Resources

FAQs

What is an investment company?

Investment companies are quoted companies listed on the London Stock Exchange. They are subject to the listing rules of the UK Listing Authority under the Financial Services and Markets Act. An investment company invests in shares and securities of other companies that trade on stock markets.

What is the role of the portfolio manager?

The portfolio manager has responsibility for the daily operations of the Company and its portfolio. They are the decision-makers regarding where to invest capital held by the Company, and when to sell. The portfolio manager drives the strategy for enabling the Company to reach its investment objectives.

What is the role of the Board?

An independent Board of Non-Executive Directors is responsible for oversight of the Company. The Board is also responsible to shareholders and oversees the relationship with the portfolio manager to ensure that the Company’s objectives are met.

What is the net asset value (NAV)?

The NAV is the value per share of all the assets owned by an investment company. Net asset value is calculated as the value of the company’s holdings, plus cash and income, less any borrowings and charges. If the company’s ’s assets increase in value, the NAV will grow, and likewise if the assets decrease in value, the NAV will decrease.

What are premiums and discounts?

Often the company’s share price will differ from the NAV. If the share price is above the NAV, the company is described as trading at a premium. When the share price is below the NAV, the company is trading at a discount.

What is the mid price?

The mid price is the average of the closing buy and sell prices. An investment company’s underlying investments are valued at the mid prices of the previous day’s closing.

What is the dividend policy?

A company’s dividend policy dictates the amount of dividends paid out by the company to its shareholders and the frequency with which the dividends are paid.

The Board and the Portfolio Manager are very focused on the sustainability of the Company’s dividend policy and regularly monitor and review the position.

Will the Company use gearing?

SMIF will not employ gearing or derivatives for investment purposes, but is expected to employ gearing and/or derivatives in order to manage key investment risks, including the management of Interest Rate Duration.

The Company may, from time to time, also use borrowing for short-term liquidity purposes, which could be achieved through a loan facility or other types of collateralised borrowing instruments including repurchase transactions or stock lending.

The Company is permitted to provide security to lenders in order to borrow money, which may be by way of mortgages, charges or other security interests or by way of outright transfer of title to the Company’s assets. The Articles restrict aggregate borrowing to an amount not exceeding 10 per cent. of the Company’s Net Asset Value at the time of drawdown. Derivatives may be used for currency hedging purposes as set out below and for efficient portfolio management. At the date of this Prospectus, the Company has not incurred any borrowings or indebtedness

How can I invest?

SMIF’s shares are traded on the London Stock Exchange. They can be bought by placing an order with a stockbroker or by asking a professional adviser to do so.

If you are not sure whether an investment company is the right investment for you, it is recommended that you speak to a financial adviser.

Risks

For a full suite of applicable risks, please refer to the latest financial statements and/or latest prospectus, both available here.

How can I find the latest share prices and NAVs?

The share prices and NAV for TFIF are available via the London Stock Exchange website, or the fund’s own website here.

Who is the registrar for TwentyFour Select Monthly Income Fund?

Computershare Investor Services (Guernsey) Limited has been appointed as Registrar to the Company.

Who should I contact for general enquiries?

The Company Secretary will be able to direct your queries:

Useful links

www.theaic.co.uk

Glossary

A

Asset-backed Security (ABS) is a security whose income payments, and hence value, are derived from and collateralised (or “backed”) by a specified pool of underlying assets.

Additional Tier 1 (AT1) is part of a family of bank capital securities known as Contingent Convertibles or ‘Cocos’. They are bonds issued by banks that contribute to the total level of capital they are required to hold by regulators. A Tier 1 subordinated debt instrument where holders are repaid before shareholders but after all other types of debt holder.

Alpha is a measurement of the performance of a fund relative to its reference index. Alpha is positive (or negative) when the relative performance is larger (or smaller) than that of the reference index.

Asset class is a group of financial instruments with similar attributes, such as cash, money market, equities or bonds. The asset class is important in categorizing funds by type of investments.

Active manager is a fund manager who follows an active approach to investing. The active investor aims to beat the returns from the stock market or specified index/sector rather than to match them.

AIC is the Association of Investment Companies, the industry body representing investment trusts – the oldest form of collective investment.

AFME – Association for Financial Markets in Europe.

Amortisation is a reduction of principal as underlying loans are repaid, decreasing the amount of the security outstanding.

An asset is anything that has a commercial or exchange value that is owned by a business, institution or individual.

Asset allocation is apportioning a portfolio’s assets according to risk tolerance and investment goals.

Asset class is a category of assets, such as cash, company shares, fixed income securities and their sub-categories, as well as tangible assets such as real estate.

Average Rating is calculated on the weighted average rating on the fund’s assets excluding cash.

B

Benchmark is an index, a rate, or a combination thereof, to which funds are compared in order to measure the relative performance of a fund.

Beta is a measure of a fund’s sensitivity compared to a market (represented by its reference index). A beta of 1.05 means that a fund’s prices move 5% more than the index when the market rises or falls.

Bear market is a market in which the prices of securities are falling, and widespread pessimism often causes the negative sentiment to be self-sustaining.

BoE – Bank of England.

Bond is 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.

Bottom-up selection is selecting stocks based on the attractiveness of a company.

BTL RMBS – Buy-to-Let RMBS consist of mortgages originated based on the rental income generated from a property.

Bull market is a market in which the prices of securities are rising, often characterised by investor optimism and confidence in continuing strong returns.

Bunds are fixed income securities issued by the German government.

BWIC – Bids Wanted In Competition: a formal request for bids on a package of securities, submitted by an institutional investor to a number of securities dealer

C

Carry is the return obtained from holding an asset. For instance, in fixed income portfolios, positive carry versus a benchmark’s yield is typically obtained by holding longer-term higher yielding bonds while selling short-term lower yielding bonds.

Coupon is a payment to holders of bonds on a pre-defined basis, normally with a specific periodicity and percentage.

Credit default swap (CDS) is a derivative financial instrument which allows an investor to offset default risks. Similar to an insurance contract, if an investor buys a CDS on a security, the investor is reimbursed by the counterparty if the security defaults within a certain period.

Credit spread reflects the difference in yield between a sovereign (government) bond and a corporate bond of similar maturity. As Government bonds are often assumed to be risk-free, the credit spread indicates how much an investor receives is paid to take on a given level of risk.

Credit-spread duration, or credit duration, or spread duration, is a measure of the sensitivity of the price of a bond to a change in credit spreads.

Current yield is the %-return on a bond investment, calculated as the interest payments expected from the bonds if hold for one year, divided by the current prices of the bonds.

Capital at risk is the risk an investor faces that he or she may lose all or part of the assets invested.
Capital growth occurs when the current value of an investment is greater than the initial amount invested.

Capital return is the term for the gain or loss derived from an investment over a particular period. Capital return includes capital gain or loss only and excludes income (in the form of interest or dividend payments).

Capital structure is the composition of a firm’s liabilities – refers to the way a firm finances its assets through a combination of equity, which refers to raising funds by selling shares, and debt. Often when capital structure is referred to, the focus is on the firm’s debt-to-equity ratio, which is an indicator of how risky a company is.

Capitalisation is the total market value of all of a company’s outstanding shares.

Cash equivalents are deposits or investments with similar characteristics to cash.

CET – Common equity tier.

Collateralised loan obligations (CLOs) are pools of corporate loans, refinanced in a securitised structure. These can either be static pools from a bank balance sheet or a managed product run by a specialist loan manager.

Commercial mortgage backed securities (CMBS) are mortgage-backed securities backed by commercial mortgages rather than residential mortgages. CMBS use structures similar to other forms of ABS.

Consumer Prices Index (CPI) is 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.

Consumer receivables include a large variety of unsecured consumer debt types that have been securitised including auto loans, credit card receivables and unsecured personal loans.

Convertible bonds are fixed income securities that can be exchanged for predetermined amounts of company shares at certain times during their life.

Corporate bonds are 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.

Coupon is the interest paid by the government or company that has raised a loan by selling bonds.
Credit is 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 Duration is calculated as a bond’s price sensitivity to spread changes.

Credit rating is 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 security’s life.

Credit research is the process of evaluating a fixed income security in order to ascertain the ability of the borrower to meet its debt obligations. This research seeks to identify the appropriate level of default risk associated with investing in that particular bond.

Credit risk is the risk that a financial obligation will not be paid and a loss will result for the lender.

Credit selection is the process of evaluating a fixed income security, also called a bond, in order to ascertain the ability of the borrower to meet its debt obligations. This research seeks to identify the appropriate level of default risk associated with investing in that particular bond.

D

Dividend policy dictates the amount of dividends paid out by the company to its shareholders and the frequency with which the dividends are paid out.

Duration, or Macaulay duration, indicates the number of years an investor would need to maintain a position in the bond until the present value of the bond’s cash flows equals the amount paid for the bond. The longer the duration, the more a bond’s price will be affected by changes in interest rates. Duration may also be used to compare the risk of debt securities with different maturities and yields.

Duration weighted Yield-to-Worst (YTW WD) is the weighted average of the yield of all the bonds in a portfolio with the Option Adjusted Spread (OAS) duration being used as the metric to weight single bond yields.

Default is when a borrower does not maintain interest payments or repay the amount borrowed when due.

Default risk is risk that a debtholder will not receive interest and full repayment of the loan when due.

Derivatives are financial instruments whose value, and price, are dependent 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 traded over the counter. Examples are futures, options and credit default swaps.

Developed economy/market are well-established economies with a high degree of industrialisation, standard of living and security.

Discount/Premium: If the share price of an investment company is lower than the NAV per share, the shares are said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per Ordinary Share and is usually expressed as a percentage of the NAV per Ordinary Share. If the share price is higher than the NAV per Ordinary Share, the shares are said to be trading at a premium.

Distribution represent a share in the net income of the fund and are paid out to income shareholders at set times of the year (monthly, quarterly, half-yearly or annually).

Distribution yield reflects the amounts that may be expected to be distributed over the next 12 months as a percentage of the mid-market share price of the Fund as at the date shown, net of applicable expenses. In addition to expected cash income, it includes the amortised annual value of unrealised capital gains/losses of current bond holdings, calculated with reference to their historic purchase price and expected redemption value (known as “effective yield from purchase price” method). It is based on a snapshot of the portfolio on the date shown. It does not include any preliminary charge and investors may be subject to tax on distributions. The Distribution Yield is higher than the Underlying Yield because a portion of the Fund’s expenses may be charged to capital.

Diversification is the practice of investing in a variety of assets. This is a risk management technique where, in a well-diversified portfolio, any loss from an individual holding should be offset by gains in other holdings, thereby lessening the impact on the overall portfolio.

Dividend represent a share in the profits of the company and are paid out to a company’s shareholders at set times of the year.

Dividends declared are the dividends that are announced in respect of the current accounting period. They usually consist of 4 dividends: three interim dividends in respect of the periods to June, September and December. On 24 February 2023, the fixed interim dividend increased to 2.00 pence per Ordinary Share. A final dividend declared in respect of March where the residual income for the year is distributed.

Dividend yield is the percentage of dividends declared in respect of the period, divided by the initial share issue price of 100.00 pence. The strategy aims to generate a dividend in the Reporting Period of 6 pence per Ordinary Share and in each subsequent Reporting discretion from time to time, with all excess income being distributed to investors at the year end of the Company.

Duration risk is the longer a fixed income security, also called a bond, or bond fund’s duration, the more sensitive and therefore at risk it is to changes in interest rates.

E

Effective duration, also called option-adjusted duration, is used to calculate the interest rate sensitivity of bonds that have uncertain cash flows due to embedded options.

Modified duration is an adjusted version of Macaulay Duration and measures the percentage change in a bond price as a result of a change in yield. It is used to measure the sensitivity of a bond’s cash flows to a change in interest rates and is more commonly used than Macaulay Duration.

Environmental, social and governance (ESG) criteria are a set of metrics or ratings that are used to screen potential investments for issues that might affect the financial performance and/or have a material impact on environment and society.

Earnings per share is an indicator of a company’s profitability – calculated as the net profit of a company divided by the number of shares in issue.

ECB – European Central Bank.

Emerging economy or market is where an economy is in the process of rapid growth and increasing industrialisation. Investments in emerging markets are generally considered to be riskier than those in developed markets.

Equities are shares of ownership in a company.

ESMA – ESMA is the EU’s financial markets regulator and supervisor.

Exchange traded usually refers to investments traded on an exchange, such as company shares on a stock exchange.

Ex-dividend date or “ex-date” is usually one business day before the record date. Investors who purchase a stock on its ex-dividend date or after will not receive the next dividend payment. Instead, the seller gets the dividend.

Exposure is the proportion of a fund invested in a particular share/fixed income security, sector/region, usually expressed as a percentage of the overall portfolio.

F

Forward, or forward contract, is an agreement between two parties to buy or sell an asset at a specified price on a future date, and is often used for hedging purposes or commodities trading, where a forward contract can be customized to an amount, delivery date, and commodity type (e.g. food, metals, oil or natural gas).

Future, or futures contract, is a legal agreement to buy or sell a particular commodity asset, currency or security at a predetermined price at a future point in time. They are standardized contracts in terms of quality and quantity which facilitates trading on a futures exchange.

Fiscal policy is a government policy on taxation, spending and borrowing.

Fixed income security is 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. Also referred to as a bond.

Floating rate notes (FRNs) are securities whose interest (income) payments are periodically adjusted depending on the change in a reference interest rate.

FOMC – The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five Reserve Bank presidents.

Foreign exchange is the exchange of one currency for another, or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around the clock. The term foreign exchange is usually abbreviated as ‘forex’ or ‘FX’.

Fundamentals (company) is a basic principle, rule, law, or the like, that serves as the groundwork of a system. A company’s fundamentals pertain specifically to that company, and are factors such as its business model, earnings, balance sheet and debt.

Fundamentals (economic) is a basic principle, rule, law, or the like, that serves as the groundwork of a system. Economic fundamentals are factors such as inflation, employment, economic growth.

G

Gearing is the level of a company’s debt in relation to its assets. A company with more debt than capital is considered to be geared.

Gilts are fixed income securities issued by the UK government.

Global Financial Crisis (GFC) – the period of extreme stress in global financial markets and banking systems between mid 2007 and early 2009

Government bonds are fixed income securities issued by governments, that normally pay a fixed rate of interest over a given time period, at the end of which the initial investment is repaid.

Gross purchase yield of a bond is the return a bond earns on the price at which it was purchased if held to maturity.

Gross redemption yield is the Gross Redemption Yield is calculated using the discount rate at which the sum of all future cash flows from the bond (coupons and principal) is equal to the price of the bond and takes into account any capital gain or loss over the full period and assumes that all interest payments are reinvested.

Gross yield is the gross yield is the yield on an investment before the deduction of taxes and expenses. It is calculated as the annual return on an investment prior to taxes and expenses divided by the current price of the investment.

H

Hedging describes the steps taken to offset the risk of a loss or unwanted gain, for example by hedging the risk of foreign currency exposure, an investor can benefit from holding a diverse range of global companies without being exposed to global foreign exchange movements.

High water mark (HWM) is the highest level that a fund’s NAV (net asset value) has reached at the end of a defined period.

High yield bonds are fixed income securities issued by companies with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default than better quality, i.e. higher-rated fixed income securities but have the potential for higher rewards. Default means that a company or government is unable to meet interest payments or repay the initial investment amount at the end of security’s life.

Historic yield is the historic yield reflects distributions declared over the past 12 months as a percentage of the share price, as at the date shown.

HMT – HM Treasury.

HPI – House Price Index.

I

Index is a portfolio that holds a broad range of securities, based on pre-defined rules. Indices such as the FTSE 100 or DAX 30 are used to represent the performance of particular markets and thus act as a reference point for performance measurement of other portfolios. An index used as reference for performance comparisons, is called a “reference index”.

ISIN (International Securities Identification Number) is a unique code that identifies a specific financial security. It is assigned by a country’s respective national numbering agency (NNA).

Income yield refers to the income received from an investment and is usually expressed annually as a percentage based on the investment’s cost, its current market value or face value.

Index tracking is a fund management strategy that aims to match the returns from a particular index.

Index-linked bonds are fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security. Also referred to as inflation-linked bonds.

Index-linked fund is a mutual fund that invests in index-linked bonds. The latter are fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security.

Inflation is the rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier.

Inflation risk is the risk that inflation will reduce the return of an investment in real terms.

Inflation-linked bonds are fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security. Also referred to as index-linked bonds.

Initial public offering (IPO) is the first sale of shares by a private company to the public.

Interest Rate Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.

Interest rate risk is the risk that a fixed income investment will lose value if interest rates move.

Interest rate swap is an agreement between two parties to swap a fixed interest payment with a variable interest payment over a specified period of time.

Investment grade bonds are fixed income securities issued by a company with a medium or high credit rating from a recognised credit rating agency. They are considered to be at lower risk from default than those issued by companies with lower credit ratings.

Issuer is an entity that sells securities, such as fixed income securities and company shares.

L

Leverage is the level of a company’s debt in relation to its assets. A company with more debt than capital is considered to be leveraged. It can also refer to a fund that borrows money or uses derivatives to magnify an investment position.

Liquidity refers to the efficiency or ease with which an asset or security can be converted into cash without a significant impact on its market price.

M

Management fee is a fee which covers the costs charged to a fund relating to portfolio management services and, if applicable, to distribution services.

Maturity indicates the length of time until the initial investment amount of a bond is due to be repaid. “Average maturity” is calculated on a bond portfolio by weighting each bond’s residual maturity by its relative size.

Macroeconomic refers to the performance and behaviour of an economy at the regional,  national or international level. Macroeconomic factors such as economic output, unemployment, inflation and investment are key indicators of economic performance. Sometimes abbreviated to ‘macro’.

Modified duration is a measure of the sensitivity of a fixed income security, called a 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.

Monetary easing is when central banks lower interest rates or buy securities on the open market to increase the money in circulation.

Monetary policy is a central bank’s regulation of money in circulation and interest rates.

Monetary tightening is when central banks raise interest rates or sell securities on the open market to decrease the money in circulation.

Morningstar™ is a provider of independent investment research, including performance statistics and independent fund ratings.

Multiverse is the universe of all publicly traded government and corporate bonds.

N

Net Asset Value (NAV) , represents the value per share of the fund. It is calculated by dividing the fund’s assets less its liabilities by the number of shares outstanding. It may be calculated on a daily, weekly, monthly, quarterly or annual basis.

Number of positions shows the number of single investments/securities in the portfolio of the fund.

NC RMBS – Non-Conforming RMBS.

Near cash are deposits or investments with similar characteristics to cash.

Net is the proportion of a fund invested in, for example, different sectors. Derivatives are included. The latter are financial instruments whose value, and price, are dependent on one or more underlying assets.

NPL – Non-performing loans.

O

Ongoing charges (OCF) expresses the sum of the costs of running a fund on an ongoing basis, like the management fee and various legal and operating costs. It If the available data is insufficient, for example, for newly launched funds, ongoing charges may be estimated using data from funds with similar characteristics.

Option is a derivative, financial instrument whose price derives from the value of underlying securities, like stocks. Call/put options give buyers the right (but not the obligation) to buy/sell an underlying asset at an agreed price and date.

Open-ended investment company (OEIC) is a type of managed fund, whose value is directly linked to the value of the fund’s underlying investments.

Options are financial contracts that offer the right, but not the obligation, to buy or sell an asset at a given price on or before a given date in the future.

Over-the-counter (OTC) is whereby financial assets are traded directly between two parties. This is in contrast to exchange trading, which is carried out through exchanges set up specifically for the purpose of trading. OTC is also known as off-exchange trading.

Overweight is when a fund is ‘overweight’ holds a larger proportion of a specific stock than the comparable index or sector.

P

Performance attribution is a methodology that determines the difference between a portfolio’s and reference index’s returns. Positive overall attribution means that portfolio managers contributed positively to overall return, relative to the portfolio’s reference index.

Performance contribution measures the contribution of individual elements of a portfolio breakdown (by sector, countries, etc.) to the portfolio’s overall return. For example, performance contribution by sector illustrates the contribution of each sector in the portfolio towards the overall portfolio performance.

Performance fee is a charge sometimes paid on top of a management fee if the fund outperforms its reference index or meets other conditions.

Passive management is an approach to investing whereby capital is allocated according to the stock or sector weightings of an index. Passive management is also referred to as ‘indexing’ or ‘tracking’.

Payment date is the date on which distributions will be paid by the fund to investors, usually the last business day of the month.

Physical is the fund’s exposure excluding derivatives, which are financial instruments whose value, and price, is dependent on one or more underlying securities.

Physical assets is an item of value that has tangible existence, for example, cash, equipment, inventory or real estate. Physical assets can also refer to securities, such as company shares or fixed income securities.

Portfolio transaction cost is the cost of trading, such as brokerage, clearing, exchange fees and bid offer spread as well as taxes such as stamp duty.

Prime RMBS – backed pools of mortgage loans made by mainstream mortgage lenders (banks and other deposit-taking institutions and mortgage originators).

Price-earnings ratio is a measure that compares a company’s current share price to its earnings per share. It provides a guide to the market’s opinion about the company’s future earnings prospects. Calculated by dividing the market value per share by the earnings per share.

Principal is the face value of a fixed income security, which is the amount due back to the investor by the borrower when the security reaches the end of its life.

Private placement is an offer of sale of securities to a relatively small number of investors selected by the company, generally investment banks, mutual funds, insurance companies or pension funds.

Profit & loss (P&L) is a financial statement that summarises a company’s revenues, costs and expenses during a specific time period – usually a quarter or year. 

R

Rating, or credit rating, assesses a bond issuer’s ability to repay on time all its debt (interest and principal). High ratings, like AAA or Aaa, indicate low risk (i.e., low probability of default), while ratings such as BBB- or Baa3 indicate a higher risk.

Real return is the return on an investment, adjusted for changes in prices in an economy.

Real yield is the return of an investment, adjusted for changes in prices in an economy.

Residential mortgage backed securities (RMBS) are securities backed by underlying pools of residential mortgage loans, created by banks and other financial institutions. They represent the largest component of the European ABS market and are the most liquid.

Retail Prices Index (RPI) is a UK inflation index that measures the rate of change of prices for a basket of goods and services in the UK, including mortgage payments and council tax.

Risk is the chance that an investment’s return will be different to what is expected. Risk includes the possibility of losing some or all of the original investment.

Risk management is the term used to describe the activities the fund manager undertakes to limit the risk of a loss in a fund.

Risk premium is the difference between the return from a risk-free asset, such as a high-quality government bond or cash, and the return from an investment in any other asset. The risk premium can be considered the ‘price’ or ‘pay-off’ for taking on increased risk. A higher risk premium implies higher risk.

Risk/reward ratio is a ratio comparing the expected returns of an investment with the amount of risk undertaken.

Risk-free asset is an asset that notionally carries no risk of non-payment by the borrower such as a high-quality fixed income security issued by a government or cash.

S

Sharpe ratio measures excess return per unit of risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility. A portfolio with a higher Sharpe ratio is considered superior relative to its peers.

SRRI is a value based on a sub fund’s volatility, providing a gauge of the overall risk and reward profile of the sub fund.

Subordination, or bond subordination, expresses the priority for repayment of a bond in the event of default. A subordinated bond is more junior than other, more senior bonds with respect to claims on assets or earnings.

Safe-haven assets refers to assets that investors perceive to be relatively safe from suffering a loss in times of market turmoil.

Security is a financial term for an asset – usually a share in a company or a fixed income security also known as a bond.

Short-dated corporate bonds are fixed income securities issued by companies and repaid over relatively short periods.

Short-dated government bonds are fixed income securities issued by governments and repaid over relatively short periods.

Sovereign debt is debt of a government. Also referred to as government bonds.

Standard deviation is a statistical measure of dispersion of a set of data from its mean, indicating the spread of a fund’s returns over a certain period of time.

Sub-investment grade bonds are fixed income securities issued by a company with a low rating from a recognised credit rating agency. They are considered to be at higher risk from default than those issued by companies with higher credit ratings.

T

Total expense ratio (TER) measures the total costs associated with managing and operating an investment fund.

Tracking error is the standard deviation of the difference between the returns of a fund and its reference index, expressed as a percentage. The more actively a fund is managed, the higher the tracking error.

TFS – Term Funding Scheme.

Top-down investing is an investment approach that analyses economic factors, i.e. surveys the ‘big picture’, before selecting which companies to invest in. The top-down investor will look at which industries are likely to generate the best returns in certain economic conditions and limit the search to that area.

Total return is the term for the gain or loss derived from an investment over a particular period. Total return includes income (in the form of interest or dividend payments) and capital gains.

Total Return per Ordinary Share is calculated by adding the increase or decrease in NAV per Ordinary Share with the dividend per Ordinary Share and dividing it by the NAV per Ordinary Share at the start of the year.

Treasuries (or USTs/US Treasuries) are fixed income securities issued by the US government.

U

Unconstrained is the term used to describe the mandate of a fund whereby the manager has the freedom to invest according to his or her own strategy, not being obliged to allocate capital according to the weightings of any index, for example.

Underlying value is the fundamental value of a company, reflecting both tangible and intangible assets, rather than the current market value.

Underlying yield reflects the annualised income net of expenses of the Fund as a percentage of the mid-market share price of the Fund as at the date shown.

Underweight is when a portfolio holds a smaller proportion of a specific stock than the comparable index or sector.

V

Volatility measures the fluctuation of a fund’s performance over a certain period. It is most commonly expressed using the annualized standard deviation. The higher the volatility, the riskier a fund tends to be.

Volatile – when the value of a particular share, market or sector swings up and down fairly frequently and/or significantly, it is considered volatile.

W

Weighted Average Carbon Intensity (WACI) reports the carbon emissions of companies held in a portfolio relative to the revenues they generate, excluding emissions from supply chains and products / services.

Weighted Average Life (WAL) determines the time outstanding on a bond, and is calculated by weighting the times at which the principal is re-paid by the amounts of principal involved (WAL does not consider interest payments). A smaller WAL is assumed to carry less credit risk.

Y

Yield-to-maturity (YTM) measures the return of the fund if all the bonds in the portfolio of the fund were held to maturity. The ratio is expressed as an annual return in percent.

Yield refers to either the interest received from a fixed income security or to the dividends received from a share. It is usually expressed as a percentage based on the investment’s costs, its current market value or its face value. Dividends represent a share in the profits of the company and are paid out to a company’s shareholders at set times of the year.

Yield (bonds) refers to the interest received from a fixed income security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.

Yield (income) refers to the income received from an investment and is usually expressed annually as a percentage based on the investment’s cost, its current market value or face value.

YTD – Year to date.

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3-year volatility is an annualised 3-year rolling standard deviation of daily or monthly returns (stated as appropriate).