R, S, T, U, V Flashcards
Rate-anticipation swap
A portfolio management technique where the bond portfolio manager decides to position the portfolio with a longer or shorter duration, based on market information.
Real estate
An alternative investment that tends to take
two forms: private and public. With the
private form, investments are made in real,
tangible assets that usually generate steady
cash flow from rental income; real estate
takes public form when it is securitized
(that is, when a pool of real estate assets is
resold to investors as shares).
Real-return bonds
See Index-linked bonds.
Relative-value strategy
A hedge fund strategy that attempts to
profit by exploiting inefficiencies or
arbitrage opportunities in the pricing of
related stocks, bonds or derivatives.
Replicating an index
A passive investment strategy where the manager selects an appropriate index to replicate in a fund, holding each stock within the fund portfolio in exact proportion to its weighting within the index.
Repo transaction
Essentially a sale and repurchase agreement
where a broker/dealer sells a fixed-income
security to a third party at an agreed upon
price today and simultaneously agrees to
buy back the same security from the third
party at a set price on a future date.
Returns-based style analysis
An analysis of a manager’s style developed
by William Sharpe in 1988; performed by
comparing the fund’s returns (usually 36 to
60 months of data) to the returns of a
number of selected passive style indexes
Risk budgeting
A process that limits the deviations of a
portfolio’s return from a benchmark. It is
the most common technique used to create
an enhanced index portfolio
Road shows
Meetings in which a fund manager’s senior
and regional sales and marketing staff and a
new fund’s investment manager make
presentations to the distributors’ sales staff.
Sale of options
Selling options to take advantage of current
or desired portfolio holdings and to earn
additional income.
Sector rotation
The attempt by an active portfolio manager
to pick the best sectors.
Securitization
The process of turning relatively illiquid
assets into tradable securities.
Seed capital
The capital invested in a new mutual fund
at the point in time when it is created.
Segregated account
An investment account that is owned by an
institutional investor and managed by a
third-party portfolio manager.
Self-regulatory organizations
SROs
Organizations that have been given regulatory supervision by the various provincial and territorial securities commissions by way of monitoring the activities of their member firms.
Separation of duties principle
A principle that is incorporated into a firm’s
organizational structure to minimize the
potential for employee self-dealing via
collusion with another individual in the
firm.
Settlement (of trades)
The moment of irrevocable exchange of
cash and securities.
Soft-dollar arrangement
An arrangement where an investment fi rm
purchases services via commission dollars
rather than via an invoice for the goods or
services
Special purpose vehicle (SPV)
A legal entity that is set up by the originator
of a loan, typically as a trust. It is the legal
owner of the loans and is separate from the
originator
Standards of conduct
Standards to which fiduciaries are held
accountable.
Straight-through processing
A type of security trade processing and
portfolio management software that
provides one continuous real-time
investment management database that links
the front, middle and back offi ces of the
fi rm
Stratifi ed sampling
See Cellular sampling.
Structured products
Financial products that employ financial
engineering in their design and
management.
Style analysis
The study of style drift in a fund’s holdings
or returns over time.
Style drift
Occurs when a manager’s portfolio strays
from a specific style of investment
management.
Sub-advisor
A person or entity that the firm managing
an investment fund will hire because the
sub-advisor has expertise that is deemed
appropriate and beneficial to the fund.
Synthetic collateralized debt
obligation
The credit derivative variant of the cash
CDO, where the originator (the bank)
retains ownership of the underlying assets and buys protection from the SPV using a
credit default swap, thus swapping the
credit risk over to the SPV.
Target asset mix
The desired market value weighting for the
major asset classes that are included in the
management of the firm’s various balanced
fund portfolios.
Target date immunization
In the pension industry, a means of protecting a bond portfolio from interest-rate risk, where there is an obligation to make a future payout on a target date.
Top-down approach
An approach to investing that begins with a
macro- and microeconomic analysis of
trends and market forecasts in the global,
North American and Canadian economies.
The manager then selects the sectors that he
or she expects will outperform other sectors,
within the expected economic outlook.
Tracking error
When a manager is practicing index
trading, the standard deviation of the return
difference between the portfolio and the
index
Tracking error minimization
An approach that uses historical data to
model the tracking error variance for each
bond in the index, then minimizes the total
tracking error in that model
Trade-matching elements
The details that an institutional investor
must provide to a dealer or custodian in
order to facilitate the settlement of a trade;
there are 26 different elements that must be
confirmed for an institutional equity trade
to clear.
Traders
Those employees who actually execute
trades within an investment management
fi rm.
Trading philosophy
The role that active security trading plays in
executing the investment management
strategy for a particular fund
Tranches
Layers of ownership within an ABS. Each
layer has a different level of credit risk and
hence a different level of return.
Transparency risk
The risk incurred by investors’ limited
access to information about their alternative
investments, including the operation of the
fund, its holdings and its performance.
Trust
Is a belief that those people on whom we
depend, whether by choice or circumstance,
will meet the expectations we have placed
on them
Trustee
A person or entity that holds title to the
property (the cash and securities) of a
mutual fund on behalf of the mutual fund’s
unitholders.
Ultimately responsible person
URP
The person within an investment
management firm that is responsible to the
self-regulatory organizations for the
conduct of the firm and the supervision of
its employees.
Value-oriented approach
A bottom-up approach to investing that
looks for undervalued securities, with little
focus on overall economic and market
conditions.
Values
Beliefs that are long lasting and guide
individual and corporate behaviour and
goals
Value system
Is one in which the end and means values
mutually reinforce and support each other.
