Glossary of Terms and FAQs
Glossary of terms
Any income earned on this type of unit is added to the price of your units (no income is distributed), increasing the value of your holding, but leaving the number of units held unchanged.
AIM (London Stock Exchange's international market for smaller growing companies)
The AIM (Alternative Investment Market) is the London Stock Exchange’s international market for smaller sized companies. Businesses range from venture capital-backed start-ups to mature organisations looking to expand. The objective of this FTSE sector is to offer smaller companies, from any country and any sector, the chance to raise capital on a public market. The nature of these companies means that their shares are likely to be more volatile.
Alpha is the return on an investment or fund that is incrementally more than a benchmark index such as the FTSE 100, or another appropriate benchmark such as an industry sector.
Alternative Investment Fund Managers Directive (AIFMD)
The AIFMD covers the management, administration and marketing of alternative investment funds (AIFs). Its focus is on regulating the Alternative Investment Fund Manager (AIFM) rather than the AIF. The AIFMD establishes an European Union-wide framework for monitoring and supervising risks posed by AIFMs and the AIFs they manage.
An AIF is a ‘collective investment undertaking’ that is not subject to the UCITS regime, and includes hedge funds, private equity funds, retail investment funds, investment companies and real estate funds, among others.
Annual Management Charge (AMC)
The AMC is a fee paid to the Manager once a year which includes service and administration fees. It is calculated daily at the point of valuation. The AMC forms part of the ongoing charges of a fund.
Describes how your money is invested in the fund. In most cases, the fund manager will split the fund across geographic area, by individual sectors, e.g. oil & gas, financials. In order to spread risk and diversify your holdings.
Auditors are required to certify that the fund accounts produced by their client companies have been prepared in accordance with normal accounting standards and represent a true and fair view of the fund.
Authorised Corporate Director (ACD)
The term used to describe the manager of an Open Ended Investment Company (OEIC). An ACD has the same role and responsibilities as their unit trust equivalents, known as a fund manager.
An investor who sells a stock or share in the hope of buying it back at a lower price, as he thinks the market will go down. A bear market is a falling market in which bears would prosper.
The beneficial owner of an asset is the person for whose benefit it is being held.
Beta is a measure of the volatility of a security or a fund compared to the relevant benchmark as a whole. Beta higher than 1.0 can be interpreted as more volatile than the benchmark or sector quoted.
The bid price is the price at which units are sold to investors and are lower than the offer or buying price.
The standard difference between the price of buying and selling units. Usually quoted as a percentage term for unit trusts and is generally 6%.
Bonds are debt instruments and represent loans made to the issuer. Governments (at all levels) and corporations commonly use bonds in order to borrow money.
An investor who buys a stock or share in the hope of selling it at a higher price, as he thinks the market will go up. A bull market is a rising market in which bulls would prosper.
This is the lowest possible price at which an investor can sell units back to the fund manager under FCA regulations. It excludes exit charges. The cancellation price represents the proceeds the fund would receive if the fund's assets were sold.
Client Assets Sourcebook (CASS)
The Client Assets Sourcebook (CASS) is part of the FCA Handbook and sets out the requirements with which firms must comply when holding or controlling client assets.
COLL (FCA regulations)
COLL is a new set of regulations, prescribed by the FCA under the rulebook for New Collective Investment Schemes which all managers were required to adopt by February 2007. Rathbone Unit Trust Management has fully implemented these changes.
Collective investment schemes
Funds which pool investors’ money and invest on their behalf. This term refers to unit trusts, OEICs and ICVCs. An OEIC means an Open Ended Investment Company and is a type of regulated investment fund domiciled in the UK structured as a company. An ICVC is an investment company with variable capital where you buy shares and is deemed a collective investment scheme.
On completion of the investment in the fund, our dealing office despatches a contract note which contains the details of the transaction. A Contract note is also provided where an investor redeems units in a fund and again provides details of the transaction.
Correlation describes the extent to which the prices of different types of assets move in the same direction at the same time. The correlation measure can run between -1 and +1. It is unusual for pairs of conventional assets to exhibit significant negative correlation for extended periods.
This is a regular payment received by the bondholder over the lifetime of a bond. The coupon rate is expressed as a percentage of the face value of a bond.
This is the highest possible price at which an investor can buy units from the manager under FCA regulations. The initial charge is not included. The creation price represents the cost of buying the fund’s assets.
Usually a major banking group, the custodian is appointed by the fund’s trustee to safeguard the fund’s assets on behalf of the investors.
Dealing is the process of buying and selling investments — shares, units in a unit trust, bonds etc.
A rating, usually of performance, on a scale of 1 to 10 where 1 is best, 10 is worst, and each number corresponds to an increment of 10 percentage points.
Financial instruments whose value is linked to one or more rates, indices, share prices or other values.
The actual cost of purchasing or selling a fund’s investments may be higher or lower than the mid-market value used in calculating the single unit price — for example, due to dealing charges, or through dealing at prices other than the mid-market price. Under certain circumstances (for example, large volumes of deals) this may have an adverse effect on unitholders’ interest in a fund, this is known as ‘dilution’.
Discretionary fund management
The investing of clients’ money by a member firm on a discretionary basis. The client leaves specific decisions to the manager’s discretion.
Distributions are paid out (if the units/shares in your chosen funds are income-paying) quarterly or half-yearly depending on the fund and represent a dividend based on the amount of income that has been accumulated from the fund’s underlying investments.
Diversification means owning a variety of investments that typically perform differently from one another. This helps to reduce the risk, or volatility, of the overall collection of investments.
That part of a company's profits after tax which is distributed to shareholders - usually expressed in pence per share.
Unit trusts and OEICs can be dual-priced. Such funds have an offer price at which you buy, and a lower bid price, at which you sell.
A company's earnings are its after-tax net income. This is the company's bottom line or its profits.
Also known as Socially Responsible Investments (SRIs). These funds aim to avoid investing in activities which may be harmful to society, such as tobacco production or child labour. Some funds also aim to actively invest in companies which promote ethical policies such as recycling.
Exchange-Traded Fund (ETF)
An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs track or seek to outperform a particular index, sector, commodity, or other asset.
Ex dividend date
The ex-dividend (also known as the ‘XD’ date) defines the date from which the dividend is excluded from the share price, thus reflecting the payment in the value of the unit.
With effect from 1 November 1994, under FCA regulations, unit trust managers have been given the option to levy a charge on redemption of units in place of, or in combination with their initial charge. Rathbone Unit Trust Management have not imposed any exit charges on their funds.
FCA (Financial Conduct Authority)
The FCA is the Government body that regulates all aspects of the financial services industry in the UK.
Floating Rate Note (FRN)
This term used to describe a collective investment scheme, into which investors’ monies is pooled and managed as a single entity with a common investment aim. These protect investors against a rise in interest rates (which have an inverse relationship with bond prices), but also carry lower yields than fixed notes of the same maturity. It's the same idea as an adjustable-rate mortgage, except FRNs are investments (not debt).
Form of renunciation
In order to sell fund holdings, the investor must ‘renounce’ the units/shares held by completing and signing a form of renunciation. Where part of a holding is being sold, the number or the value of the units/shares to be sold must be entered on the form of renunciation.
Units are priced on a forward basis when they are bought or sold by the manager at a price which will be fixed at the next valuation of the unit trust.
The FTSE stands for the Financial Times Stock Exchange and is made up of a number of share indices listed on the London Stock Exchange.
FTSE 100 Index
Arithmetic index of the UK's leading 100 shares, weighted according to the company's market capitalisation. It is a real time index calculated by the London Stock Exchange.
A broad index based on 98% of all UK listed companies, in terms of market capitalisation, not number.
FTSE Mid 250 Index
As above, but relating to the 250 shares below the top 100.
FTSE Small Cap
FTSE Small Cap constitutes the 500 smallest FTSE companies with an approximate market capitalisation of £40 million to £250 million.
This term used to describe a collective investment scheme, into which investors' monies is pooled and managed as a single entity with a common investment aim.
Domestic Sterling denominated government bond issued by the Treasury.
Gross Domestic Product (GDP)
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
Gross redemption yield
The Gross Redemption Yield of a bond is the return a bond earns on the price at which it was purchased if held to maturity. The calculation takes into account any capital gain or loss over the full period and assumes that all interest payments are reinvested.
A fund whose main objective is capital appreciation. This contrasts with an income fund where the main aim is to provide higher than average income from dividend payments.
Using techniques to fully or partially cancel out risks.
The opposite of forward pricing. This is where managers will buy and sell shares on the basis of prices calculated at the last valuation point - investors therefore know the price they will receive when they deal.
A fund whose objective is to provide income growth on a regular basis over time.
A grouping of shares or fixed interest securities on the stock market which are often similar in size or represent similar industries. For example, the FTSE 100 index represents the largest 100 UK companies by market capitalisation.
Individual Savings Account (ISA)
An ISA is a scheme of investment with no tax liability on income or capital gains arising from assets held within the scheme. It is not an investment in itself but a wrapper put around one or more investments, and may comprise components which fluctuate in value, e.g. stocks and shares.
Information Ratio is defined as a portfolio’s excess return relative to its benchmark, divided by the active risk taken to generate the return. It is a measure of efficiency and can be regarded as a measure of the manager’s skill.
Initial charge (sometimes called the Entry Charge)
A charge that may be paid to the firm that manages a fund when you buy units or shares in that fund. The charge is designed to cover the cost of attracting investors to the fund (such as advertising and other promotional activities). Also sometimes called an ‘entry fee’. The charge is deducted from the amount you invest and the remaining sum is used to buy units or shares. There is no Initial Charge on I-class units/shares. Rathbones does not currently make an Initial Charge.
Investment Association (IA)
The IA is a trade body for the UK investment management industry.
ICVC (Investment Company with Variable Capital)
These are funds very similar to unit trusts, but are constituted as companies rather than trusts.
Investment grade bonds
These bonds have a low risk of the company that issued them being unable to repay them. The most secure forms are known as "triple A" rated bonds.
ISIN (International Securities Identification Number )
International Securities Identification Number (ISIN). International code for a listed security.
These are bonds rated 'BB' or lower because of its high default risk. They are also known as a "high-yield bond" “Non-investment grade bonds” or "speculative bonds". These are usually purchased for speculative purposes. Junk bonds typically offer interest rates three to four percentage points higher than safer government issues.
Key Investor Information Document (KIID)
The Key Investor Information Document (KIID) is a two-page pre-sales document. The KIID contains concise descriptions of key fund information, including a short description of its investment objectives and policy; presentation of past performance or performance scenarios; costs and associated charges; the risk/reward profile of the investment, including guidance and warnings. (It should always be used together with this Supplementary Information Document (SID)). The KIID must be read before an purchase for units or shares is made.
The date on which a unit trust or similar collective investment scheme starts investing its assets.
Lipper, a Reuters company, delivers mutual fund information, analytical tools, and commentary. Lipper's benchmarking provides the trusted guidepost to asset managers, fund companies, financial intermediaries, traditional media, websites, and individual investors.
Long-dated securities are a class of income-generating assets where the revenue stream is generated over a long period of time.
Half-yearly fund accounting and investment report.
Market capitalisation is used to indicate the value of a company by multiplying the number of shares in issue by the current share price.
Mid market price
A price between the offer and bid price. The mid price is equal to the sum of the best bid price and the best offer price divided by two, and rounded up to be consistent with the relevant price format.
Monetary Policy Committee (MPC)
The Committee is made up of economic experts and examines all the data available and relevant to decide whether inflation is likely to rise above the Governments target rate.
Money laundering is the process of passing money gained illegally through the financial system to convert into legitimate funds. Since 1994, when the government introduced the Money Laundering Regulations, financial services firms have been required to have procedures in place to prevent money laundering. To comply with the current Money Laundering regulations we may require you to supply evidence of identity and address and may check these details or that supplied in the application form against any database (public or other) to which we have access to meet the regulations.
Money market instruments
High-quality investments that pay interest and are designed to maintain a stable value.
A qualitative fund ratings agency whose ratings, awarded following in-depth meetings with fund managers, are evidence that a fund is, for its type, consistently producing the returns it set out to deliver, and is likely to continue to meet its investment objectives over the long term.
Net Asset Value (NAV)
The total value of a company or fund, based on quoted mid-market prices, together with other assets, less liabilities, divided by the number of shares in issue.
Notice of cancellation
Where a client has bought a unit trust under advice from an adviser, the fund provider is obliged to give the client 14 days' cancellation rights. These rights are outlined in the Notice of Cancellation which will be sent with the contract note.
An Open-Ended Investment Company. Now known as ICVCs (Investment Company with Variable Capital). These are very similar to unit trusts, but are constituted as companies rather than trusts. They are the established structure in many other European countries and can be single or dual-priced.
The offer price is the price at which a company is looking to sell units. Usually higher than the bid, or selling, price as it includes an initial charge.
Ongoing Charges Figure (OCF)
The OCF is a calculation of costs and charges expressed as a percentage of the fund value. OCFs provide investors with a clearer picture of the total annual costs for running a fund. It consists principally of the manager’s annual charge, but also includes the costs for other services paid for by the fund, such as the fees paid to the trustee/depositary, custodian, auditors and registrar. This charge is deducted from the value of the fund in which you invest.
These funds have no limit to the number of units (or shares) they can issue. The price of the units (or shares) remains closely aligned to the NAV of the fund. Unit trusts and OEICs are open-ended funds.
Ordinary shares are also known as equity shares and they are the most common form of share in the UK. An ordinary share gives the right to its owner to share in the profits of the company (dividends) and to vote at general meetings of the company.
A group of investments held across asset classes (stocks, bonds, real estate, gold) or within the same asset class (exposure to stocks across companies and industries).
Pound cost averaging
Buying more units when prices are low and fewer units when prices are high.
The Prospectus contains all material information which investors and their investment advisers might reasonably require and reasonably expect to find for the purpose of making an informed judgement about the merits of participating in a scheme and the extent of the risks accepted by so participating.
Quartile rankings are a measure of how well a fund has performed against all other funds. The rankings range from 1 to 4 for all time periods covered. Mutual funds with the highest percentage returns are assigned a quartile of 1, whereas those with the worst returns are assigned a quartile of 4.
Rating agencies determine the issuer’s ability to meet their debt obligations to their investors. Agencies include Standard & Poor’s (S&P) and Fitch IBCA.
The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures.
The registrar is responsible for maintaining the register of shareholders in the fund. Registration fees cover staff costs and overheads for the maintenance of the register and payment of income distributions.
Reinvestment of income
Income allocations can be reinvested to purchase further units in the existing investment vehicle
Risk - ex-ante
This is predicted risk (uncertainty inherent in returns) from a model or portfolio that combines historic data on volatility and correlation with the current portfolio structure.
Risk - ex-post
This is risk measured directly from a realised performance track record. This may provide little insight into the risks facing a portfolio currently.
Used to describe the income investors get from their portfolio as a percentage of market value of the securities.
The Stock Exchange Daily Official List number to identify any security.
Fund purchases have to be paid for. Once units/shares have been bought on your behalf, you have an obligation to pay for the investment prior to the settlement date (a number, usually 4, working days after the transaction has taken place). Most companies will accept cheques and direct bank transfers.
A measure of the risk adjusted return of an investment/portfolio. It is given by the excess return above the risk free rate divided by the volatility (i.e. standard deviation) of the portfolios returns. The higher the value, the better the performance, given the risk taken.
In investment terms this is used to describe the difference between the buying and selling price, i.e. the bid-offer spread. This can vary depending on the demand for the investment and the volumes in which it is normally traded. Collective Investment schemes normally have a set spread between the buying & selling prices (bid/offer spread).
Stock lending is the temporary transfer of securities, by a lender to a borrower, with agreement by the borrower to return equivalent securities to the lender at pre-agreed time. There are two main motivations for stock lending; securities-driven, and cash-driven. In securities-driven transactions, borrowing firms seek specific securities (equities or bonds), perhaps to facilitate their trading operations. In the cash-driven trades, the lender is able to increase the returns on an underlying portfolio by receiving a fee for making its investments available to the borrower. Such transactions may boost overall income returns.
Supplementary Information Document (SID)
The SID is a document that supports the Key Investor Information Documents (KIID), providing in-depth information on how to make investments in a fund. (See Key Investor Information Document (KIID)).
Swinging single pricing
A ‘dilution adjustment’ can be applied to the fund price in accordance with the policy outlined in the Prospectus for that fund. This is known as ‘swinging’ single pricing (i.e. the price swings in response to particular circumstances to mitigate the effects of dilution). For example, when there are net inflows to a fund, a dilution adjustment increases the price (price swings up) and when there are net outflows from a fund, the dilution adjustment reduces the price (price swings down). This is to protect the interests of existing investors.
Transferable securities are those classes of investments which are negotiable on the capital market such as shares in companies and other investments equivalent to shares in companies, partnerships or other entities or capital return and interest investments known as bonds.
The Trustee is responsible for overseeing the fund manager’s activities in relation to a fund. Usually a large bank, the trustee must be independent of the Manager where the fund is authorised by the Financial Conduct Authority. It acts in the interests of the investors, owning the investments in the fund on their behalf. It also ensures the fund is invested according to its investment objectives and that the manager complies with the regulations.
Turnover rate (or PTR)
The PTR equals the value of purchases or sales of a portfolio’s stocks, which ever is less, divided by the average value of the portfolio’s stocks. A 100% portfolio turnover rate occurs if all stocks, on average, are replaced once during the period. Annual turnover figures are available on our factsheets which are available by calling our Information Line or by visiting our website, rathbonefunds.com
UCITS stands for ‘Undertakings for Collective Investments in Transferable Securities’ and is a European Directive which has been adopted in the UK which prescribes rules allowing funds to be marketed in all countries in the European Union. Since Brexit our UK funds are no longer subject to European legislation and are now known as UK UCITS funds.
Unit trusts are open-ended funds where private investors pool their money to be invested in a portfolio of securities. Unit trusts issue units to investors. Unit trusts issue units in response to demand. Being open-ended, unit price is closely aligned to the net asset value (NAV) of the fund.
Units (sometimes referred to as ‘shares’)
A unit/share is a proportion of the fund for which a buying and selling price will be quoted. For single priced funds (the Rathbones range), the buying and selling prices are the same for all investors. Your investment amount divided by the price will give the number of units/shares that you will be allocated. These can be income-paying units/shares (income units/shares) or income reinvesting units/shares (accumulation units/shares).
The name given to the time of day that unit trusts or OEICs are valued and then priced, (usually midday).
Volatility is a measure of risk. It is the extent and rapidity of up-and-down movements of an investment. The higher the volatility, the more uncertainty there is in the returns and the greater the risk implicit in the portfolio.
The percentage/share of a portfolio held in a single asset or sector compared with its benchmark/another index.
See ex-dividend date.
The yield is the amount of income generated (as defined by the most recent annual record) by a fund’s investments in relation to the quoted price.
Different quoted bond fund yields
A redemption yield applies to a fund holding fixed interest securities. The running yield on a fund gives an indication of the current level of income. The redemption yield is the running yield adjusted for any capital profit or loss if the stock is held to maturity. In practice, the stock will not usually be held to maturity as the fund manager seeks to reduce any loss by active fund management.
How can I invest?
Your can contact our dealing and valuations line on 0330 123 3810 or email firstname.lastname@example.org between 9.00am and 5.00pm Monday to Friday, or application forms can be downloaded online or requested by post. Completed application forms should be sent to:
Rathbones Asset Management Limited
PO Box 9948
Please see our 'how to invest' page for further information.
How do I change my address?
Please write to Rathbones Asset Management Limited, PO Box 9948, Chelmsford, CM99 2AG. Alternatively call our dealing and valuations line on 0330 123 3810 and select option 2 for enquiries.
How do I make a complaint?
Rathbones Asset Management Limited always strives to deliver the best possible service, however, if you believe we have fallen short of these high standards, we would like to hear from you. This will give us an opportunity to put the matter right and learn from the experience to further enhance the service we offer our clients.
You can find more information on on our complaints handling procedure here.