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Active Management |
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The fund manager selects markets and stocks that the manager
believes will out-perform the average, with the objective of
out-performing their stated benchmark. |
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Benchmark |
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A standard measure against which the performance of a fund is
compared. |
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Diversification |
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Diversification refers to reducing risk by spreading an
investment across a number of characteristics. A simple example
is "not putting all your eggs in one basket".
Diversification can refer to many characteristics, for example
a portfolio could hold more shares so that the influence of each
share on the whole portfolio is smaller. It can be applied to
investment managers where one portfolio is invested with several
managers so that if one manager performs poorly, the overall
portfolio suffers less. |
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Duration |
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A time-related measure based on the amount and timing of cash
flows associated with a bond over its remaining lifetime. The
higher the duration, the further into the future the "average cashflow" of the bond is and the more sensitive the price of the
bond is to changes in interest rates. |
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Index |
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A widely recognised combination of stocks that is representative
of a particular area or market. |
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Large cap equities |
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Short-hand for shares of companies with a large market
capitalisation (the total of number of shares issued multiplied
by share price) i.e. big companies. |
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Passive
Management |
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The fund manager manages the fund in line with a set of well
defined rules and applies limited discretion to the selection of
markets or stocks.
Typically the fund manager aims to replicate a benchmark by
investing in the benchmark constituents. The manager aims
to hold the same proportion of each constituent as the
benchmark. This is also known as index-tracking. |
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Small cap equities |
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Short-hand for shares of companies with a small market
capitalisation (the total of number of shares issued multiplied
by share price) i.e. small companies. |
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Specialist |
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A manager who has proven abilities in managing specific
types of investments. For example, a Small Cap manager
would specialise in managing portfolios holding shares in
small companies. |
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Styles |
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This is a short description of how an active
manager selects the shares and markets they invest in. Active managers choose which stocks to buy
based on different criteria and processes. It is these criteria
and the processes employed that are described by the manager's
style.
For example:
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Growth - the manager selects stocks with a high level of anticipated future
earnings growth. |
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Value - stocks are selected where the manager believes the price paid does not fully reflect the value of the share. |
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Fundamental Analysis
- the manager utilises a range of tools and information sources to develop a view of the future and selects stocks that will benefit from this anticipated environment. |
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Econometric Modelling with Overlays
- a mathematical approach to predicting the future direction of the economy and selecting stocks that will benefit from this anticipated environment. |
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Active Quantitative Management - a mathematical approach to predicting the future share prices. |
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Price-driven value management - stocks are selected where the manager believes the price paid does not fully reflect the value of the share. |
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Fundamental quality-driven management - stocks are selected based on analysis of the quality of a company
i.e. strength of management, competitive advantage and financial strength. |
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Quantitative value management - a mathematical based approach to select shares where the manager believes the price paid does not fully reflect the value of the share. |
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Multi-management - the selection and appointment of a number of managers with different and complementary styles to manage each portfolio. |
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Risk |
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Risk can mean many things. One definition of risk describes the
fluctuation of an investment over time, i.e. the degree of
unpredictability in the return or future value of the
investment. |
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Volatility |
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A term that measures the degree and frequency of
"fluctuation"
in the value of a fund. Volatility against a benchmark refers
to the variation from the benchmark; the higher the volatility,
the more the performance of the fund differs from performance of
the benchmark. |
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