Glossary
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Affidavit: Banking document intended for foreign holders of certain securities and drawn up for the purpose of obtaining tax relief on these securities as they are already taxable in the investors’ home country.
Alpha (factor): Parameter used to measure a fund's risk-weighted outperformance and thus to measure the portfolio manager's performance.
Analyst: Specialist in economic or financial research into companies or markets.
Anti-cyclical sensitivity: The propensity of a stock or portfolio to perform counter to market trends.
Asset allocation: Distribution of investment categories in a portfolio.
Asset class: Investment category or group of securities (e.g. second-line stocks constitute an asset class).
Asset manager: The person advising clients on asset distribution and/or managing the assets on the basis of a management agreement.
Beta (factor): Measurement of a security's behaviour relative to market changes. The volatility of a security with a Beta of 1 will be equal to that of its benchmark. A Beta of 1.1 indicates that the security's volatility exceeds the benchmark's by 10%.
Beat the index (to): To achieve a better performance than the benchmark index.
Blue chips: Stocks with the largest international market capitalisations.
Blue chips and second-liners: Other terms for large caps and second-line stocks.
Bottom-up: Portfolio management approach in which stock selection takes precedence over macroeconomic considerations.
Broker: Intermediary in the buying and selling of securities.
Business plan: Plan in terms of operations and financial objectives aimed at assessing a company's future financial requirements and results. Business plans usually cover a minimum period of five years.
Cash: Amount available in cash (e.g. in a fund, the cash portion is not invested in securities and enables the fund management to buy back the units of investors wishing to redeem them).
Cash flow: Difference between a company's operating income and operating expenses, before amortisation and provisions.
Closed-end fund: A fund that does not issue additional units after the subscription period.
Commission: Fee retained by an agent for professionally executing a transaction. According to the nature of the transaction, the commission may be called a management fee, transaction fee, brokerage fee, etc.
Convertible bond: Bond that can be exchanged, after a given period and at a fixed price, for another security, usually a share or a participation certificate.
Correlation: Statistical measure determining the linear relationship between two variables. A positive correlation means that, if the value of one of the two variables rises, the other, on average, will react in the same way. By definition, the correlation can vary between +1 (perfectly positive correlation) and -1 (perfectly negative correlation). If the correlation is 0, no relationship exists between the two variables.
Cushion: Predefined maximum loss in a floor fund, expressed in percent. For example, if the floor has been set at 90% initially, the cushion is 10%.
Custodian bank (depository bank): Bank where the sums invested in a fund are deposited.
Cycle (positive/negative): Time span during which the market price of a security or group of securities tends to rise or fall.