Glossary

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A


Authorised corporate director (ACD)
A company or an authorised person given powers and duties under Financial Services Authority regulations to operate an open-ended investment company (OEIC).

Active management
A style of investment management that involves the fund manager making investment decisions, based on research and analysis. The aim is usually to outperform a particular market or sector index rather than to replicate it.

Alternative Investment Market (AIM)
The Alternative Investment Market is the London Stock Exchange's global market for smaller, growing companies.

Alpha
A measure of fund performance adjusted for the risk associated with a benchmark over a given period. Alpha is usually used to evaluate the contribution to performance by active management. Higher alpha means better fund performance.

Annual return
The average gain or loss an investment has made each calendar year or over other 12-month periods.

Asset allocation
How a portfolio is divided between different types of assets. The main asset classes are equities, bonds, property and cash.

Assets
The underlying investments of a fund, which may comprise shares, bonds, property, cash or other securities depending on the type of portfolio.

Authorisation
Any company wishing to conduct investment business in the UK needs to be authorised under the provisions of the Financial Services and Markets Act 2000. This authorisation is granted by the Financial Services Authority, which is the regulatory body for the financial services industry.

Authorised fund
A fund that has been authorised by the Financial Services Authority for marketing to the public in the UK.

Average gain
An arithmetic mean of the periods with a gain. This is calculated by summing the returns for gain periods - when returns are positive - and dividing by the total number of gain periods.

Average loss
An arithmetic mean of the periods with a loss. This is calculated by summing the returns for loss periods - when returns are negative - and dividing by the total number of loss periods.

Average return
This is an arithmetic mean of the returns on an investment. It is calculated by summing the returns for each period - daily, weekly, monthly, yearly or any other set period - and dividing the total by the number of periods. It does not take the compounding effect of investment returns into account. It is purely a statistical measure of the average return. The average is also referred to as the mean.

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