Glossary

The most important terms from the world of funds - arranged alphabetically. Click one of the letters to display the relevant terms.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Derivatives

Derivative instruments are financial products whose value is derived from basic values (interest rates, indices, currencies, securities, raw materials). These include: options, futures, swaps, foreign exchange forwards. Derivatives are used in fund management to hedge price and exchange rate risks. Only a very small proportion of the fund's assets may be used for speculative purposes. However some investment funds' conditions permit absolutely no speculative business at all.

Distributed Earnings

The sum of money that is paid to the fund's shareholders from security returns - usually paid annually.

Distributing Funds

Funds that make dividends to the shareholders at the end of the financial year. The capital yields are equity dividends, interest or the sale of securities. (Opposite: re-investment fund)

Diversification

In terms of capital investment diversification means distributing the assets over different investment forms or values. The aim is to create a portfolio with the highest possible yield at the lowest possible risk.

Duration

Stipulates the period that a bond needs to adjust to a rate fluctuation caused by a change in market interest rates. The greater the duration, the greater the interest rate risk.