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Asset Management
Tracking error measures the standard deviation of relative excess, i.e. the annualized fund return error less the annualized benchmark return (calculated geometrically). Tracking error is often used as a measure of risk taken against the fund benchmark, with a larger tracking error indicating that greater risks were taken relative to the benchmark in achieving the return of the fund.

Alpha is the term used to describe the risk-adjusted outperformance of an investment. A large alpha indicates good performance relative to the market.

Average Annual Return is used to compare returns over different periods on a consistent basis with the unit being years,, hence per annum. Normally only returns over periods greater than one year are annualized. The average annual return is the rate that an investor would have earned in each year to achieve the total cumulative return over the period.

Asset backed securities are bonds where the borrower backs the loan with assets, usually in a company such as buildings or machinery or land, that can be used to repay the lender in the event of default.

Volatility is one measure used to assess the risk of a portfolio as it helps to describe the likely range of returns achieved by the fund. In statistical terms it is the annualized standard deviation of the return distribution. Greater volatility of monthly fund returns means that there is a wider range of likely returns in the future, or greater uncertainty regarding the fund return. Most investors would equate this greater uncertainty with greater risk.

Person who studies particular stock markets or industry sectors and makes buy or sell recommendations regarding the shares of specific companies within them. These are arrived at through a combination of research, economic statistics and, frequently, visits to the companies themselves.

The different classes of investment held by a fund - such as shares/equities, bonds and cash. Assets - another word for the investments that a unit trusts holds within its portfolio.

The remaining lifetime of all bonds in a fund's investment portfolio, weighted by the amount of money invested in each bond. (See also Bonds)

Agency securities are issued by government-sponsored entities, such as mortgage and loan organizations that have government backing.

Average annualized return is used to compare returns over different periods on a consistent basis with return the unit being years, hence per annum. Normally only returns over periods greater than one year are annualized. The annualized average return is the rate that an investor would have earned in each year to achieve the total cumulative return over the period.
Otherwise known as fixed-interest securities, bonds are basically IOUs which are issued by governments, financial institutions and companies. Generally, the issuer undertakes to pay investors a fixed rate of interest for a fixed number of years (e.g. 7% for 5 years). The fact that the interest rate is fixed makes bonds attractive because their return is so predictable. Bonds are traded in open markets, in the same way as shares. (See also Gilts)

A yardstick (usually a stock market index) against which performance is to be judged. Most commonly used to assess the investment performance of a fund or portfolio.

Describes the sensitivity of a fund's return to the return of the market portfolio. The market has a beta of 1.0 as it moves in line with itself. A more aggressively positioned portfolio has a beta of greater than one so that if the market rises as expected, the fund will rise more than the market - a higher beta means higher potential returns but also higher risk. A fund manager positions the portfolio with a beta of less than one if he thinks the market may fall so that the fund price falls less than the market - a lower beta means lower expected returns but also lower risk.

The base interest rate determined usually by a country's central bank (such as the Bank of England) upon which all other lending or savings interest rates are based.

The difference between the prices at which you buy units from us and sell them back to us. The buying (offer) price is usually higher than selling (bid) price and the difference between them may vary. Both offer and bid prices are quoted for each of our funds on the Daily Prices page.
Describes the way in which two investments have moved relative to each other. Correlation coefficients range between +1.0 for assets that consistently move in the same direction, and -1.0 for assets that consistently move in the opposite direction. Assets with a correlation of zero were unrelated. Portfolios combining assets with low correlations provide diversification or risk reduction benefits, potentially without decreasing total portfolio return.

A lump sum of money. Usually refers to the amount you invest in a fund at the outset e.g. your original capital.

Corporate bonds are securities issued by companies to raise capital. The fixed income and repayment of principle are dependent on the financial strength of the company to meet payments.

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