E, F, G, H, I Flashcards
Effi cient frontier
A set of optimal portfolios that match a
client’s expected returns with their tolerance
for risk.
End values
Represents the ends toward which a person
strives and infl uences how a person acts
today to achieve tomorrow’s goals
Endowment funds
Portfolios that are managed to produce
income for a beneficiary organization.
Enhanced active equity investing
An active portfolio management technique
where the manager overweights the
securities that are expected to outperform
the benchmark and underweights the
securities that are expected to
underperform, using short selling if
necessary
Enhanced indexing
An indexing technique that results in
portfolios that are designed to provide
index-like performance with some excess
return net of costs
Ethical dilemma
Exists when two or more of the possible
choices pit different values against each
other
Ethical principles
Help guide behaviour in situations where
no regulation exists or applies.
Ethics
A set of consistent values that guide
individual behaviour.
Event-driven strategy
A hedge fund strategy that seeks to profit
from unique events such as mergers,
acquisitions, stock splits and buybacks.
Execution slippage
Occurs when the execution of a transaction
causes subsequent prices to worsen.
Exempt investors
Investors who do not require a fi rm to sell
them securities via a prospectus.
Exempt market dealer
A dealer who trades or advises in the
exempt market, such as private placements
Fairness policy
A policy that all investment management
firms should have outlining the way
employees with the firm will deal with clients in matters of making and providing
investment analysis, recommendations or
trade services. The policy ensures that all
clients are treated fairly by the firm’s
employees.
Fiduciary
In a fiduciary relationship, the person in
whom trust has been placed.
Fiduciary duty
The duty of a person in a position of trust
to act solely in the interest of the
benefi ciary
Financial engineering
The process of combining traditional or
alternative investments with fi nancial
derivatives
Financial intermediaries
The various companies and organizations
that connect and move capital between
suppliers and users of capital.
Financial intermediation
The movement of funds from suppliers of
capital to users of capital.
Financial Transactions and Reports
Analysis Centre of Canada
(FINTRAC)
A federal agency created to gather financial
information under the Proceeds of Crime
(Money Laundering) and Terrorist Financing
Act.
Foreign-denominated bonds
Bonds issued by domestic or foreign
corporations or governments offering
diversification from interest-rate and
currency risk.
Forward rate agreements (FRAs)
Over-the-counter contracts for hedging
interest rates
Fund accounting
The proper accounting of the fund’s asset
values.
Fund of hedge funds (FoHF)
A portfolio of hedge funds overseen by a
manager who determines which hedge
funds to invest in and how much to invest
in each.
Fundamental indexing
A methodology where each stock’s index weighting is determined by four fundamental measures, thus diluting weighting errors and erasing the link between portfolio weight and over- or undervaluation.
General partner
Under a limited partnership, the
institutional investment manager
Global Investment Performance
Standards (GIPS)
Standards that attempt to present
investment performance from firms of
different countries fairly and ethically to
current and potential clients; GIPS are the
product of the Investment Performance
Council of the CFA Institute, and although
not mandatory, most investment
management firms are GIPS-compliant.
Go/no-go decision
A decision made by the new product development committee on whether or not to proceed any further with the development of a particular fund or product.
Growth-oriented approach
A bottom-up approach to investing that
focuses on the individual stock, specifically
on the earnings.
Guarantor
The entity that guarantees the principal and
the return, if any, at maturity of a PPN.
Head of equities
The person within an investment
management firm who has overall
responsibility for the portfolio management
of all the equities managed by the firm.
Head of fi xed income
The person within an investment
management fi rm who has overall
responsibility for the portfolio management
of all the fi xed-income and money market
securities
Hedge funds
Lightly regulated pools of capital whose
managers have great flexibility in their
investment strategies.
Hedge ratio
The relative number of derivative contracts
per underlying asset necessary to insure
against portfolio value changes
Hedged portfolio
A portfolio with no exposure to a specific
risk.
High closing
An illegal activity where a portfolio
manager enters a higher bid price for a
security at closing to artifi cially increase the
net asset value of the fund to which the
security belongs
Holdings-based style analysis
An analysis of a manager’s style that
examines each stock in the portfolio and
maps it to a style at a specific point in time,
creating, in effect, a history in the form of
“snapshots.”
Horizon analysis
A technique used by analysts to react to
financial forecasts, where the analyst
chooses a horizon over which the rate
change is expected to evolve, and at the end
of which a new yield curve is predicted.
Immunization
A means of protecting the bond portfolio
from interest-rate risk.
Index funds
A fund that uses a passive portfolio
construction technique that merely tracks
the performance of a target portfolio with
no attempt at adding value using active
management
Index tracking
A passive investment strategy where the
manager constructs a subset of the
benchmark that faithfully mimics the index
Index-linked bonds
Bonds promising to pay interest based on
inflation levels.
Institutional investor
Any non-retail investor; also known as financial intermediaries, they include pension plans, mutual funds, insurance companies, endowments, charitable foundations, family trusts/estates and corporate treasuries.
Interest-rate futures
Contracts used by banks, corporations and
individuals to hedge interest-rate risk for
future payments.
Interest-rate risk
The variation in bond values due to
changes in market yields.
Interest-rate swaps
Interest-rate swaps
Investment committee
A committee populated by a subset of individuals that serve on the board of directors of an investment management firm, that focuses on the investment management aspects of the fund’s operations.
Investment consultants
See pension consultants.
Investment dealer
A registration category for an investment
management fi rm that allows appropriately
registered staff to engage in the sale and
distribution of all types of securities to all
types of investors
Investment-grade credit quality
rating
Means that the issuers of a fixed-income
security have at least a BBB credit quality
rating from at least one of the popular
fixed-income credit-rating agencies.
Investment management
agreement
The contract that governs the relationship
between an institutional investment
manager (the “Advisor”) and its
institutional investor client (the “Client”).
Investment policy statement
Investment policy statement
Issuer
See Guarantor.
