112 Annual Report and audited Financial Statements • December 2022112
Adjusted opening NAV The opening NAV, adjusted for the
payment of the last dividend in respect of the previous
financial year.
Asset Anything having commercial or exchange value that is
owned by a business, institution or individual.
ABS (Asset backed security) A security whose income
payments and value are derived from and collateralised by a
specified pool of underlying assets.
Asset class Category of assets, such as cash, company
shares, fixed income securities and their sub-categories, as
well as tangible assets such as real estate.
Association of Investment Companies (AIC) The UK trade
body that represents investment managers. It works with
investment managers, liaising with government on matters of
taxation and regulation, and also aims to help investors
understand the industry and the investment options available
to them.
AUM Assets under management.
Basis points (bps) A common unit of measure for interest
rates and other percentages in finance. One basis point is
equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to
denote the percentage change in a financial instrument.
Bond A loan in the form of a security, usually issued by a
government or company, which normally pays a fixed rate of
interest over a given time period, at the end of which the initial
amount borrowed is repaid.
Callable bond A bond that can be redeemed (in other words,
called) by the issuer before its maturity date. The price at
which the issuer buys back the bond is normally higher than its
issue price. A bond is usually called when interest rates fall, so
that the issuer can refinance its debt at the new, lower interest
rates.
Capital Refers to the financial assets, or resources, that a
company has to fund its business operations.
Capitalisation The total market value of all of a company’s
outstanding shares.
CTA Corporation Tax Act.
CLO (Collateralised loan obligation) Actively managed
investment vehicle which issues rated tranches of debt from
AAA-B and an unrated equity tranche. Underlying assets are
predominantly made up of leveraged loans and high yield
bonds.
Closed-ended A term used to describe an investment
company whose capital is fixed and whose shares are not
generally redeemable at the option of a holder.
CMBS ( Commercial mortgage-backed security) A type of
asset-backed security which is collateralised by a commercial
real estate asset, either a single property, or – more often – a
portfolio of several properties.
Comparative sector A group of investment companies with
similar investment objectives and/or types of investment, as
classified by bodies such as the AIC or Morningstar™. Sector
definitions are mostly based on the main assets an investment
company should invest in, and may also have a geographic
focus. Sectors can be the basis for comparing the different
characteristics of similar investment companies, such as their
performance or charging structure.
Consumer Prices Index (CPI) An index used to measure
inflation, which is the rate of change in prices for a basket of
goods and services. The contents of the basket are meant to
be representative of products and services we typically spend
our money on.
Convertible bonds Fixed income securities that can be
exchanged for predetermined amounts of company shares at
certain times during their life.
Corporate bonds Fixed income securities issued by a
company. They are also known as bonds and can offer higher
interest payments than bonds issued by governments as they
are often considered more risky.
Credit The borrowing capacity of an individual, company or
government. More narrowly, the term is often used as a
synonym for fixed income securities issued by companies.
Credit default swaps (CDS) Are a type of derivative, namely
financial instruments whose value, and price, are dependent
on one or more underlying assets. CDS are insurance-like
contracts that allow investors to transfer the risk of a fixed
income security defaulting to another investor.
Credit rating An independent assessment of a borrower’s
ability to repay its debts. A high rating indicates that the credit
rating agency considers the issuer to be at low risk of default;
likewise, a low rating indicates high risk of default. Standard &
Poor’s, Fitch and Moody’s are the three most prominent credit
rating agencies. Default means that a company or government
is unable to meet interest payments or repay the initial
investment amount at the end of a security’s life.
Credit spread The difference between the yield of a
corporate bond, a fixed income security issued by a company,
and a government bond of the same life span. Yield refers to
the income received from an investment and is expressed as a
percentage of the investment’s current market value.
Debt instrument A formal contract that a government, a
business or an individual can use to borrow money. Debt
instruments outline the detailed conditions of the loan, such as
the amount and schedule of payment of interest, the length of
Glossary