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Glossary

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A - F G - L M - R S - Z

A - F

This measure looks at the appreciation or depreciation, expressed as a percentage, that an asset, such as a stock or a mutual fund, achieves over a given period of time.

Measures the investment manager’s ability to effectively allocate the assets of a portfolio to different segments. The allocation effect determines whether the overweighting or under weighting of sectors relative to a benchmark contributes negatively or positively to an account’s overall return.

Alternative funds invest in non-traditional asset classes such as private debt, private equity, infrastructure, real estate and others that provide absolute returns. These funds are good risk diversifiers as they are lowly correlated with publicly traded funds and securities.

The return an investment provides over a period of time, expressed as a time-weighted annual percentage. Sources of returns can include dividends, returns of capital and capital appreciation.

Geometric average amount of money earned by an investment each year over a given time period. It is calculated as a geometric average to show what an investor would earn over a period of time if the annual return was compounded annually.

Investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to specific goals, risk tolerance and investment horizon.

The credit worthiness of corporate or government bonds as determined by credit rating agencies such as Moody’s, S&P and Fitch.

The book value corresponds to the amount initially invested in a fund, plus any additional investments over time, plus the interest and the reinvestment of dividends, less the value of any amount divested.

A capital gain results from the sale of an asset at a profit. Conversely, a capital loss arises when an asset is sold at a loss. The gain and/or loss are determined when the selling price is subtracted from the purchase price.

The method of granting, verifying, and giving advice on collateral transactions in order to reduce credit risk in unsecured financial transactions.

Debt financing refers to amounts borrowed by individuals or corporations to finance a project, an event or simply to purchase a good or service. In the corporate world, borrowing funds to finance projects is sometimes favoured over equity financing, if the cost of funds is low, and as interest on the debt receives a favourable tax treatment and is easily measurable.

A financial security with a value that is reliant upon or derived from an underlying asset or group of assets. The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset.

Amount paid to an investor in respect of his investment in a fund during a certain period of time.

A statistical measure of an investment manager’s overall performance in down-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.

An investigation or audit of a potential investment or product to confirm all facts, that might include the review of financial records. Due diligence refers to the research done before entering into an agreement or a financial transaction with another party.

Exchange-traded funds (ETFs) are funds that replicate an index such as the S&P/TSX Composite or S&P 500. These vehicles are very attractive because of their low fee structure that does not penalize investor returns.

Any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year, and to repay the principal amount on maturity.

G - L

A type of private equity investment, in companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business.

Maximum weight allowed in regards to the investment policy for a given asset class.

Minimum weight allowed in regards to the investment policy for a given asset class.

Document drafted between an investment manager and a client that outlines general rules for the manager. This statement provides the general investment goals and objectives of a client, describes the strategies that the manager should employ to meet these objectives and outlines any constraints or restrictions in terms of investment strategies or instruments.

It stands for Limited Partnership.

Liquid alternative investments aim to provide investors access to alternative strategies such as hedge funds in the form of mutual funds or exchange-traded funds (ETFs) that would otherwise be inaccessible due to their illiquidity. Liquid alts as they are also known are focused on providing absolute returns and are normally lowly correlated to public issues, making them good diversifiers of risk.

The degree to which an asset or security can be quickly bought or sold in the market at a price reflecting its intrinsic value.

M - R

A transaction where a company’s management team purchases the assets and operations of the business they manage.

A fee paid for managing a business, property, strategy or financial assets on another’s behalf.

The value of an asset or investment if it were to be transacted in the market place at a specific point in time.

The minimum amount of capital that may be invested in an investment fund.

Number of distinct financial instruments held in a portfolio and pertaining to all asset classes, including equities, fixed income, cash and alternative investments.

The Organisation for Economic Co-operation and Development, an international organization of thirty-six countries. The members of OECD all have a democratic system of government that accept the principle of a free economy.

When two or more individuals and/or entities pool their funds together to invest, collectively, this is referred to as an investment fund. If this fund is left open to onboard new investors, then the fund takes on the definition of open-end fund. The term contrasts with a closed-end fund, which issues a set number of shares at the onset and is normally closed to new investors.

Process of posting more collateral than is needed to obtain or secure financing.

Determines how the portfolio manager’s asset allocation and selection of securities affects the portfolio’s performance when compared to a benchmark. The two main components of performance attribution are sector allocation and stock selection.

A measure of how frequently assets within a portfolio are bought and sold by the manager.

A type of short-term debt that is loaned by investors.

Private credit as its name suggests is credit that is negotiated privately to fund companies seeking capital for projects or other ventures. It is not publicly traded and takes various legal forms including loans, bonds and/or notes. Private credit or private debt fits into the broad category of alternative investments. Its strategies include real estate debt, distressed debt, direct lending, mezzanine financing and structured financing.

Private equity refers to funds that are directly invested in non-exchange listed private companies. Private equity may target public companies in buyouts to take them private. Private equity fits in the broad category of alternative investments.

Once every three months.

Quasi-equity fills the gap between debt and equity and aims to reflect some of the characteristics of both. It is usually structured as investments where the financial return is calculated as a percentage of the investee’s future revenue streams.

S - Z

A security is a certificate or other financial instrument that has monetary value and can be traded. Securities are generally classified as either equity securities, such as stocks, or debt securities, such as bonds and debentures.

The part of the financial industry that is involved in the creation, promotion, and sale of stocks, bonds, foreign exchange, and other financial instruments. Sell-side individuals and firms work to create and service products that are made available to the buy-side of the financial industry.

Term used to classify companies with relatively small market capitalizations (e.g. market cap ranging from $300M to about $2 billion). A company’s market capitalization is the market value of its outstanding shares.

An active portfolio management technique that focuses on advantageous selection of particular stocks rather than on broad asset allocation choices.

Commitment of an individual to provide, at an agreed date, a sum of money for an investment.

A company controlled by a holding company.

The difference between the portfolio’s return and the benchmark’s return.

A loan that is not secured by the issuer’s assets and thus presents more risk to lenders. Due to the higher risk involved, the interest rates on these notes are higher than with secured notes.

The statistical measure of an investment manager’s overall performance in up-markets. The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is calculated by dividing the manager’s returns by the returns of the index during the up-market and multiplying that factor by 100.

A security that entitles the holder to buy the underlying stock of the issuing company at a fixed price until the expiry date.

A period starting from the beginning of the current year (either the calendar year or fiscal year) and continuing up to the present day.

Yield is defined as the return that an investor can realize on an investment from interest, dividend and capital gains. Otherwise known as total return, the yield on investment can be different for different assets, but is always presented in percentage based on the invested amount or on the current market value of the security.

The total return anticipated on a bond if the bond is held until it matures. Yield to maturity is considered a long-term bond yield but it is expressed as an annual rate.

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