per Share in Europe

Transparency: A company's willingness to issue voluntarily and regularly clear and detailed financial information on its activities.

True and fair: Principle of honesty and clarity applied to corporate accounting information.

Units held by institutional investors: This number is of key importance to investors because, if an institutional investor liquidates sizeable holdings in a fund, the remaining unit holders can suffer losses in the event of the fund manager being forced to sell quickly in an illiquid market.

Unit-holding structure: Distribution ratio of unit holders among private and institutional investors.

Unit redemption: Repurchase by fund management of units sold by holders.