Glossary



We hope you find this glossary useful and easy to use.

While we make every effort not to use jargon within our market commentaries and updates, some of our literature will require the use of more technical terms than others. This glossary has been created to help you better understand these terms.

Please be aware that while we have made every effort to describe the terms as accurately as we can, these descriptions are not definitive and they may differ from other interpretations used.

Term

Explanation

Absolute Return

Otherwise known as a simple return, this is the performance or return that a bond, fund or stock achieves over a stated period of time. Usually expressed as a percentage, the figure details the increase or decrease that the asset has achieved.

Accumulation

7IM refers to the accumulation phase as the stage in your life when you are growing or accumulating a pot for future goals e.g. retirement. It is the opposite of the decumulation phase, when you are drawing on those savings.

Accumulation Unit

With accumulation units, income generated by the funds is retained within the fund so, although you still have the same number of units, the price of each unit increases and so the overall value of your holding increases.

Active Manager / Management

This is where the fund manager 'actively' selects which individual bonds, funds or stocks to invest in. Using a variety of processes that are often largely specific to that individual fund manager, he/she will choose a smaller number of holdings to try and outperform the benchmark or index.

Additional Permitted Subscription / APS

If your spouse dies and has an Individual Savings Accounts (ISA), the Additional Permitted Subscriptions allows you (as the surviving spouse or civil partner) to make additional subscriptions to an ISA in addition to their own annual ISA limit. It is not dependent on inheriting the money or investments held within the ISA.

Adventurous

Adventurous is the riskiest of the 7IM risk profiles. As its name suggests, it is for investors who are willing to accept more risk to achieve a bigger return over the long term.

Alpha

This is the measure of the performance that is over and above the performance of the benchmark against which a fund is gauged and is achieved by a fund manager as he/she actively manages the fund.

Alternative Assets

We generally refer to Alternatives as any asset that is not a bond or a stock. They include (for example) commodities, hedge funds and property, but can also include art, coins and stamps.

Annual Allowance

The annual allowance refers to the limit against which you can receive income, make capital gains or save before tax is payable.

Annual Limit

The annual limit refers to the maximum amount up to which you can subscribe to a tax wrapper such as an ISA or SIPP.

Annual Management Charge / AMC

This charge is taken by the fund manager and deducted directly from the fund to cover ongoing management. The Ongoing Charges Figure / OCF includes the AMC as well as other costs involved in running the fund.

Annuity

An annuity is a product that gives you a guaranteed income for the rest of your life or for a fixed number of years. Pension savings don't necessarily do this and so one option is to buy an annuity from an insurance company. There are different types of annuities and a diverse set of providers offering up a variety of options.

Asset

This is a component or security that has a commercial or exchangeable value and that is owned by someone or some organisation. Assets are the collective noun for the investments i.e. bonds, cash, futures, property, stocks, etc. that are held in a portfolio.

Asset Class

This is term used to reference the category of individual components or assets that are held in a portfolio or that are available on the market for investment purposes.

Attribution

A measurement tool that looks to assess the performance of a fund manager. It assigns, or attributes, where performance has come from or been affected to determine whether performance is due to luck or skill.

Authorised Corporate Director

An Authorised Corporate Director (ACD) is a corporate body and/or an authorised by the UK regulator (i.e. the Financial Conduct Authority) to operate an Open Ended Investment Company. The ACD is responsible for all aspects of operating an OEIC.

Balanced

This risk profile lies in the middle of the 7IM risk spectrum.

Basis Point

A unit of measurement used in financial circles with regard to anything from fees and charges to interest rates to yields. One basis point (often expressed as bp) is equivalent to 0.01%, 1/100th of a percent or 0.0001.

Benchmark

A standard against which the performance of an individual security or a portfolio of assets is measured. This is usually a recognised index (e.g. FTSE 100) or a combination of indices (e.g. FTSE 350 = FTSE 100 + FTSE 250), but could also be a consolidation of similar portfolios as in a ‘Peer Group‘. Given many fund managers will publish their performance relative to a benchmark, it is important you understand the underlying performance. If a portfolio manager has beaten the benchmark by 5% but that index is down 10%, you have still lost money.

Beta

A measure of the market movement of an asset, beta indicates whether an asset's price fluctuates a lot or a little when compare to average movement of the underlying benchmark i.e. the asset's peer group.

Bond

Businesses, governments and other institutions raise money through the sale of bonds that are effectively loans. The bond usually pays a fixed rate of interest or coupon over a stated period of time. At the end of the time, your initial amount is paid back to you.

Call Option

A financial contract giving the owner the right but not the obligation to buy or sell a pre-agreed amount of an underlying financial asset at a pre-agreed price within a specific time period. It is used when you expect the price of the asset to change in a direction that is different to the expectations of the market or the institution with whom you are dealing.

Capacity for Loss

This is how much you can afford to lose without it having a material impact on your standard of living if there was a loss in the value of your investments.

Capital

The amount of money you initially invest is typically called your capital. The terms also refers to the finances that a company uses to fund its business operations.

Capital Gains Tax / CGT

This is the tax that is payable on any profits you make from your investments above your annual allowance. The 2016/17 allowance is £11,100.

Capitalisation

The (market) capitalisation is the sum of all of a company's outstanding shares. So to calculate that value you multiply the share price by the total number of shares available.

Cautious

This category is the lowest risk category of the 7IM risk profiles.

Consumer Prices Index / CPI

This is a measure that we use to tell us what is happening with the direction of prices through the use of a basket of consumer goods and services and can change every year. The prices of the goods and services are also annually 'weighted' (i.e. a multiple or a decrease in the original price based on the previous year's spending by the population). Changes in CPI are used to assess the cost of living and so is used by the Bank of England to measure inflations against pre-set targets. The CPI differs from the RPI by what is included in the basket and the calculation method e.g. The CPI excludes the costs of housing (i.e. mortgage rate costs, council tax etc.).

Corporate Action

This is an event or a process started by a company when they want to make changes to the company or its finances in a way that affects the assets or securities (bonds, loans or stocks) that the company has issued (i.e. sold to investors). A fund may also initiate a corporate action if the fund manager wishes to merge one fund with another that has similar objectives. They are decided on by the company's board of directors and voted on by the shareholders.

Corporate Bonds

This type of bond has a company as the lender rather than a government or other sovereign entity. These are also known as credits. Some large, high quality or blue chip companies may only have to pay similar levels of interest on their bonds to governments. Others will not have the same high credit ratings and so are deemed to be riskier and as such will have to pay out higher borrowing costs to reward investors for the higher risk they’re taking.

Correlation

Asset classes can react to economic news or statistics in a similar way. Others react very differently. These are said to have a high correlation / be correlated or have a low correlation / be uncorrelated respectively. An everyday example would be that a supermarket will sell more ice-cream, salads and BBQ items in warm weather - these are highly correlated. A negatively correlated 'asset' in this instance would be furry boots.

Coupon

This is the term used to describe the interest payment on a bond.

Coverage

This is how we refer to the value of assets that are easily sold versus the level of debts or liabilities. Low coverage therefore could be used to describe a pension scheme that only covers a minority of all the people that should be entitled to receive money from the scheme now and in the future.

Credit Rating

This is an independent, third party assessment of a company, government or institution's ability to repay its debts based on an in-depth examination of the entity's financials. Standard & Poor's, Fitch and Moody's are the three most prominent ratings agencies, but there are others.

Credits

See corporate bonds.

Debt

This is collective term for bonds, credit, loans and other outstanding obligations that have been borrowed by one party from another and are being or will be paid off in the future.

Decumulation

We refer to the decumulation phase as the phase in your life when you need to start drawing on your savings for money to live off i.e. retirement. No new money is paid in and typically the money you have in your account(s) reduces or decumulates. 7IM believes that your decumulation years should focus on goal risk and while you may not be adding more money, you may choose not to withdraw all of the income or capital gains accrued from your investment. In this case the amount that you have in your savings may actually go up.

Defined Benefit Pension Schemes

Otherwise known as final salary schemes, these schemes provide retirement benefits based on the level of earnings and length of membership in the scheme.

Defined Contribution Pension Schemes

Also known as money purchase schemes, companies pay a set percentage of an employee's wage into a pension scheme, with the employees also paying in a percentage.

Deflation

Also known as negative inflation, this is where the prices of goods and services fall on average. If this trend affects inflation expectations, it could lead to deferred spending decisions, which in turn can affect economic growth and cause further deflation, leading to a vicious deflationary circle. Japan is an economy that has regularly suffered from this effect.

Developed Economy

These is a well-established and diversified country with a high level of industrialisation, a broad service sector and strong consumer demand to support economic growth. This in turn allows for a high standard of living and good infrastructure.

Discretionary Fund Management

This is a form of wealth management in which the investment decisions are made by a portfolio manager or investment specialist on behalf of clients within a pre-agreed set of parameters. These typically include the risk profile and other client specific factors and asset allocation decisions that are made at the fund manager's preference or discretion. It allows investors and financial planners the opportunity to focus on financial planning rather than be tied down by the day-to-day decisions as to which asset is best placed to deliver their expected returns.

Distribution

This refers to the ad hoc or regular payment(s) to fund holders or shareholders of dividends or interest received on the underlying assets of a fund.

Diversification

One of the basic principles of investing, it is often encapsulated by the idiom of not having all your eggs in one basket. The approach supports risk management since including a number of investments in your portfolio should mean that any losses from one investment would be offset by gains in another investment. However, diversification needs to be carefully approached. Warren Buffet is famous for calling this "Diworsification" as he believes that many investors choose to invest in assets that respond to economic changes and news in the same direction and therefore do not provide protection when markets are falling. It also happens when investors diversify but fail to understand that by buying five funds from five different managers that all invest in the same market means that there is a high chance that you could own the same stock in each of the five funds. It's important to have a range of asset classes, sectors, geographies i.e. assets that ideally have the lowest correlation to each other. 7IM also enables its investors to take advantage of currency diversification.

Dividend

A payment made per share, to a company's shareholders by a company, based on some or all of the profits of the year. A company can choose to pay a dividend from reserves following a loss-making year. Conversely a company can choose to pay no dividend after a profit-making year. It all depends on what is believed to be in the best interests of the company at that point in time.

Dividend Yield

A ratio that tells investors how much a company has paid or will pay out in dividends for a year in relation to its share price.

Duration

This is a measure of how sensitive a bond is or how easily a bond responds to changes in interest rates. Typically the longer the maturity, the higher the sensitivity or duration.

Earnings Per Share / EPS

This is the net profits of company divided by the number of ordinary shares outstanding. If a firm has earned a profit of £10 million in the previous financial year and has two million shares held by all its shareholders, then it has an Earnings Per Share or EPS of £5.

Emerging Market

These are markets or countries that are seen to be growing at a higher pace of growth than developed economies and are increasingly industrialised or emerging onto the global stage. They are generally seen as riskier investments than developed markets.

Equities

Also known as shares or stocks, capital made up of equity forms the financial base for a company. Bonds and other debt can also be used as capital, but bond holders receive an agreed and fixed rate of return or coupon whereas equity owners receive an ongoing proportion of the profits of the business, which are distributed in the form of dividends. Over time, as profits rise or fall or depending on decisions made by the management, the dividends increase or decrease and can substantially influence the change in the value of the underlying equity.

Event Risk

This is the possibility that an unforeseen event will negatively affect a company or industry. It can also refer to business news or current affairs that affect an entire market or asset class.

Exchange Traded

This typically refers to an asset or fund that is traded on an exchange e.g. the London Stock Exchange. As the stockmarket is open throughout the trading day, the value of the asset/fund changes throughout the day in line with the market allowing for investors to quickly buy or sell units depending on market movements. 7IM, for example, invests in a number of exchange traded funds across its funds and model portfolios.

Expected Returns

The process 7IM use for forecasting asset returns begins with a theoretical return on an investment which has no risk (e.g. a three-month UK government bond) and our expectation of long term inflation. These two numbers combine to provide a value against which other asset classes are compared given they all involve more risk, particularly in the short term. Over the long-term, riskier assets typically see higher levels of return and so carry a risk premium. We analyse the historic returns of various asset classes to calculate a forward looking, long term return for each asset class. The output forms our Strategic Asset Allocation.

Exposure

Typically expressed as a percentage, this is the proportion of a fund or portfolio that is invested in an individual security or stock or more broadly in a sector, region or market. It represents the amount and investor can lose.

Financial Conduct Authority / FCA

The FCA authorises and regulates 7IM and is the conduct regulator for UK financial services firms. Operating independently from the Government, its two primary goals are to protect the consumer and maintain the integrity of the UK's financial markets. For investors, it is keen to make sure that firms treat customers fairly. To achieve this, it conducts regular reviews of firm's practices through audits and interviews, and may take action against firms whose practices are felt to be unfair or restrictive.

Fund of Funds / FoF

This is a fund which holds a number of funds as investments instead of the individual asset classes. The structure allows for the underlying vehicles to be conventional unit trusts (a.k.a. OEICS), investment trusts or even hedge funds. Some FoFs are multi-manager, whereas others only invest in the funds of a single investment manager.

Futures

This is a contract that is intended to be executed in the future at a pre-agreed price on a pre-determined date between two parties to buy or sell an asset, and in particular a commodities or shares. They are sold on regulated exchanges.

Gearing

Usually expressed in percentage form, it is the level of a company's debts to assets. A company that has significantly more debt than assets is said to be geared. In general, a company with a high gearing ratio may be more vulnerable to an economic slowdown because it has to make interest payments when cash flow can be significantly lower.

General Investment Account / GIA

This is our flexible investment account which allows your investments to be held as a collective vehicle for easier administration. You can hold an array of investments within a GIA, including funds, shares, investment trusts and exchange traded funds. As they are held within a single account and while they can invest in a broader set of asset classes than an ISA and they do not have to be listed on a recognised exchange, there are no tax benefits to a GIA.

Gilt

These are Sterling denominated debt securities issued by the Bank of England on behalf of Her Majesty's Treasury. They are called Gilts as the certificates used to be gilt edged to highlight the high level of security behind the investments given the British Government has never failed to make an interest or a principal payment on the securities as they fall due.

Goal Risk

This is the risk of not saving up enough money to achieving the goals you would like to see happen. These might be as basic as paying off the remainder of your mortgage to a round the world trip, but also include how long you think you will need to live off the money based on a theoretical expected longevity.

Growth Manager

This is a style used by a fund manager that looks to invest in securities that have a history of higher earnings' growth than the average of the overall market. Based on historic returns, the manager analyses the scenarios in which the stock will grow and then looks to invest at the right point in the sector's investment cycle to capture the best returns. It is generally seen as a different style from a Value manager.

Hedging

This is a technique used by managers and financial professionals to reduce unnecessary or unintended risks e.g. if you buy a US stock, you may hedge the currency in order to reduce the impact that the exchange rate between the Pound and the US Dollar will have on the investment performance.

High Yield Bonds

These are bonds that have higher yields or a reward because they are issued by companies or institutions that have a lower credit rating than better 'quality' companies. Investors are rewarded for the extra risk they take given these companies are more likely to default.

Implementation

While a risk profile refers to how much risk you take, the implementation method defines how that risk is taken. An investor, for example, may choose to implement this strategy using an active manager or a passive tracker.

Income

Income refers to the distributions (e.g. dividends) paid out from your investments.

Income Fund

This is a style of fund where the fund is designed to generate an income for the investors that is then distributed at pre-agreed points over the calendar year.

Income Unit

With income units, income generated by the funds is paid out to its investors.

Individual Savings Account / ISA

These are tax efficient ways of saving. Each year everyone is granted an ISA allowance. In 2016/17 (until 5 April) that limit is £15,240. ISAs are available as cash accounts or stocks and shares versions that can used to invest. Junior ISAs are available for children up to the age of 18 and April 2017 will see the introduction of the new Lifetime ISA.

Inflation

Inflation is the increase in prices of goods and services. Inflationary risk is the possibility of loss of purchasing power due to the general rise in prices. A return higher than the inflation rate would ensure that the investor’s wealth has grown, while a return lower than inflation means that the investor has actually lost money in real terms.

Inheritance Tax / IHT

This is the tax that is payable on any amounts of money or assets left to you when someone dies other than your married partner.

Interest Rate

Interest rates are set by the Bank of England's Monetary Policy Committee. It is one of the main levers that the Bank has over the economy and any changes usually have an immediate impact on consumer sentiment given the strong links with mortgage rates.

Investment Risk

This is the risk that investors take when they invest in financial markets and refers to the risk that they may lose a proportion or all of their initial investment. A number of risks contribute to this including market risk, liquidity risk and counterparty risk. This is often the top risk in most people's minds, not least as stockmarket movements are widely published in the press.

Investment Risk Team

They assist / work closely with the 7IM Investment Management team in order fully appreciate what might happen using various 'what if' scenarios and also ensure that investors are not seeing their money invested in assets that have a higher risk level than they may be comfortable with. They continue to monitor risks for as long as the investments are held.

Investment Trust

A closed-end investment company that has a fixed number of shares available for investment. Shares are traded on the relevant stock market.

Junior ISA / JISA

These are tax efficient ways of saving for children. Each year children are granted a JISA allowance. In 2016/17 (until 5 April) that limit is £4,080. JISAs are available as cash accounts or stocks and shares’ versions that can used to invest.

Lifetime Allowance

This is the maximum amount on which you usually pay tax if your pension is worth more than the lifetime allowance. The current allowance for 2016/17 is £1mn per person. Please note the tax rules are subject to change and will depend on your own individual circumstances.

Liquidity

This is the measure of the ability to sell an asset at any given time in the market and raise cash. An example of a liquid asset class is a stake in the FTSE 100 as there is a ready market for the index. A relatively illiquid asset is a property which can take months to sell and may only see a lower price paid when the seller is being forced to sell. At 7IM, we measure liquidity on a daily basis to ensure that we can sell 60% of the portfolio in a day, and the remaining 40% the following trading day.

London Interbank Offered Rate / LIBOR

The interest rate at which banks can borrow funds from other banks. It is fixed daily by the British Bankers’ Association and is the most widely used benchmark for short-term interest rates.

Long

This refers to the position that an investor takes when they buy and hold an asset for a period of time. This is because they believe the asset will increase in price or the returns from that investment will outperform similar assets over the foreseeable future.

Longevity Risk

This is the risk that you may not save enough money and so you run out of money in retirement. This might be because an individual has not saved enough during their working life, or withdraws too much each time during retirement.

Maturity

This is the stated length of time that a fixed income security will be in the market before the issuer repays the holder of the investment the initial or pre-agreed investment amount.

Model Portfolios

7IM has a range of broadly diversified portfolios that allow investors to invest in a range of instruments to meet different investment aspirations and tolerances to risk.

Moving Average

This marks the average price of security or commodity prices over a period of time. This can be as short as a few days or as long as several years. Each day a new average is calculated to provide a trend for the latest interval.

Multi Manager Fund

This is where an investment house looks to use funds and other investments from other investment managers to the benefit of the end client. Multiple managers therefore end up contributing to the returns of a fund (or not as the case may be), but the coordinating manager will collate the information stemming from the investments to report on the entire set of investments collectively.

Net Asset Value / NAV

This figure is published every day on a fund provider's website and is calculated by adding up the total value of all the fund’s assets and then dividing that total by the number of shares in the fund at the end of each trading day. This figure that is then used to price the purchase and sale of investor's individual holdings.

Ongoing Charges Figure OCF

When you buy a fund, this published figure includes the Annual Management Change / AMC and represents the ongoing costs to the fund.

Open Ended Investment Company / OEIC

OEICS and unit trusts are both types of collective investment schemes where investors’ money is pooled in a fund to enable investment in a professionally managed portfolio of investments.

Option

These are financial contracts that offer the right, but not the obligation, to buy or sell an asset under particular circumstances e.g. at a specified date or when the investment reaches a pre-set price.

Other Cash Movements

The 'Other Cash Movements' row is often found in the investment summary table in the summary section of client reports and refers to the sum of dividends with interest added. It also references the fees that a wealth manager or financial planner may take, together with any relevant 7IM fees.

Overweight

This refers to the position that a fund manager may take over and above the percentage of that asset held in the benchmark of the portfolio e.g. FTSE 100. The overweight position is typically expressed as a percentage. In 7IM's case, we overweight assets versus our Strategic Asset Allocation. It is the opposite of an underweight position.

Passive Manager / Management

An increasingly popular type of investment in recent years, it refers to a style of management in which the fund manager looks to replicate an entire index of investments using the same percentage of each stock or security as per the underlying index. They can choose to copy the whole index or invest in a representative sample of the index, but they do not actively choose to increase or decrease the percentage of an investment in any particular company.

Performance Fees

A type of fee that gives a portion of the returns of a fund or investment to the manager as a reward for positive performance typically over and above a pre-agreed amount.

Platform

This is effectively an online shop for funds and other types of investments that enables individuals or financial planners to trade in investments easily and cost effectively, with other benefits typically attached. 7IM has its own platform.

Portfolio

A portfolio is a collection of investments that may be a range of individual, direct investments or a collection of funds. 7IM believes that it is more cost effective and beneficial for the investor to hold unitised portfolios, which we provide as funds.

Price Earnings Ratio / P/E Ratio

One of the most commonly used valuation methods. This is a valuation ratio of a company’s current share price compared to its earnings. The Earnings Per Share (EPS) used is either from the previous four quarters (i.e. the trailing P/E), or estimates for the next four quarters (i.e. the forward or projected P/E). The ratio is used by investors to make assumptions about a share such as future growth prospects and forecast returns, and gives an indication as to how expensive a share price is deemed to be, usually relative to a comparable company.

Private Equity Investing

Private equity investing offers the opportunity to invest in companies that are not listed or quoted on any recognised exchange.

Quantitative Easing / QE

This is a monetary policy whereby a central bank aims to increase the money supply by buying up government or other securities in the market thus providing capital to financial institutions to encourage lending and increase liquidity. This is typically employed when low interest rates have not produced the desired effect. A risk of QE is that it can lead to higher inflation.

Real Estate Investment Trust / REIT

A limited company with special tax advantages for the managers of the trust that invests mainly in real estate traded on a regulated exchange. REITs can provide a more liquid and diversified way of investing in property without buying property directly but carry more risk than other fund structures.

Redemption

This is where an investor chooses to divest their holding and receive cash equivalent to the published value.

Retail Prices Index / RPI

The UK Retail Price Index (RPI) is a measure of inflation. It measures the change in cost of a representative sample of retail goods and services. The RPI and CPI differ in that they include slightly different things and use different calculation methods. The cost of housing (mortgage interest costs and council tax), for example, are included in the RPI figures.

Risk

There are many types of risk associated with investments, one of which is investment risk.

Risk Premium

This is the difference in return from investing in an asset that is deemed to be more risky than investing in say a UK government bond (or Gilt) or cash. The addition returns are said to be your 'pay off' for the additional level of risk you originally took.

Risk Reward Ratio

This is the traditional play off between how much risk you take and how much return you could benefit from should markets perform as they are expected to. Typically, if you take a higher level of investment risk, you should be due higher returns. But you should expect to see more up and downswings in the investment prices over your investment period, when compared to lower risk and return investments.

Savings Risk

This is the risk that you may not be saving enough money versus what you actually need in the future (i.e. taking inflation into account) to achieve your financial goals and aspirations.

Section 32

See deferred annuity.

Security

This is the term used within the financial services industry for a stock or share or a bond in a company. It can be used as security by which the holder can borrow against it.

Self-invested Personal Pension / SIPP

A self-invested personal pension (SIPP), is a type of plan that enables the holder to choose and manage the investments made and benefit from tax breaks. Like all pensions, a SIPP offers up to 45% tax relief on contributions and there is no UK capital gains tax or UK income tax to pay. They also offer the option for a broader range of investments than is typically available through a company pension scheme which will usually be restricted to one provider.

Share

Otherwise known as a stock or equity, this entitles the holder to benefit from a share in a listed company. There are different types of shares available which grant different entitlements.

Share Class

Fund houses can offer different share classes which typically offer different charging structures.

Short

Opposite to a long position, a short position is where an investor believes that the value of an investment is about to drop in value. The investor will therefore look to borrow an asset from a third party and 'sell' that asset. If the asset price does fall then the manager makes a profit as he will be buying the asset for a lower price than he sold it for. Of course that may not always be the case - if the price rises, the manager will lose money.

Small Self Administered Scheme / SSAS

These are pension schemes set up by an employer to provide retirement benefits for employees.

Sovereign Debt

These are fixed income investments issued by governments or government related organisations and so are deemed to be less risky than corporate debt obligations.

Stock

Otherwise known as a share, this entitles the holder to benefit from a share in a listed company. There are different types of company stocks available which grant different entitlements.

Strategic Asset Allocation

Strategic Asset Allocation is defined as the optimum combination of investments likely to maximise long term returns for a given level of risk. The 7IM strategic asset allocation is reviewed annually to ensure continued validity.

Sub-investment Grade

Often referred to as 'junk', these are fixed income investments that typically provide a higher return than sovereign or high quality corporate debt, for a higher risk of default.

Sustainable Investment

The idea behind sustainable business is that while a business should make money, it should not do so at the detriment to the community in which it operates. Unlike general investments, sustainable investments are those which select investments based on their social and environmental characteristics.

Tactical Asset Allocation

Tactical Asset Allocation is the series of short term tilts away from the Strategic Asset Allocation. These are short term changes which reflect our current view of the markets and economic outlook. The positioning of the tactical tilt is reviewed quarterly and is subject to continual monitoring against the latest market information.

Targeted Returns

We can offer no guarantees and the value of investments may go down as well as up, but at 7IM we aim to manage money to a stated expected return. The purpose of this is to provide greater clarity to our clients about what your savings pot may generate through investing over the long term and help you plan your future financial goals and aspirations.

Total Return

This term applies to the overall gains or losses from a particular investment and includes any income generated (e.g. dividends paid out, interest payments) and any capital gains.

Tracking Error

This is the measure of the difference between the benchmark and the fund performance. It is used a lot in passive investments to ensure that the fund manager is doing a good job at 'copying' the index.

Treasuries

These are fixed income investments issued by the US Government.

Turnover

This is the measure of the number of stocks or securities that a fund manager buys and sells in any given period. We try to keep turnover to a minimum to keep trading costs low, while balancing the need to make changes to anticipate or react to market events or trends.

Unconstrained

This means that the fund manager is not restricted on the types of assets or sectors that they may invest in.

Undertakings for Collective Investments in Transferable Securities / UCITS

This is the structure which the European Union use to set up funds so that they can be sold across the whole common market.

Underweight

This refers to the position that a fund manager may take below the percentage of that asset held in the benchmark of the portfolio e.g. FTSE 100. The underweight position is typically expressed as a percentage. In 7IM's case, we underweight assets versus our Strategic Asset Allocation. It is the opposite of an overweight position.

Unit Trusts

Unit trusts and OEICS are both types of collective investment schemes where investors’ money is pooled in a fund to enable investment in a professionally managed portfolio of investments forms of open-ended investment vehicles.

Unitised

This is where assets are pooled but investors retain an individual net asset value. In addition to tax benefits since any trading gains are reinvested within the investment, unitised portfolios allow managers to make changes on behalf of all their clients at the same time - whether they're big or small.

Value Manager

This is a style of investing where a fund manager believes that there is additional value to be derived from or we will see an increase in the price of an investment in a company that is suffering under market sentiment. For example, a value manager may measure the value of that company's assets minus the debts that a company must settle if that company were theoretically to be wound up at that point in time.

Vanilla

This refers to a basic or standard type of investment. These are investments that are relatively straightforward in that they do not have complicated payment hierarchies or lots of sub investments, and tend to be issued by governments or companies with long track records.

Volatility

This is the measure by which the price or return of an investment may go up or down in value over a given period.

Yield

The yield is the interest or dividends received from a security. It is usually expressed annually as a percentage of the investment costs, its current market value or its face value.


You should be aware that the value of investments may go up and down and you may get back less than you invested originally.

Get in touch


Seven Investment Management
55 Bishopsgate
London
EC2N 3AS
T020 7760 8777
F020 7760 8799

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