Glossary
Terms relating to funds
Net assets
Total net amount of a fund’s assets valued at market price less any liabilities.
OPCVM ARIA (OPCVM A Règles d’Investissements Allégés – UCITS with flexible investment rules)/Alternative investment
Reserved for well-informed investors as the investment rules are more flexible than in the case of funds governed by common law. This type of fund allows the use of certain alternative investment techniques, implying investment that is not correlated to market indices and is based on strategies and tools that are both diversified and complex and may or may not make use of gearing.
Accumulation/Income
Choice made by a fund as to whether or not to distribute the income earned on the portfolio. When income is accumulated (capitalised), it increases the NAV of the fund shares or units. However, tax credits attached to any dividends capitalised cannot be reclaimed.
Hedging
A market transaction, or series of such transactions, whose objective is to hedge, or offset, fully or partially, the risk of a movement in an asset or liability, this risk stemming from a movement in the price of a security, currency, interest rate or commodity.
Custodian
Service provider responsible for holding the securities and ensuring the legality of the investment decisions taken on behalf of the fund.
Entry/exit fees
Also known as subscription/redemption commissions, these fees are payable for the purchase/sale of units or shares in a fund. A portion of these fees may be due to the fund itself.
FCP (Fonds Commun de Placement)
An FCP is a collection of jointly held securities that is not a separate legal person. It issues units and is managed by an asset management company.
Management fees
Total of the various fees and commissions calculated as a percentage of the fund’s net assets. These include both fixed costs (fund operating costs and management fees) and variable costs (outperformance fees).
Futures
This financial product allows a buyer and a seller to undertake to buy and sell respectively on a fixed date a financial instrument at a price determined on the day the commitment is made.
Investment horizon
The recommended investment period is determined based on the investment objective and the financial instruments in which the fund is invested.
Multi-management
Multi-management involves selecting funds or managers across all asset classes. The selection process is based on a dual approach combining quantitative sorting of funds with qualitative analysis of management companies. The objective of multi-management is to obtain greater portfolio diversification by combining funds and managers within a fund (fund of funds) according to the various investment styles, while at the same time optimising the risk/return profile.
Rating
Fund ratings are generally expressed in terms of stars (from 1 to 5) and are published by independent bodies. Depending on the body concerned, the ratings reflect, based on an analysis of actual performances and risk levels, the fund’s relative ranking within a sample of similar funds.
Convertible bonds
A “traditional” bond issued by a company and which may be converted into equities at any time in accordance with the terms and conditions stipulated in the issue agreement.
OPCVM (Organisme de Placement Collectif en Valeurs Mobilières)
Savings product approved or authorised by the Autorité des Marchés Financiers (the French Regulator for financial markets) that is managed by an asset management company and is aimed at retail and intuitional investors. This is the French equivalent of a UCITS (undertaking for collective investment in transferable securities).
Annualised performance
Performance measurement used to compare performances recorded over periods of different durations. The actual performance over the period is adjusted to reflect the annual growth rate.
Fund risk profile
Based on the fund’s volatility, that reflects both the risk of the assets held in the portfolio and that of the investment style used, the funds are rated on a scale of 0 to 6 to give the investor essential information on the risk profile.
Sharpe ratio
Measures the excess return delivered by an investment in relation to a risk-free asset compared with the risk taken. The higher the ratio, the greater the return on the risk taken. For ratios below zero, the order of importance is not significant. In this publication, the calculation is based on performances in Euro compared with compounded Eonia. The sharpe ratio is calculated based on past performances, which may differ from future performances.
SICAV (Société d’Investissement à Capital Variable)
A limited liability company whose purpose is to manage a portfolio of marketable securities and financial instruments. It is a separate legal entity. To be marketed, a SICAV must first be approved by the Autorité des Marchés Financiers, the French financial markets supervisor. The investor is a shareholder.
Equity sensitivity
Measures the implied exposure of a convertible bond to the price of the underlying equity. By extension, the equity sensitivity of a convertible bond portfolio is the average of the individual security sensitivities, weighted by the proportion they represent within the portfolio. This sensitivity is also called the delta.
Interest-rate sensitivity
Measures the impact of changes in market interest rates on the price of a bond (as a %). By extension, the interest-rate sensitivity of a bond portfolio is calculated as the average of the individual security sensitivities, weighted by the proportion they represent within the portfolio. For example, if a fund’s portfolio has a sensitivity of 2, a 1% change in interest rates will cause its value to move by 2% in the opposite direction.
Tracking error
Measures the volatility of performance differences between the fund and a benchmark index. The higher the tracking error, the greater the positions taken by the investment team. The tracking error is calculated based on past performances, which may differ from future performances.
Net asset value (NAV)
Price of fund units/shares, published on each fund valuation date.
Volatility
Measures the historical dispersion of performances. The higher the indicator, the greater the risk statistically. Volatility is calculated based on past performances, which may differ from future performances.
EuroMTS 5-7 years
Index covering the main Eurozone government borrowings with a term of between 5 and 7 years. This
benchmark index is calculated by EuroMTS.
UBS Convertibles Europe (Union des Banques Suisses)
The UBS Convertible Europe benchmark index is a subdivision of UBS Convertible Global and is calculated by UBS.
Euribor
This European money market interest rate is equal to the arithmetic mean of the interest rates offered on the European interbank market for a given maturity (ranging from 1 week to 12 months). It is published by the European Central Bank based on listed prices supplied daily by 64 European banks.
CAC 40
The Paris Bourse index, calculated on a continuous basis based on the 40 securities selected from among the most active in the market. The CAC 40’s composition is updated regularly.
DJ Stoxx 600
A broad index comprising 600 companies – large/mid/ small caps – listed on 17 different European markets.
S&P 500
US stock market index covering the top 500 listed securities. It is calculated by Standard and Poor’s.
Topix Tokyo SE
This index represents all companies listed in the First Section of the Tokyo Stock Exchange. It is weighted by each component’s market capitalisation.
JPM EMU (European Monetary Union)
Index created by JP Morgan and designated as the core performance indicator for fixed-income products and the benchmark for European bonds.
JPM Global Government Bond
Index comprising government bonds from all countries worldwide (other than emerging markets).
TEC 10 (Taux de l’Echéance Constante à 10 ans – 10Y constant maturity rate)
Index representing the yield on an artificial 10-year French OAT (Obligation Assimilable du Trésor – French government bond).
EONIA (Euro Overnight Index Average)
Index representing the risk-free rate in the Eurozone and corresponding to the average of overnight interest rates in this region.
SBF 120
Index comprising the 120 largest and most liquid market capitalisations on the Paris Bourse.
MSCI (Morgan Stanley Capital International)
Index representing equity performance by region (France, Europe, World, etc.).
For further information, please refer to the AMF lexicon: www.amf-france.org