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Private investors

Glossary of terms

From A to Z, understand investment jargon with our glossary of terms

‘IA sector’

As there are numerous funds in the market available from different fund managers, the Investment Association (previously called the Investment Management Association or IMA) provides a list of sectors as a way of dividing these funds into broad groups; with the aim of helping investors and their advisers compare funds in any one sector to assist them in making investment decisions. Further information can be found on the Investment Association's website www.theinvestmentassociation.org under the section 'Fund sectors'.

‘Incentive fee’

An incentive fee, also called a performance fee, is a payment made to a fund manager for generating positive returns. The fee is usually dependent upon the manager achieving specified performance returns over a set period of time and is generally calculated as a percentage of investment returns.

‘Income distribution’

Income distribution refers to income paid out (distributed) to investors in a fund.

‘Income fund’

An income fund is one whose main aim is to provide income to investors in the form of dividend or interest payments. Conversely, a growth fund is one where the main objective is to increase the value of its investments over time (capital appreciation).

‘Income units or shares’

Funds may issue two types of units or shares to investors in a fund. Income units/shares (usually called 'distribution' units/shares) are those where income will be paid to investors on set dates relating to the financial year of the fund. Conversely, accumulation units/shares are those where income is not distributed but is instead automatically retained and reinvested. Also see 'accumulation units or shares'.

‘Index’

An index is an indicator of the value of a sector of shares in a market. The most common index in the UK is the FTSE 100 which is an indication of the performance of the top 100 UK companies' shares by market capitalisation.

‘Index fund’

An index fund does not attempt to outperform a particular benchmark, but instead aims to replicate a particular index's performance by buying the same constituent shares of the index in the same percentage sizes. Success will be measured by the 'tracking error' - the amount by which the fund's return differs from that of the index. Index funds are also known as tracker funds or passive funds.

‘Individual savings account (ISA)’

An ISA is a tax efficient wrapper for savings and investments in the UK. It is a scheme allowing individuals to hold cash and investments in shares, and funds free of tax on dividends, interest, and capital gains. Anyone in the UK aged 18 or over can invest a maximum of £15,000 (for the 2014/15 tax year) in an ISA. Also see Junior ISA.

‘Inflation’

Inflation is a measure of the increase in prices of goods and services over time. It is usually expressed as a percentage.

‘Initial charge’

The initial charge is the sales fee charged by a fund manager on the purchase of units or shares in a fund. At present Artemis waives the initial charge for most new investments so, generally, no initial charge is payable by investors (although Artemis reserves the right to reintroduce an initial charge in the future).

‘Investment Association (IA)’

The Investment Association (previously the Investment Management Association or IMA) represents the UK investment management industry. It was originally formed in 2002 when the Association of Unit Trusts and Investment Funds (AUTIF) and the Fund Managers Association (FMA) merged to establish the Investment Management Association (IMA), and changed to its current name in 2015 when the IMA and the Investment Affairs division of the Association of British Insurers merged. Information is available on all the member companies and their products and can be accessed by investors, intermediaries and companies. For more information visit www.theinvestmentassociation.org.

‘Investment grade bond’

An investment grade bond is a bond which has a higher credit rating than 'high yield' bonds. They are considered to have a lower risk of default and therefore pay a lower yield. Also see 'higher yield bond' and 'credit rating'.

‘Investment Management Association (IMA)’

The Investment Management Association represented the UK investment management industry. It changed name to the Investment Association in January 2015 - see 'Investment Association'.

‘Investment trust’

An investment trust is a publicly-quoted company that invests its shareholders' monies in the shares of other companies. An investment trust is a collective investment scheme, but has a fixed number of shares.

‘ISIN’

An International Securities Identification Number (ISIN) uniquely identifies a security, such as shares, options, debt securities, derivatives and futures. The ISIN code is a 12-character alpha-numerical code intended for uniform identification of a security at trading and settlement.


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