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A

  • Acquired Fund Fees

    Acquired funds fees are the fees a fund pays for access to other funds. For example, an ETF that holds 10 other ETFs must pay the fees for each fund in addition to collecting its own fees. All of these fees are ultiamtely borne by investors.

  • Active Mangement

    Active management relies on the expertise and discretion of a fund's manager(s) to select investments, usually in a bid to outperform the market. Active investing constrasts with index investing, where managers attempt to replicate the performance of a rules-based index.

  • Adjusted Duration

    Adjusted duration is one specific way of calculating duration in the fixed income asset class. Duration is calculated in different ways, but generally, it measures a bond's interest rate risk, or susceptiblity of the bond's price relative to changes in interest rates.

  • ADR

    An American Depositary Receipt (ADR) represents the shares of a foreign firm listed on a US stock exchange. A portion of the company's locally listed shares are deposited with a bank who then issues the ADRs to be listed on a US exchange.

  • ADV

    The average daily volume (ADV) is the average number of shares traded per day for a particular security. The figure can be expressed in terms of the absolute number of shares traded or as the currency value of the shares traded (# of shares x Price per Share).

  • Advisor Class Unit

    The Advisor Class Units that are listed by some ETF Providers (denoted by '.A' on the symbol) have been designed only for clients who are advised by a registered investment advisor and purchased through an advisor. The only difference between this class of units and the Common Unit, which has been designed to be purchased by institutional and individual investors, is the service fee component for the managed fees payable on the Advisor Class Unit.

  • Agencies

    Agencies are US government sponsored enterprises such as Federal National Mortgage Association, also known as Fannie Mae. Agencies bundle up individual home mortgages to create mortgage-backed securities. Agencies typically guarantee the cash flows from individual loans in the MBS, and are in turn backed by the US government. Agencies also issue their own debt that’s not directly backed by mortgages.

  • Algorithmic trading

    Algorithmic trading is a broad term that refers to automated trading that takes place according to pre-programmed formulae and methodology.

  • Alpha

    Alpha is the measure of excess, or risk-adjusted returns of an fund relative to a benchmark index.

  • Alpha-seeking

    An alpha-seeking investment or ETF aims to outperform the market rather than match it. Alpha refers to risk adjusted outperformance. Statistically, alpha refers to excess returns relative to a benchmark (typically the market’s return) after allowing for the investment’s risk relative to the market.

  • Alternatives

    Alternatives describes a broad classification of exchange-traded funds that either combine multiple asset classes or focus on unconventional exposure such as volatility.

  • Ask Quote

    Like a stock, an ETF has with 2 sets of quotes in the market— a price you’d receive if you’re selling the stock (the bid quote) and the price you’d pay to buy the ETF (the ask quote). The difference between the bid and ask is called the spread, and tighter spreads mean lower trading costs.

  • Asset Allocation

    Asset allocation refers to a subjective strategy that overwights or underweights particular sectors depending on the stage of the economic cycle.

  • Asset Class

    Asset Class is a grouping of assets with similar investment characteristics. The members of such group exhibit similar market behavior that is distinct from other asset classes. ETFs offer access to all major asset classes such as equities, fixed income, commodities etc. as well as to smaller segments within those classes.

  • Asset Class (Asset Allocation)

    Investments can be divided into different categories such as stocks, bonds, cash equivalents or commodities. Dividing investments into the different asset classes is one method of diversifying a portfolio according to the investor's objectives, time horizon and basic risk tolerance level. The proportion of investment in different asset classes is referred to as asset allocation.

  • Assets Under Management

    Assets Under Management is the market value of all the assets a fund has accumulated and is now managing on behalf of clients.

  • Authorised Participant

    An authorised participant is the bank or entity that is permitted to create and redeem shares of an ETF with its issuer. Through the create and redeem mechanism, authorised participants are incentivised to keep an ETF trading near its actual value. In tandem with an ETF's issuer, authorised participants control the supply of ETF shares on the market.

  • Average Spread (%, $)

    The Average Spread is the difference between the quoted bid and quoted ask price of an ETF averaged over a given time period. It is an indication of the liquidity of the fund and can be expressed in either absolute dollar terms or as a percentage of the price.

B

  • Backwardation

    The opposite of contango, backwardation occurs when the futures price of a commodity is lower than its expected future spot price. The futures curve for a commodity in backwardation is usually downward sloping. The practical implication for an ETF tracking a commodity that is in backwardation is positive yield from rolling futures contracts.

  • Basic Materials

    Basic Materials is an economic sector and includes companies in the business of chemicals, metals & mining and paper products. Such firms often produce inputs and raw goods for other businesses outside the sector.

  • Basis Points

    A basis point (or bp, pronounced \"bip\") is 1/100 of a percent. For example, a gain of 1.5% is a gain of 150 basis points.

  • Behavioral Finance

    A branch of financial theory which seeks to identify systematic inefficiencies resulting from cases where investor behavior deviates from the rational actor model. Investors are thought to behave irrationally in predictable ways, such as paying too much attention to recent information or ignoring information that doesn't coalesce with an investment thesis.

  • Beta

    Beta is a measure of price volatility based on how a security’s price changes in relation to the overall market. A beta of one indicates the security moves in step with the market, while a beta greater than 1 indicates that, given a move in the market, the price change in the security should exceed that of the broader market. Beta is only a relevant statistic for highly correlated securities, usually measured by R2.

  • Bid Ask Sread

    For ETPs, the spread is the difference between the price a market maker is willing to pay for the ETP and the price at which the market maker is willing to sell it. Lower spreads are beneficial to investors as they can buy and sell closer to actual value instead of buying at a premium and selling at a discount

  • Bid Quote

    The price one would receive for selling an ETF in the market. The difference between the bid and the ask (the price to buy an ETF in the market) is called the spread.

  • BRIC

    An acronym for Brazil, Russia, India, and China. These four economies dominate the emerging markets space.

  • Broker-Dealer

    A broker-dealer is a company that is engaged in securities trading for both its own account and on behalf of its clients. The firm is considered to be a broker when it places trades on behalf of its clients, and is considered to be acting as a dealer when it transacts for its own account.

  • Buy-Write

    Buy-write is a strategy when an investor sells call options on an asset they own. The investor surrenders some up-side potential in exchange for a fee.

  • Buyback

    Buyback is a strategy implemented by corporations where they buy back shares in their own company either on the secondary market, or through a tender offer. It often causes an initial upward movement in the stock's share price because it reduces the number of outstanding shares traded.

C

  • Call Options

    Call options give the owner the right, but not the obligation, to buy a security at a specified time and price. "American" call options allow the holder to exercise the option on or before the expiration date, but "European" option holders can only exercise the option on its expiry date.

  • Capital Appreciation

    An increase in the value of assets from rising market prices. Investors often face a tradeoff between capital appreciation and income: companies that distribute income aren't investing that income in future growth opportunities and, without growth, capital appreciation is likely limited.

  • Capital Gains

    Capital gains are the realised gains from selling an investment at a higher price than was paid for it. Depending on local tax laws, realising capital gains can trigger a tax event. ETFs often avoid realising capital gains by utilising the creation and redemption mechanism.

  • Carbon Credits

    Carbon credits are tradable certificates or permits that allow for the emission of one tonne of carbon dioxide or the carbon dioxide equivalent in other greenhouse gases. Credits are awarded to countries or companies that have reduced their emmisons below their quota either through volantary or regulatory means.

  • Cash Flow Frequency

    Cash flow frequency describes the regularity of cash distributions from an ETF. For example, an ETF with quarterly cash flow frequency distributes dividends (and/or capital gains) every 3 months. It signals to investors how often they should expect to receive distributions from an ETF.

  • CDS

    A credit default swap is an agreement between the buyer and seller of the swap to compensate the buyer should a third party default on its debt. A debt holder might purchase a CDS as protection should a counterparty default.

  • Commission-free

    Commission-free trades are those trades where the client does not pay any fees to the broker for executing the ETP trade. Brokerage firms historically, and still usually charge a fee, or commissions, for executing a trade on behalf of the client.

  • Commodities

    In finance, commodities denotes a specific asset class like equity or fixed income. However, in contrast to equity and fixed income investing, commodity investing involves the trading of basic physical goods such as copper, cotton, oil, or gold, to name a few.

  • Consumer Discretionary

    Consumer Discretionary describes firms whose goods and services are targeted at consumers but do not fall into their essential consumption baskets. Discretionary goods and services include items such as luxury apparel, cars or hotels whose demand is considered to be cyclical in nature and tend to outperform during economic expansions with high rates of employment, and rising disposable incomes or wealth effects.

  • Contango

    Contango describes a state of the futures curve for a commodity when current futures prices are greater than expected future spot prices. A market that is in contango has an upward sloping futures curve. The practical implication for an ETF tracking a good or commodity that is in contango is negative yield from rolling futures contracts.

  • Convertible Debt

    A type of bond that can be coverted into equity or ownership of the company that originally issued the bond.

  • Convexity

    In fixed income investing, convexity measures how duration changes as interest rates change. Duration moves inversely to interest rates, and a high convexity bond will see a greater change in duration than a low convexity bond for a given change in interest rates. Generally, bonds with large coupons have higher convexity.

  • Corporate Debt

    Debt, bonds or notes that are issued by a corporation, as opposed to a municipality or government.

  • Correlation

    Correlation is a statistical measure of how two assets move together in their market performance over time. It ranges from +1 (the two move in lockstep with each other) to -1 (the two move exactly opposite to each other) with a value of 0 indicating the relationship between them is random.

  • Cost of Carry

    Cost of carry refers to the inbedded costs associated with being in a specific investment position. These costs can include interest and dividend payments due to the lender from being short a security, as well as commodity storage and insurance costs.

  • Counterparty

    A counterparty is the party or legal entity on the other side of a transaction. If you buy an ETN, the counterparty to the buyer is the issuer that promises to pay the index's return. Synthetically replicated ETPs also bear varying levels of counterparty risk.

  • Counterparty Risk

    The risk that the party on the other side of an agreement does not follow through on their commitment. In the world of exchange-traded products, counterparty risk is particularly salient with swap agreements, ETNs, and securities lending.

  • Country Indices

    Indices that systematically measure and track the value of the companies based in or operating within a particular country. Selection and weighting schemes can vary between country indices.

  • Country Rotation

    A strategy that seeks to identify the countries most likely to benefit from current macroeconomic conditions.

  • Covered Call

    A situation where the writer of a call option owns the underyling security. This reduces risk for the writer, who cannot lose more than the amount paid for the security. Covered calls are sometimes used to generate additional income from an investment by giving up potential capital gains.

  • Creation fee

    A creation fee is the price charged by ETF issuers to authorised participants (APs) to create a unit of ETF shares. The creation process is a crucial element of the plumbing that keeps ETFs trading in line with their actual value; higher creation fees increase friction within the creation process and have an adverse effect on general liquidity.

  • Creation Mechanism

    The process by which an authorised participant (AP) creates new shares of an ETF by delivering its underlying basket/cash to the ETF Issuer in exchange for new shares, or vice versa in the case of a redemption.

  • Creation Unit

    A creation unit is the number of shares that an authorised participant (AP) will receive in exchange for a creation basket. If the AP is redeeming shares, a creation unit is the number of shares that must be deposited to receive the redemption basket.

  • Credit Rating

    A credit rating is an indication of a rating agency's opinion of a borrower's ability to pay back its debt. The rating may be either the result of a quantitative model, or an expression of the agency's analysis based on financial, business, and accounting data. The higher the rating, the lower the likelihood of default. Credit ratings are commonly used to segment the fixed-income market into \"investment grade\" and \"high yield\".

  • Credit Risk

    Credit risk is the risk that a counterparty defaults on its obligations. In ETPs, this applies to sythentically replicated ETFs, ETNs and Fixed Income funds where investor returns rely on the credit worthiness of the fund's issuer (ETNs) or the issuer of the underlying holdings.

  • Credit Spread Duration

    Credit spread duration measures a security's sensitivity to changes in the yield spread between corporate securities and a higher quality benchmark. The exact number is the expected percentage change in the security's price given a 100 bp change in the relevant spread.

  • Currency Risk

    Currency risk describes the additional risk that currencies add to a portfolio. For example, a UK investor that owns shares of American companies must buy and sell the stock in US dollars. Consequently, the investor is subject not only to the risk that the stocks depreciate but also to the risk that the US dollar depreciates.

  • Currency-hedged

    Currency-hedged ETPs neutralize the currency exposure of the underlying securities versus the fund's listing currency by using forward and futures currency contracts. This strategy can be useful for international funds where the listing currency is different from the fund's base currency, and thus, the fund is exposed to currency cross fluctuations.

  • Cyclical

    Investments that are highly correlated to the economic cycle. Cyclical investments tend to outperform during economic expansions and underperfom during contractions.

D

  • Decay

    Decay in an ETP measures the inbedded costs associated with rolling over futures contracts over a specific period of time. If the next contract is trading at a higher price (a situation referred to as contango), there is a cost associated with \"paying up\" for rolling into that contract, which negatively affects an ETPs returns over time.

  • Decay-to-Front

    Decay-to-front measures the price difference between the price of a futures contract and the current front-month futures price for the commodity. Decay-to-front shows the expected cost (appreciation or depreciation) of rolling a futures contract forward, a common technique in commodities ETPs.

  • Defensive

    A categorization of sectors or companies that ought to outperform during economic downturns. Defensive sectors and companies usually have stable cash flows and current valuations that do not necessitate future growth.

  • Deflation

    A decline in prices or assets that is typically driven by a scarcity of money.

  • Depository Receipt

    Depository Receipts are one way for domestic investors to invest in foreign stocks. A Depository Receipt is a receipt at a local financial institution for shares in a foreign stock. Investors in Depository Receipts are fully exposed to the underlying currency risk just as if they owned the foreign shares.

  • Developed Markets

    Developed Markets are countries with a high level of income per capita, widely built-out infrastructure and a sophisticated financial system with robust capital markets. Major examples are the US, the European Union and Japan. These markets function under a well-established rule of law with strong private property protections.

  • Discount

    The term discount is used when a fund's current share price is below its NAV (net asset value). Discounts can arise for a few reasons, some artificial and some real. True discounts of any significant size are usually arbitraged away by authorised participants in the create and redeem process.

  • Distributions

    Distributions are cash payments that are distributed to shareholders of ETPs which are usually from dividends or interest payments generated from the ETP's underlying securities, or from capital gains made in the fund. Distributions are usually made monthly, quarterly, semi-annually or annually.

  • Diversification

    Diversification is a broad term that describes the general process of reducing risk by holding many securities with different characteristics. By owning many different types of investments, the probability of worst-case scenarios (losing all your money) is greatly reduced.

  • Dividend

    Dividend is the portion of a company’s earnings paid out to its equity holders. The actual amount is at the discretion of the Board of Directors (except in the case of preferred stock) and can vary depending on the growth stage of the company, its available investment opportunities and other factors.

  • Dividend Weighted

    A portfolio that weights constituents by the sum of all dividends paid. Dividend weighting is a form of fundamental indexing, which seeks to weight stocks based on fundamental economic strengths rather than market value. Dividend-weighted portfolios tend to take on the characteristics of \"value investing\" as young growth companies are relatively underrepresented in comparison to a plain vanilla strategy.

  • Dividend Yield

    A fund's total annual dividend payout, as a percentage of its share price. For equity securities, dividend yield is a component, along with capital gains,of total return.

  • Down Beta

    The beta of a fund relative to a benchmark for days when the benchmark experiences negative returns. For an investor with a long position it would be ideal if 'Down Beta' were less than 'Up Beta' which would indicate that the security consistently outperforms the market.

  • Duration

    Duration is a measure of the sensitivity of a bond to changes in interest rates. The exact number reflects the expected change in the price of a bond given a 100bp parallel shift in the interest rate curve. The statistic can also be used for a portfolio of bonds, such as a fixed income ETF.

E

  • Effective Duration

    A measure of interest rate risk. It estimates a change in value to the portfolio based on a 1% parallel shift in the yield curve. Effective duration accounts for the bond's coupons as well as any embedded options (such as call options).

  • EMEA

    EMEA is an acronym that stands for Europe, Middle East and Africa. There are indices based on this theme, and they usually consist of emerging market companies from Europe, such as Hungary, Poland and Czech Republic, along with companies from the Middle East and the African continent.

  • Emerging Markets

    Emerging markets are countries whose economies are developing characteristics of a modern financial market such as organized exchanges, more liquid equity markets, and more established sovereign debt. In general, amerging markets countries are considered more risky than developed markets and less risky than frontier markets

  • Equal Weighting

    Equal weighting is a type of index weighting scheme in which all consituents in the index are weighted equally, and usually rebalanced periodically to maintain that equal weighting balance. Equal-weighted indices tend to tilt smaller in weighted average market cap since small-caps get the same weighting as large-caps.

  • Equity

    From the investor’s perspective, equity is an ownership stake in a firm. Shares of a firm’s stock is equity that’s publicly traded. The accounting equation “Assets – Liabilities = Equity” conveys that idea that equity holders have a claim on whatever’s left over after a firm pays all its bills—the net long term profits in other words.

  • Equity Income

    Equity Income refers to a strategy that uses stock dividends rather than bond coupon payment to produce consistent cash flows. Such strategies are especially popular when bond yields are low.

  • ETC

    ETC usually denotes exchange-traded commodities but can also represent exchange-traded currencies. ETCs fit under the broader umbrella term of ETPs, or exchange-traded products.

  • ETF

    ETF stands for exchange traded fund. Like a mutual fund, an ETF is a portfolio of securities (or offers exposure to a portfolio of securities). Unlike a mutual fund, an ETF can be bought and sold throughout the day. ETFs offer more transparency and some tax advantages over mutual funds.

  • ETN

    An ETN is a bank note that trades on an exchange; in exchange for cash the ETN issuer, which is usually a large investment bank, offers investors the returns of an index. Credit risk is significantly greater for ETNs than for other ETP structures as the promise to pay the returns of an index is only as good as the underwriter's ability to pay, meaning that credit risk can be a significant factor for ETNs,

  • ETP

    ETP stands for exchange traded product. This umbrella term includes ETFs, ETNs, and exchange traded commodities (ETCs)

  • ETV

    Exchange Traded Vehicle, an umbrella term for ETFs, ETNs, and ETCs. Synonymous with Exchange Traded Product or ETP.

  • Ex-Div Date

    The ex-div date is the first day that an ETF trades without an announced dividend. Investors that buy an ETF on or after its ex-div date will not receive the ETF's next dividend distribution.

  • Exchange

    An exchange is a central marketplace, either physical or electronic, where a secutiy is traded. An advantage of centralising trading is that a single price can be distributed to all market participants. Examples include the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE).

  • Expense Ratio

    The expense ratio of a fund or ETF is the rate charged each fiscal year for the costs of managing and administering that fund. Expense ratios are stated on an annual basis but deducted from NAV daily. Expense ratio is the single greatest indicator of future tracking difference.

  • Extended Market

    A portfolio that combines midcaps and small-caps. Extended market funds are often used to \"complete\" a portfolio that tracks a popular large-cap index, such as the S&P 500.

F

  • Fair Value

    An ETF’s fair value refers to the weighted average value of the stocks, bonds or other assets in its underlying portfolio. It is supposed to represent the going for a security, or group of securities and could be estimated or based on recent transactions. A fund’s Net Asset Value is one measure of fair value. In most cases, arbitrage keeps an ETF’s market price extremely close to its fair value.

  • Fixed Income

    Fixed Income is an asset class that deals exclusively in bond investments. The term stems from bonds themselves which have fixed coupon payments (income). Fixed income includes corporate debt, domestic debt and even consumer debt. Bonds are backed by the general credit worthiness of their issuer. They are usually considered lower risk, lower reward investments than equities.

  • Floating Rate

    Floating Rate refers to the yield on a fixed income security that is reset periodically. Floating rate bonds will typically have a yield with a specific spread to a reference interest rate, like LIBOR, that is adjusted weekly or monthly.

  • Forward

    A forward contract is a derivative security that allows the purchaser to lock in a future price of an asset. For example, a forward contract on Euros for a British investor would lock them into a specific exchange rate for buying Euros using Pounds at some future date. Forwards are typically used by multinational companies to hedge the currency risk of future cash flows.

  • Front-Month

    Front-month refers to the nearest futures contract that is available. In the context of investment strategies that rely on futures contracts to get their exposure, front month means that the strategy rolls its exposure from the current expiring contract to the next front month contract. In contrast, other strategies choose contracts farther out on the futures curve.

  • Frontier Markets

    Frontier Markets are countries with nascent economic and financial systems. Frontier markets are also generally considered to bear greater political risk and are generally less advanced than emerging markets and significantly lag developed markets. They generally exhibit higher volatility as risk appetite can shift quickly causing significant capital flow risk.

  • Fund Flows

    Fund flows are the net amount of money going in or out of a fund for any given time period. Each day’s flows are calculated as (Day2’s Shares Outstanding – Day1’s Shares Outstanding)*Day2’s Closing NAV. Those figures are then summed to give the net flows for a given period.

  • Fundamental Analysis

    Fundamental analysis focuses on the factors that affect the intrinsic value of a company such as financial statement results, marketplace analysis and competitive positioning. In contrast, technical analysis focuses on price and volume movements in a company's equity to determine buyng and selling opportunities.

  • Fundamental Weighting

    An index whose components are weighted based on fundamental factors such as price ratios or dividend yield as opposed to basic market capitalization. Fundamental weighting focuses on real operating results and attempts to remove price from the weighting equation so that the fund doesn't buy securities simply because they are more expense (a primary feature of market capitalisation weighting)

  • Futures

    A contract to buy or sell a good at a pre-specified price on a future date. Futures contracts benefit both the producers and consumers of commodities and other goods as it allows them to lock-in a price and focus efforts and resources on planning.

G

  • Global Macro

    Global Macro refers to an investment approach with a very broad mandate. Based on the manager's macroeconomic outlook, a Global Macro Fund might invest in stocks, bonds or commodities in any corner of the globe.

  • Grains

    Grains are a sub-sector within the agriculture sector, which fall under the commodities umbrella. While there's some subjectivity between index issuers around the exact commodities that make up the grains sector, it usually consists of corn, soybeans and wheat, at a minimum.

  • Growth Investing

    Growth Investing is an investment strategy that emphasizes the selection of companies based on future prospects rather than current reality. Growth companies are usually identified by high valuations (such as a high P/E ratio)

H

  • Hedge Fund

    Hedge funds are pooled investment vehicles that are usually limited to accredited investors. By limiting their clientele, hedge funds circumvent most financial product regulation. As a result, hedge funds can employ a wide variety of investment strategies and risk characteristics and are said to be able to \"go anywhere\" and \"do anything\". In practice, most hedge funds limit their investment objectives to a particular asset class, geographic region, or strategy.

  • Hedge Fund Replication

    Hedge fund replication describes a strategy employed by some exchange-traded products that try to emulate the holdings and performance of hedge funds using publicly available information.

  • High-Yield Bonds

    High-Yield Bonds, also known as junk bonds, are fixed income securities from issuers with a credit rating below BBB- (Fitch and S&P) or Baa3 (Moody's). As a result of their lower credit rating, high-yield issuers pay higher interest rates to borrow cash. The higher interest rates compensate investors for the risk inherent in lending to higher-risk borrowers.

I

  • In Specie

    In the world of exchange-traded products, in-specie refers to the type of creations or redemptions that an ETF issuer is willing to satisfy. An in-specie creation implies that both parties exchange equity shares whereas an in-kind creation implies that one side receives a cash-equivalent of the securities.

  • In-kind

    In the world of exchange-traded products, in-kind refers to the type of creations or redemptions that an ETF issuer is willing to satisfy. An in-specie creation implies that both parties exchange equity shares whereas an in-kind creation implies that one side receives a cash-equivalent of the securities.

  • Inception Date

    The inception date is the date that a fund began its operations.

  • Index Fund

    A fund that seeks to replicate the returns of a rules-based index. An index fund may hold every security in its index, or it may attempt to optimize by holding a limited number of securities while still achieving the same return as the index.

  • Index Methodology

    Index methodology describes the rules by which an ETF’s underlying index selects and weights its securities. For example, an equity index might rely on each firm’s market value of equity to pick the stocks and to allocate to them within the index.

  • Index Provider

    An index provider is a firm that provides or licenses an index to an ETP issuer. The index provider determines the eligible universe of securities, the selection process, and the weighting scheme. The index provider also typically provides index maintenance inlcuding rebalancing. Examples are FTSE, Dow Jones, and STOXX.

  • Index/ETF Arbitrage

    This describes the process by which APs close the gap between the price of the securities held by (or tracked by) an ETP and the price of the ETP. Because all ETPs should trade at a price reflective of their underlying securities minus any trading costs, there is an arbitrage opportunity whenever the price of the ETP strays too far from the price of its reference securities since the AP can simultaneously buy the less expensive security and sell more expensive security.

  • Industrial Metals

    Industrial Metals -also known as base metals- are used in manufacturing and construction activities and include iron, copper, aluminum, zinc, lead etc. Unlike precious metals, their demand is strongly affected by economic activity and their price tends to fluctuate with the business cycle.

  • Inflation

    Inflation measures the rate at which the general price level in an economy is rising. It is the goal of most central banks around the world to keep inflation at a positive but low level - usually around 2% – in order to ensure price stability while at the same time stimulating economic growth.

  • Inflation-Protected Securities

    Inflation-protected securities are fixed income investments that adjust their principal to inflation and deflation in order to deliver a real rate of return.

  • Insider Sentiment

    Insider sentiment describes a strategy whereby a fund uses the transaction activity of company insiders as a signal of future value. For example, an insider sentiment ETF would sell shares of a company if the company's insiders are selling their securities. The idea hinges on the concept that insiders have the greatest information about everything from future prospects to operating efficiency.

  • Interest Rate Risk

    The risk of adverse price effects due to a change in interest rates. Interest rate risk is most commonly measured by effective duration. Interest rate risk is directly related to time to maturity and inversely related to coupon yield.

  • Intermediate-Term

    Intermediate term is typically used in reference to fixed income securities with maturities between those of short and long-term credits, often falling somewhere between 1-10 years. For example, Barclay's considers intermediate term to be 1-10 years, while other index providers may consider it to be 3-7 years.

  • Intraday Indicative Value

    The intraday indicative value is measured by taking real time prices for the underlying securities in an ETF, aggregating them, and dividing them by the ETP's outstanding shares. Since an ETP's net asset value is calculated at the close, the intraday indicative value allows investors trading the ETP during market hours to gauge what its true fair value is.

  • Inverse

    Inverse is a classification for ETFs that attempt to provide the opposite returns of an index. For example, an inverse FTSE 100 ETF attempts to provide a return of +2% on days when the FTSE 100 falls 2%.

  • IPO

    An Initial Public Offering (IPO) is the first sale of stock to the general public by a previously private firm. In an IPO shares are first purchased by an investment banker then sold at an intial price to the public via a stock exchange.

  • Issuer

    The term 'issuer' refers to the issuing entity of any security. In regards to ETFs, an issuer is the company that produces and, oftentimes, manages an ETF. BlackRock, for example, issues ETFs as well as other securities.

J

  • Junk Bonds

    Junk bonds, also known as high-yield bonds, are fixed income instruments rated by a ratings agency as below \"investment-grade\". For S&P and Fitch anything below BBB- (Baa3 for Moody's) is considered high-yield. Their lower credit ratings indicate that they bear higher risk but also offer greater reward.

K

  • Key-Rate-Duration

    A specific measure of interest rate sensitivity that measures the percentage change in price for a bond or portfolio of bonds resulting from a 100bp change in the yield on a specific benchmark maturity such as 5 year or 10 year Treasury bonds. The 5-year key rate duration of a bond or portfolio measures the change in the price of that bond or portfolio given a 100 bp change in 5-year Treasury rates.

L

  • Large-Cap

    Large-Cap refers to publicly traded companies with a market capitalization of usually 10 billion or more. These companies play a central role in the economy, are widely followed by analysts and their stocks are very liquid.

  • Leverage Reset

    This occurs when a leveraged or inverse fund rebalances its holdings to maintain its headline leverage ratio. Most funds reset leverage daily, but some funds reset at longer intervals, when a leverage threshold is met, or not at all. Holding a fund through a leverage reset means an investor's effective leverage will vary from the headline ratio.

  • Leveraged

    Leveraged funds are those that promise multiples of an index's daily return on a daily basis. For example a 3x leveraged fund tracking the S&P 500 promises investors 3 times the daily return of that index each day. Over periods longer than a day, however, realised leverage results are unlikely to reflect advertised leverage.

  • Limit Order

    Limit Order is a contingent order to buy or sell a security in the market at a specified price or better – at the limit or lower for buy limit orders and at the limit or higher for sell limit orders. Transactions for thinly traded ETFs with large bid/ask spreads should be executed using limit orders close to their NAV to minimize costs.

  • Liquidity

    The ease (speed and price) with which an asset can be bought or sold. Highly liquid assets can be bought and sold quickly with minimal impact on price. In contrast, it may be challenging to find a buyer or seller of an illiquid asset and, additionally, a purchase or sale could distort the current price unfavorably.

  • Local Currency Bond

    A local currency bond is an internationally issued bond that is denominated in the local currency. Local currency bonds bear currency risk in addition to credit and interest rate risk.

  • Long

    To be 'long' is to take a position of ownership in a security or market. Investors with a long position in an asset benefit from price increases and dividends.

  • Long/Short

    Long/short is a type of strategy implemented by certain funds, whereby the manager has the capacity to go long equities, as well as short them in an attempt to maximize total returns in various market conditions.

M

  • Macroeconomics

    Macroeconomics is a branch of the economics field focused on the study and explanation of how an economy works as a whole. It explores the relationships between economic growth, employment and inflation. Macroeconomic models are frequently used to set appropriate monetary and fiscal policy.

  • Managed Futures

    Refers to a pooled investment fund whose strategy is to trade futures contracts to capitalise on inefficiencies and opportunities in the futures curve.

  • Management Fees

    ETF issuers charge management fees to cover the costs of managing the fund. The management fee is often but not always equal to the total expense ratio, which might include additional charges such as acquired fund fees. Management fees are typically deducted on a daily basis from the returns of the fund; therefore the Net Asset Value reflects this deduction.

  • Market Depth

    Market depth is a measure of liquidity and refers to the size of an order needed to move the market. Funds with deep markets are easily tradable and investors can buy or sell in large quantities without causing adverse price movements.

  • Market Impact

    The price effect of a trade. Trading a large number of shares of a thinly traded security can have a significant adverse effect (market impact) on the price of that security. In the world of exchange-traded products this problem can manifest itself with ETFs that track thinly traded markets: If an investor sells millions worth of an ETF that tracks Vietnamese securities (a thin market) it could significantly depress the price of those Vietnamese securities as the trade is being executed.

  • Market Maker

    Market Makers facilitate trading and liquidity in all exchange traded securities, including ETPs. In exchange for providing liquidity to investors, market makers attempt to acquire shares at a lower price (bid) than they sell shares (ask). The difference between the bid and ask is known as the spread.

  • Market Neutral

    A fund or portfolio manager is said to be market neutral when the value of their long positions is the same as the value of their short positions so, theoretically, they're indifferent to which direction the market moves and can profit in both rising and falling markets because of superior security selection.

  • MBS

    An MBS, or mortgage-backed security, is a structured investment vehicle backed by mortgages. The basic idea is that downside and upside are relatively easier to assess across a large basket of mortgages than for any individual mortgage. Some ETFs hold many mortgage backed securities to provide further diversification

  • Mean-reverting

    A behavioral characteristic which suggests that movements away from a central average are unlikely to be sustained over time and, instead, will revert toward their mean.

  • Median Daily Volume

    Median Daily Volume is the middle numerical value of shares traded on any given day. Unlike an average, which can be distorted by a few large or small trades, the median daily volume conveys the size of trades that occur most frequently.

  • Merger Arbitrage

    An investment strategy that seeks to benefit from mergers and acquisitions. Traditional positioning is to go long the acquiree and short the acquired. The strategy is largely an offshoot of the winners curse theory that the acquirer usually overpays for their target company.

  • Micro-cap

    The term micro-cap refers to companies with lower market capitalisations than small-cap companies. Various classification services and index providers use different cutoffs to denote a \"micro-cap\" company. In general, though, micro-cap companies have a market capitalisation less than $600 million. As the smallest companies in the equity universe, they are generally considered riskier investments than larger companies.

  • Microeconomics

    The branch of economics that focuses on the supply and demand factors that influence individual households, individual companies, and individual markets.

  • Midcap

    The term midcap refers to companies with \"middle\" market capitalisations. Various classification services and index providers use different cutoffs to denote a \"midcap\" company. In general, though, their market capitalisation is between approximately $2 billion and approximately $13 billion in market capitalisation. Midcap companies are generally considered to be riskier than their large-cap counterparts but less risky than small-caps.

  • MLP

    A master limited partnership (MLP) is a publicly traded limited partnership that derives nearly all of its revenue from energy commodities and related infrastructure. MLPs utilize a tax-advantaged legal structure intended to facilitate long-term investment in energy and infrastructure developments. MLPs are able make return of capital distributions without triggering tax events for the limited partner.

  • Momentum

    The idea that existing trends are more likely to continue than to reverse. For example, a fund trading upwards for the three hours before close that then spikes sharply at the close would be said to have upward momentum.

  • Money-Market Funds

    A money market fund holds very high quality debt with very short maturities (no more than 13 months, or 60 days average maturity). Money market funds are generally seen as a safe place to park cash in the short term.

  • Municipal Debt

    Municipal Debt (Or “Muni Bonds”) refers to bonds issued by state and local governments in the United States. They are usually issued to finance a public project. The most noteworthy characteristic of Muni Bonds is their Federal tax exemption.

N

  • Near-month

    Near-month or Front-month is the futures contract currently trading that is nearest to expiration. Different futures contracts and commodities have different terms so in mid-February the near-month contract for Brent crude may be a March contract while the near-month contract for sugar may be August.

  • Net Asset Value

    Net Asset Value or NAV is a measure of an ETF’s fair value on a per share basis. It’s derived from the sum of the market value of the ETF’s portfolio stocks plus cash and less expenses, divided by the number of ETF shares outstanding.

O

  • Open-end Funds

    Open-end funds include any collective investment vehicle for which shares can be created or eliminated as necessary. In contrast, closed-end funds have a fixed supply of shares reducing their ability to adjust to changes in demand. Typically, open-end investorscan add or remove capital at any time, including ETFs and traditional mutual funds whereas closed-end fund investors cannot withdraw capital until the fund is liquidated.

  • Optimized (futures selection)

    A strategy for selecting futures contracts dynamically based on the current state of the futures curve. Most optimized strategies try to maximize roll-yield by avoiding contango in favor of backwardation.

  • Optimized (index tracking)

    Refers to an index fund or ETP that samples holdings from an index rather than fully replicating the full list of index consituents. For example, an ETP may hold the 200 bonds it feels are most representative of a 1,000-holding fixed income index, with the goal being to replicate the index's returns without absorbing the full cost of owning all of the securities in the index.

  • Overlay Strategy

    A complement or addition to a principal investment strategy. For example, a gold investor may sell covered calls to generate additional income. The covered calls are considered an 'overlay' as they don't supplant the original investment.

P

  • P/B

    P/B is shorthand for \"Price-to-Book Ratio\", which is a company's, or fund's, price per share divided by its net assets per share. Said differently, it's the price investors are currently paying per pound of net assets on the company's balance sheet. It is used as an indicator of how richly investors value the future prospects of the company relative to its current assets.

  • P/E

    P/E is the ratio of a stock’s market price to its earnings per share. The concept can also be applied to an equity ETF where its price is divided by the total earnings per share of its underlying components.

  • Physically Held

    A commodity which is held directly by a fund or individual investor in its physical form or equivalent (eg, a warehouse receipt), rather than in a derivative form such as a futures contract. Physically held commodities are generally non-perishable metals, such as gold.

  • Pooled Investment

    An investment vehicle which aggregates the capital of multiple investors. Pooled investments allow smaller investors to achieve economies of scale and diversify risk. Examples include ETFs, traditional mutual funds, closed-end funds, REITs, pension funds, and hedge funds.

  • Portfolio Disclosure

    Portfolio disclosure refers to issuers publishing the exact make up of their funds' holdings. Some issuers provide investors with all holdings with weightings including cash on a daily basis, while others may provide quarterly data.

  • Precious Metals

    Precious metals are naturally occurring metals that are considered rare and are traded as commodities. There are exchange traded products listed on the London Stock Exchange that provide exposure to gold, silver, platinum, and palladium.

  • Preferred Securities

    Preferred securities are a separate share class of stock from common stock, with separate liquidity pool and share price. Preferred shares usually have no voting rights and a fixed dividend amount, which gets paid out before common stock. Preferred stock is also considered senior to common stock in the case of a company liquidation.

  • Premium

    ETFs trade at a premium when shares trade at a price that is greater than their NAV. When an ETF is trading at a premium, investors are theoretically paying more for a security than its actually worth. However, premiums can arise for a few reasons some artificial and some real. Premiums can appear in thinly traded ETFs, in ETFs that are halted for creations or redemptions, and in ETFs with stale NAVs. To avoid paying a premium when trading ETFs, set limit orders near NAV.

  • Price Discovery

    Price discovery is the mechanism or vehicle that is used to determine the true market price of securities. If an ETP's NAV is stale and the underlying shares are not being traded, the price of the ETP can at times be used as a price discovery mechanism for the underlying shares based on current market conditions.

  • Primary Market

    For ETFs, the primary market is where ETF shares are created and redeemed. Authorised Participants in this market deliver shares of underlying securities to the ETF issuer and receive ETF shares in return. The opposite happens when ETF shares are redeemed. In contrast, the secondary market is where buyers and sellers trade shares of the ETF itself.

  • Private Equity

    Company equity that is not publicly listed. Whereas investors trade public equity between each other, private equity usually requires a direct transaction with the company. Because of high capital requirements, private equity investments are usually conducted through pooled structures, many of which charge significant fees for participation.

  • Prospectus

    A legal document that discloses and details the investment strategy, costs and risks of a financial security for investors.

  • Protective Put

    A protective put is an options overlay strategy made up of a long position in an asset and a long put option on the same asset. The put option protects the investor from price drops in the asset, while the long asset position maintains the upside. The investor must pay for the put option however.

  • Put Options

    A put option is a contract giving the holder of the option the right, but not the obligation, to sell a security at a specific price (the \"strike price), for a specified amount of time. A put option places a lower bound on the selling price of a security with the basic idea being that investors pay a fee to protect their downside but retain the upside potential of owning the security.

Q

  • Qualified Foreign Institutional Investor (QFII)

    Few investors can directly access the stock markets in mainland China, unlike exchanges in London or New York. Qualified Foreign Institutional Investor status allows an investor—typically a large institution—to directly buy and sell stocks (so-called “A-shares”) in mainland China. Investors without QFII status must rely on swaps or other means for access to these markets.

  • Quant-Model

    An investing strategy that relies on complex mathematical and statistical techniques to model the market environment.

R

  • R2

    R2 is a measure of how accurately a fund tracks its index or benchmark, measured between 0 and 1. If a fund's R2 is 1, every movement, or lack thereof, may be explained by movements of the index, and vice versa.

  • Rebalancing Frequency

    ETFs reset their exposure to their underlying indices at regular intervals such as monthly or quarterly. This interval is the rebalancing frequency. The same idea applies to indices, which rebalance or reset according to their rules on a set schedule.

  • Redemption Mechanism

    The redemption mechanism is the process by which an Authorised Participant delivers shares of the ETP to the issuer in exchange for the basket of underlying securities. The process is akin to decreasing the number of shares outstanding for the ETP.

  • Renminbi

    The currency of the People’s Republic of China issued by the People's Bank of China. The yuan is the unit of this currency.

  • Revenue Weighting

    Revenue weighting uses top-line revenues as the primary factor for determining the relative size of holdings in a portfolio. Companies are weighted according to their individual contribution to the aggregate revenue of all portfolio holdings. The idea is to focus on company fundamentals rather than market price, a primary factor in market capitalisation weighting schemes.

  • Roll Yield

    Some ETFs use futures contracts for exposure to certain assets. As futures contracts approach expiration, the fund must repeatedly settle old contracts and enter new ones to maintain the desired exposure. The resulting gain or loss from selling old contracts and buying new contracts is known as the roll yield—separate from what investors earn on the underlying asset itself.

S

  • Sampling

    Sampling, or optimization, is a strategy implemented by many physically-replicating ETPs whereby the fund manager doesn't fully replicate the index. Instead the manager takes a sampling approach, holding only certain securities in the index that are deemed necessary to track the index efficiently.

  • Secondary Market

    The secondary market is often referred to as the public market. This is the medium where securities are resold after issuance. For example, the secondary market for an ETP is the exchange where its shares are listed after they have been created, the stock exchange is the secondary market for stocks after they IPO and the OTC market is the secondary market for bonds after they have been issued to primary dealers.

  • Sector

    Sectors are subdivisions of the wider economy that group businesses according to a shared commonality such as products or services offered. Because the companies within a sector have similar businesses they're often affected by the same macroeconomic factors. Global Industry Classification Standards denotes 10 sectors: energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, information technology, telecommunications, and utilities.

  • Sector Indices

    Sector indices are indices that focus a specific sector of the economy, such as energy, financials, health care, or utilities. Most equity indices target a specific size of the market-cap or specific sectors of the economy.

  • Sector Rotation

    An investment strategy that attempts to identify the equity sectors that will outperform based on current valuations or based on the current stage of the economic cycle.

  • Securities Lending

    The managers of an ETF may generate extra revenue by lending out portfolio securities to fee-paying borrowers. The borrowers typically provide collateral, which greatly reduces the risk of the transaction. Some ETF issuers return all net proceeds to the fund while others keep a portion for themselves.

  • Selection Criteria

    A set of rules that govern how an index provider selects constituent securities for an index. The most common selection criteria for ETPs is market capitalisation; that is, most indices first pick the largest companies then determine the relative size (weighting) of each within the portfolio.

  • Senior Loans

    Senior loans are floating rate, non-investment grade debt instruments, typically issued by financial institutions to corporations. “Senior” means the creditors stand at the front of the line in case of default by the borrower, but the debt is still below investment grade. Senior loans typically carry high credit risk but low interest rate risk due to their floating rates.

  • Settlement Failure

    Settlement failure occurs when one of the two parties involved in a trade fails to deliver on their end of the trade by settlement date. Most trades settle in 3 days, and a settlement failure can occur if either the buyer fails to deliver the cash, or the seller fails to deliver the shares by the settlement date.

  • Shareholder

    A person who owns a share of a company's stock, and therefore owns part of the company. Shareholders are granted rights, such as selling their shares, voting, claiming dividends, and a right to the value of the remaining assets in the event of a liquidation.

  • Shares Outstanding

    This is the number of shares of an ETF or stock that have been issued. In the case of an ETP it describes the number of shares that have been created to date.

  • Short

    Short - Being ‘short’ in financial markets context means taking the reverse position of owning a security. Those who are short benefit when the price of that security drops and lose when the price increases. An ETF that is short a certain segment of the market is called an inverse ETF.

  • Short-term

    Short-term refers to the targeted maturity of the underlying securities in a fixed income ETP. Short-term bonds usually mature in 1-3 years from now, although the exact cutoff between the various maturities is subjective with different issuers.

  • Size & Style

    Size & Style are ways in which ETFs are frequently categorized. Style refers to a focus on particular fundamental characteristics of the securities included - i.e. growth vs. value stock funds. On the other hand, size refers to the average market capitalization of the selected securities – large cap vs. small cap stock funds.

  • Slippage

    The difference between a desired outcome and a realised outcome. Slippage can arise from many sources, some of the most common are delays in executing trades and, for ETFs, optimized replication as opposed to full replication.

  • Small-Cap

    The term small-cap refers to companies with \"small\" market capitalizations. Various classification services and index providers use different cutoffs to denote a \"small-cap\" company. In general, though, their market capitalisation is between approximately $500 million and approximately $2.5 billion in market capitalisation. Small-cap companies are generally considered to be riskier than large-cap companies.

  • Softs

    A sub-category of commodities that is defined differently across the financial industry. In general, softs typically exclude commodities that are mined or drilled. That is, softs are non-metal, non-energy commodities such as cotton, wheat, and cocoa.

  • Sovereign bonds

    Bonds issued by a national government that are denominated in a foreign currency.

  • Standard Deviation

    In finance, standard deviation is a measure of volatility. Standard deviation gauges the frequency and degree of deviations away from an average value.

  • Staples

    Staples is short for consumer staples and describes products or services that are relatively inelastic to changes in economic conditions. That is, consumer staples are the goods that consumers tend to purchase regardless of the current stage of the economic cycle. Healthcare and food products are generally considered to be consumer staples.

  • Statement of Additional Information

    The Statement of Additional Information, also known as the SAI, is meant to be a supplement to the prospectus, and includes additional information about the fund, including its description, investment strategies, management, proxy voting policies, taxation, and sometimes even the index descriptions, depending on the issuer.

  • Stop Order

    An order on the secondary market to buy or sell a security when its price reaches a certain level. Stop orders are typically executed to limit an investor's loss or to guarantee profit. When the level on the security is reached, the stop order becomes a market order, and is filled immediately at the best price.

  • Strategic Allocation

    Investors make strategic allocations to various asset classes and securities in those asset classes based on their long term investment needs. Investors can use ETFs to make strategic allocations to broad asset classes like domestic equities or corporate bonds. In contrast a tactical allocation aims to gain from short term market conditions or trends.

  • Swap

    A swap is a financial agreement between two parties to exchange sets of cash flows. Often one or both parties receive a set of returns based on a financial index. The swap’s cash value at the outset is typically zero, and returns are paid out (or netted) per the swap’s terms.

  • Synthetic ETF

    A type of exchange-traded product that gains its underlying exposure using total return swaps rather than taking physical ownership of the underlying securities. Syntehtic ETFs tend to be less volatile and have lower tracking difference than their physically-replicated counterparts but also have greater counterparty risk than physically replicated ETFs.

T

  • Tactical Allocation

    A tactical asset allocation strategy attempts to outperform by shifting capital between different asset classes or categories to take advantage of market conditions. These strategies may be actively managed or rules-based. Tactical allocation is often used in conjunction with strategic allocation with the former indicating short-term positioning and the latter indicating long-term positioning

  • Target Date

    A type of fund or portfolio that has a specific date at which it will terminate or begin unwinding its exposure. Target date maturity bond funds have a specific maturity target and will hold bonds that expire on or around that date. For example, a 2022 target date bond fund would hold bonds with effective maturities in 2022. Investors often use these to match expected cash flow needs such as retirement, for example.

  • Ticker

    Tickers are unique identifiers of securities that can range from one to four letters and numbers, depending on where the security is traded.

  • Total Market

    Total Market usually describes a strategy that tries to capture the returns of the broad market rather than a specific size or sector subdivision of the market. For example, while a large-cap strategy ignores those companies with market capitalisations below £10 billion a total market strategy would include exposure to the smaller companies as well.

  • Tracking Difference

    Tracking difference is the difference in performance between an ETF’s NAV and its underlying index. Tracking difference reflects an ETF’s success in tracking its underlying index and, as such, reflects the aggregate effect of the full range of discretionary management decisions including total expense ratio, securities lending, and optimization.

  • Transparency

    ETF proponents cite transparency as a key advantage over mutual funds. Most ETFs disclose their holdings on a daily basis, while mutual funds disclose their positions quarterly, and on a lagged basis. Transparency can also refer to a rules-based investment approach as opposed to an opaque strategy where the rules for security selection or weighting aren’t clear.

  • Treasuries

    Treasuries is short for US Treasury bills, notes and bonds. These debt instruments can vary in maturity from 30 days to 30 years, are issued by the Treasury department and are backed by the full faith and credit of the United States Government. They are among the most liquid securities in the world and are considered free of credit risk.

  • Treasury Curve

    The Treasury Curve is a mapping of the yield of U.S. Government securities over various maturities. Mapped on a timeline, the series of yields appears as a line, or curve. For example, a normal treasury curve has yields that increase with maturity. That is, for a normal US treasury curve, the yield on US treasury securities maturing in 3-months is less than the yield on US treasury securities maturing in 2-years and so-on and so-forth. The yield curve can, however, be inverted or flat as well.

  • Trend-Following

    Trend-following is a type of investment strategy implemented by usually short-term technical analysts. Instead of looking at a company's fundamentals, trend-following involves following certain technical trends in the market or stock, such as momentum and price movements. Trend-following is more widely used by short-term traders, rather than long-term investors.

U

  • Ultra Short-term

    A segment of the maturity spectrum that denotes bonds maturing in less than 1 year. A fund that holds multiple bonds may be classified as ultra short-term when its weighted average maturity is less than 1 year. Ultra short-term bonds are generally considered less risky than longer-term bonds as they have lower interest rate risk and, because of the shorter timeframe, also usually bear less credit risk.

  • Underlying Index

    ETFs attempt to replicate the performance of their underlying index. Said differently, an underlying index is the benchmark against which an ETF's holdings and performance are compared.

  • Underlying Securities

    The securities held by a fund. Any ETF can be exchanged for it's underlying securities in creation unit sized blocks. Each share of an ETF represents a claim of ownership on the fund's underlying securities.

  • Underlying Volume

    The volume of the securities within a fund or portfolio as opposed to the volume of the fund or portfolio itself. For example, an ETF might be relatively illiquid, implying that few shares of the ETF are traded daily, but underlying volume could be very strong, implying that the securities contained within the fund or portfolio are heavily traded.

  • Unit Investment Trust

    Unit Investment Trusts (UITs) are US listed ETFs with passive portfolios that are governed by the Investment Company Act of 1940 and must file for exemptive relief from the SEC.

  • Up Beta

    The comparison of a fund's performance relative to the market on days when the market is up. For example, an up Beta of 1.05 to the Euro STOXX 50 would indicate that on days that the Euro STOXX has gains, the fund tracking that index has gains that are 5% greater than the gains on the index.

V

  • Value Investing

    Value investing is the strategy of purchasing securities that are undervalued by the market in the hopes that their price will eventually reach the intrinsic value perceived by the investor. Typical characteristics of \"value stocks\" include low price ratios (P/E, P/B) and relatively high dividend yields.

  • VIX

    An index that provides a measurement of the market's expected 30-day volatility. It is calculated based on the price and volume of S&P 500 options (call & put) that are bought and sold.

  • Volatility

    A statistical measure of the oscillation of a security's price. It is typically quoted as a percentage, with standard deviation as the most common way of calculating it. In essence, it measures risk. Greater volatility indicates greater price fluctuations

  • Volatility Weighting

    A weighting scheme that emphasises the least-volatile securities in a portfolio. Volatility weighting is used to mitigate large price swings.

  • Volume

    In finance, volume typically refers to the number of shares traded over a given period.

  • Volume-Weighted Average Price (VWAP)

    VWAP is the average price of a security weighted by the volume traded at that price over a given period.

W

  • Weighted Average Credit Rating

    The average credit rating of all debt instruments in a portfolio, weighted by the size of each position in the portfolio. Lower weighted average credit ratings indicate greater risk which is compensated by additional yield.

  • Weighted Average Market Cap

    The average market capitalization of the firms in the portfolio based on each firm’s weighting in the portfolio. The formula is to simply add the product of each firm's percentage weighting in the portfolio or index multiplied by its market capitalization.

  • Weighted average maturity

    Weighted average maturity is a summary statistic for a portfolio of fixed income securities. It takes the maturity of each bond in the portfolio, weights it according to its relative size in the portfolio then averages the results. Practically speaking, weighted average maturity is an indirect indicator of interest rate risk within a portfolio.

  • Weighting Scheme

    A weighting scheme is the method used to determine the weighting or proportion of individual securities in an index or index fund. For example, market cap weighting describes a scheme whereby stocks are weighted by their market capitlization.

Y

  • Yield

    Yield is simply the amount of cash flow generated by a security divided by its price. A dividend yield is the dividend amount divided by the share price, the yield on a bond is simply the annual coupon payment divided by the face value.

  • Yield Curve

    The yield curve is a mapping of the yield of fixed income securities over various maturities. Mapped on a timeline, the series of yields appears as a line or a curve. For example, a normal yield curve increases with maturity. That is, for a normal yield curve, the yield on bonds maturing in 3-months is less than the yield on bonds maturing in 2-years and so-on and so-forth. The yield curve can, however, be inverted or flat as well.

  • Yield-To-Maturity

    Yield-To-Maturity is the expected annual rate of return if a bond is held to its stated maturity. Yield-to-maturity accounts not only for a bond's coupon rate but also its current market price relative to its par value and its remaining time to maturity. In an ETP or portfolio context, it is the YTM of the entire portfolio, as measured by a weighted average of each individual bond's yield-to-maturity.