D
- 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 payments of interest, the length of time before the principal is paid back, or any guarantees (collateral) that the borrower offers. Any type of debt can be a debt instrument – from bonds and loans to credit cards.
- Default
- When a borrower does not maintain interest payments or repay the amount borrowed when due.
- Default risk
- Risk that a debtholder will not receive interest and full repayment of the loan when due.
- Defaulted bond
- When a bond issuer does not maintain interest payments or repay the amount borrowed when due.
- Derivatives
- Financial instruments whose value and price depend on one or more underlying assets. Derivatives can be used to gain exposure to, or to help protect against, expected changes in the value of the underlying investments. Derivatives may be traded on a regulated exchange or directly between two parties (over the counter).
- Developed economy/market
- Well-established economy with a high degree of industrialisation, standard of living and security.
- Dilution adjustment
- A change to the price of the fund’s shares, which is used to ensure that the costs of buying and selling the shares are borne by incoming and outgoing investors, not by ongoing investors. The dilution adjustment is made up of direct and indirect transaction costs incurred at the creation and cancellation of shares in the fund. (Also see swing pricing).
- Distribution
- Distributions represent a share in the income of the fund and are paid out to Income shareholders, or reinvested for Accumulation shareholders at set times of the year (monthly, quarterly, half-yearly or annually). They may be in the form of interest distributions (for bonds) or dividend distributions (for shares).
- Distribution yield
- The amount that is expected to be distributed by the fund over the next 12 months expressed as a percentage of the share price as at a certain date. It is based on the expected gross income less the ongoing charges where they are deducted from income.
- Diversification
- The practice of investing in a variety of assets, which typically should perform independently of each other. This is a risk management technique where, in a well-diversified portfolio, a loss from an individual holding should be offset by gains in other holdings, thereby lessening the impact on the overall portfolio.
- Dividend
- A share in the profits of a company, paid out to the company’s shareholders at set times of the year.
- Dividend yield
- Annual income distributed by a company as a percentage of its share price as at a certain date.
- Dual pricing
Dual pricing is a method of protecting ongoing shareholders in the fund from bearing costs incurred by investors transacting with the fund on a day-to-day basis, while ensuring the costs to investors of buying and selling shares or units in the fund are aligned with the corresponding costs incurred by the fund from buying and selling assets. Unlike funds with swing pricing, dual priced funds have different buying (offer) and selling (bid) prices. Each day the assets of the Fund are valued on both an ‘offer’ basis (how much they would cost to buy) and a ‘bid’ basis (how much the Fund would receive if they were sold). Shares will ordinarily be issued at the offer price and redeemed at the bid price. The difference between the two prices is known as the “spread”. Currently only M&G Property Portfolio and M&G Feeder of Property Portfolio operate dual pricing. (Also see swing pricing)
- Duration
- A measure of the sensitivity of a fixed income security (bond) or bond fund to changes in interest rates. The longer a bond or bond fund’s duration, the more sensitive it is to interest rate movements.
- Duration risk
- The risk that the price of a fixed income security (bond) or bond fund will change sharply when interest rates change. The longer the duration of a bond or bond fund, the more sensitive and therefore at risk it is to changes in interest rates.