Copy of `Henderson Global - Investment glossary`

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Henderson Global - Investment glossary Category: Economy and Finance > Investing Date & country: 25/09/2007, UK Words: 223

Tracker funds
Tracker funds aim to mirror the progress of a stock market index, e.g. the FTSE 100, by buying and selling shares in the same proportions as represented on the index. These are also sometimes called index (tracker) funds or passive managed funds.

Trust deed
This document establishes the legal constitution, structure and organisation of a unit trust. The OEIC equivalent is known as an instrument of incorporation.

Trustee
Responsible for overseeing the fund manager's activities in relation to a unit trust. Usually a large bank, the trustee must be independent of the fund manager where the fund is authorised by the Financial Services 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. The OEIC equivalent is known as the depositary.

UCITS
A fund that can be marketed in all countries in the European Union. UCITS stands for 'Undertakings for Collective Investments in Transferable Securities'. Most, but not all, UK authorised funds are 'UCITS'.

Unit linked policies
These are insurance products where you pay a premium which is then invested in a fund holding a range of assets, usually including equities and fixed interest securities. Part of the premium paid pays for life assurance. Unit linked policies are similar to with-profits products but do not invest in as many assets.

Unit Trust
Private individuals pool their contributions with others, which combine to form a large fund. The fund invests in a spread of different assets to minimise the risk of loss. Also known as collective/pooled investments or investment funds. Unit trusts are usually dual priced although some can be single priced

Unit trust
An open-ended fund in the form of a legal trust, which issue units rather than shares.

Units
Unit trusts are divided into 'units' of equal value, therefore an investor buys units in the unit trust. The OEIC equivalent is known as a share.

Unlisted investments
Investments in companies, which have no stock market listing.

Unsecured loan stock (ULS)
A loan stock in which no specific assets have been set aside as a fund out of which the holders could be paid in priority to other creditors in the event of non-payment; may also be a Convertible (CULS).

Valuation point
The name given to the time of day that unit trusts or OEICs are valued and then priced.

Venture capital
The business of providing capital for, and making investments in, small and young companies. Such companies do not have a long trading history, have limited reserves, and are often regarded as high risk.

Venture capital trusts (VCTs)
Very similar in structure to an investment trust; VCTs are a form of closed-ended fund that offer very generous tax benefits to encourage investors to invest in venture capital.

Volatility
A statistical measure of the tendency of a market/share price to vary over time. Volatility is usually measured by the variance or standard deviation of the price and is said to be high if the price typically changes dramatically in a short period of time.

Warrant gearing
A ratio of the share price divided by the warrant price.

Warrant premium
A percentage by which the current warrant price, when added to its exercise price, exceeds the price of the share into which the warrant can be exercised.

Warrants
In the context of investment trusts, a form of traded option which gives the holder the right to subscribe for shares in the trust at some time or times in the future and at prices fixed when the warrants are issued. They offer the purchaser of warrants an option on a future interest in the equity of the trust for a relatively small initial investment. They are generally regarded as high risk investments and do not carry the same rights and protections as shares.

Warrants
A security that offers the owner the right to purchase the shares of a company at a fixed date, usually at a fixed price.

With profits
A with-profits fund is a pooled insurance product. With-profits funds pool together premiums paid by a number of investors, which the insurance company then invests in a very wide range of assets. (See also unit-linked policies).

Wrapper products
ISAs, savings and investment schemes, PEPs and pensions are all 'wrapper products'. They are not investments in their own right, but simply different ways of holding investments; some of the wrappers have tax advantages.

Yield
The yield on an investment is the interest or dividend income as a percentage of the capital value. This is also known as the running yield. The yield to redemption also takes into account the annualised capital profit (or loss) on holding a fixed interest security to redemption, ie the investors have an annual average total return. Also see Dividend Yield.

Zero Dividend Preference share
Zero Dividend Preference Shares (Zeros) are a class of share in a split capital investment trust with a limited life that offer a capital return from the assets of the split in the form of a predetermined (but not guaranteed) redemption value at wind-up. This is subject to funds being available after the claims of any prior charges/bank debt have been met. They have no right to receive a dividend, hence their name.

C share
'C' shares (also known as conversion shares) are designed to enable trusts to raise new funds without penalising the interests of existing shareholders. Such new money is raised through subscription for 'C' shares, which are kept separate from the main assets of the trust for a specified period, with the costs of the issue borne by the 'C' share pool. The 'C' shares convert to the full ordinary shares when most of the new money raised has been invested. 'C' shareholders are offered new ordinary shares at the combined NAV of the enlarged trusts.