‘Calendar year returns’
Calendar year returns relate to the performance of an investment from 1 January to 31 December in any given year.
Where a client has purchased units or shares in a fund under advice from a professional adviser, the fund provider is obliged to give the client the right to cancel their investment within 14 days. These rights are outlined in the Notice of Cancellation which will be sent with the contract note.
The lowest bid price allowed for authorised unit trusts under the Financial Conduct Authority's pricing rules. See 'Bid price'.
A capital gain occurs when an investment is sold at a price higher than that originally paid- ie- the investor has made a profit on his/her investment.
‘Capital gains tax (CGT) ’
Individuals are usually required to pay capital gains tax (CGT) on an increase in value that crystalises on a sale of assets. Each UK individual has a personal, annual capital gains allowance, and may be able to claim taper relief depending on how long the asset has been held. Investors should contact their professional advisers for further details of CGT on their own investments. Holding investments within a tax efficient wrapper, such as an Individual Savings Account (ISA), can mitigate against capital gains tax.
If a fund states as its objective 'to seek capital growth', the underlying investments will be those the investment manager believes have the potential to grow in value over time. Conversely, a fund with an objective of paying income is one that seeks to invest in stocks (or other asset types) that pay higher dividend yields.
Capital protection is an investment where the aim is to preserve a specifed amount of the initial investment.
Citywire is an independent financial publishing and data group. Citywire rates qualifying individual fund managers as AAA, AA, A or 'plus', depending on their risk-adjusted performance. Ratings measure both a manager's outperformance against suitable benchmarks and also how much risk the manager took in order to generate the returns. Only a small percentage of fund managers generally qualify for a rating from Citywire. See http://citywire.co.uk/wealth-manager/rated-fund-managers
‘Class R / class I’
Many funds issue different ‘classes’ of units or shares with different charging structures. Most Artemis funds offer two classes: ‘class R’, which has a low minimum investment but a higher annual charge; and ‘class I’, which has a high minimum investment but a lower annual charge.
‘Closed ended fund’
A closed ended fund, such as an investment trust, has a fixed number of shares and is structured in a similar way to a company. Conversely, an open ended fund, such as a unit trust or OEIC, has no limit on the number of shares or units. See also 'Open ended funds'.
‘Collective investment scheme’
A collective investment scheme is a generic term for investment funds with more than one investor, such as unit trusts, OEICs and investment trusts, which are managed by professional managers.
Commission is sometimes paid by a financial services company to professional intermediaries who distribute products on their behalf. In some cases, the intermediary will rebate some or all of the commission received to his or her clients.
‘Commission disclosure by financial advisers’
Intermediaries, such as independent financial advisers, are obliged to disclose to their clients the amount of commission they will earn on the products they sell to their clients.
Commodities are a type of asset (an 'asset class') which include a broad range of physical assets such as oil and gas, metals and agricultural products.
This is a unique number allocated by Companies House to every company (both 'limited' and 'plc') or limited liability partnership ('LLP').
‘Contract for Difference (CFDs)’
CFDs provide investors with the benefits and risks of owning a security without actually owning it. There is no delivery of physical goods or securities, which means that CFDs are generally regarded as an easier method of settlement because losses and gains are paid in cash.
A contract note will be sent out to investors when a transaction is completed - it is a legal document including all the details relating to the deal.
Conversion is the process of changing an existing investment within a fund from one type of unit or share to another - for example, converting accumulation units/shares into distribution units/shares.
Corporate bonds are issued by companies as an alternative to issuing an increased number of shares. Similar to government bonds, corporate bonds will pay a regular rate of interest and will generally be redeemed at their issue price on a set date.
Professional investors and analysts will refer to a 'correction' when a market is falling, but they believe share prices are simply coming back to more realistic levels following a period of over-valuation.
A coupon is the regular interest payment that is paid on a bond. It is described as a percentage of the face value of an investment. If a bond has a face value of £100 with a 7% coupon, for example, the bond will pay £7 a year in interest.
The creation price of a unit in a unit trust is the price before the initial charge has been applied. It represents the value of the trust at current market levels, with all expenses included, and is then divided by the number of units in issue. The creation price is used to calculate the offer price (purchase price). See also 'initial' charge.
In general terms, a credit rating is an assessment of the credit worthiness of a borrower, or of a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, authority or sovereign government. Credit assessment and evaluation for companies and governments is generally carried out by a commercial credit rating agency (such as Standard & Poor’s or Moody’s).
Credit risk is the risk that a bond issuer may not be able to meet its contractual obligation to investors and will default on debt payments.
In simple terms, currency hedging is the act of entering into a financial contract in order to protect against unexpected, expected or anticipated changes in currency exchange rates. Hedging can be likened to an insurance policy that limits the impact of foreign exchange risk. Hedging is often achieved through the use of derivatives such as options or futures.
When a fund invests in assets that are priced in a different currency to that which the fund is priced in, there is a risk of losses occurring due to adverse currency movements.
The current yield is the annual interest on an asset, divided by the asset's current market price.