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Glossary

Find in Piraeus Asset Management MFMC glossary definitions for Mutual Funds. The definitions of vocabulary arising from the international and domestic academic literature and the institutional framework. 

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R

Redemption Fee

A fee collected by an investment company from traders practicing mutual fund timing. This stiff penalty is used to discourage short-term, in-and-out trading of mutual fund shares. Generally, the fee is in effect for a holding period from 30 days to one year, but it can be in place for longer periods. Also referred to as an "exit fee", "back-end load" or "contingent deferred sales charge". 

Redemption price

The units of a Mutual Fund shall be redeemed at the redemption price on the day the relevant application was submitted, as determined. The redemption price is calculated on each business day. The redemption price of the Mutual Fund units may be lower than the net value of its unit at the rate of the corresponding commission of the Company.


Regulatory framework

A regulatory framework can have varying meanings, but it commonly pertains to tax information, necessary regulations and other important information, like relevant rules, laws and regulatory bodies. In this case it refers to the fund’s regulatory framework.

Repurchase Agreement (Repo)

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.

Return

Return on investment is defined as the difference of current market price from the initial investment cost. The return on any investment, measured over a given period of time, is simply the sum of its capital appreciation and any income generated divided by the original amount of the investment, which is expressed as a percentage. The term applied to this composite calculation is total return.

Risk

The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviation indicates a high degree of risk.

S

Securitization

Securitization is the process of creating liquid securities (such as ABS or CDO) from a pool of illiquid assets (mainly loans). An entity, generally a bank, sells assets to an SPV which issues securities whose risk and returns are linked to the sold assets. Securitization is usually combined with the mechanism of tranching to enable the issuance of low risk securities.

Sharpe Ratio

The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. It was developed by Nobel laureate William F. Sharpe. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.

Short Selling

Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit.

SICAV (Société d'Investissement à Capital Variable)

A SICAV is an open-ended collective investment scheme common in Western Europe, especially Luxembourg, Switzerland, Italy, Spain, Belgium, Malta, France and the Czech Republic. SICAV is an acronym in French for société d'investissement à capital variable, which can be translated as 'investment company with variable capital'. It is similar to an open-ended mutual fund in the United States, while a sociedad de inversión de capital fijo or société d'investissement à capital fixe (SICAF) is similar to a closed-end fund. As in the case of other open-end collective investment schemes (such as contractual funds), the investor is in principle entitled at all times to request the redemption of his units and payment of the redemption amount in cash. SICAVs are increasingly being cross-border marketed in the EU under the UCITS directive.

Speculation

Speculation is the practice of engaging in risky financial transactions in an attempt to profit from fluctuations in the market value of a tradable good such as a financial instrument, rather than attempting to profit from the underlying financial attributes embodied in the instrument such as capital gains, interest, or dividends.

Standard Deviation

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is a statistical measurement that sheds light on historical volatility. For example, a volatile stock will have a high standard deviation while the deviation of a stable blue chip stock will be lower.

Subscription Fee

A fee collected by the investment company from traders obtain units Mutual Funds. 


Subscription price

The subscription price of the Mutual Fund units is determined by the value of the unit on the day the relevant application was submitted, as determined. The subscription price is calculated on each business day. The subscription price of the Mutual Fund units may exceed the net value of its unit at the rate of the corresponding commission of the Company.

Synthetic Risk and Reward Indicator (S.R.R.I.)

Synthetic risk and reward indicator is a key feature of the Key Investor Information Document. Synthetic Risk and Reward Indicator (SRRI) is a measure of the overall risk and reward profile of a fund. Funds are categorised on a scale from 1 to 7, with 1 being lowest risk and 7 being highest risk. Typically, the SRRI is derived from the volatility of past returns over a 5-year period.

Τ

Technical Analysis

Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume.

Tracking Error

The tracking error measures the volatility of excess return of a portfolio over its benchmark.

Transfer Agent

A trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances and transactions, to cancel and issue certificates, to process investor mailings and to deal with any associated problems (i.e. lost or stolen certificates).

Transferable securities

The term "transferable securities" is defined as follows:
shares in companies and other securities equivalent to shares in companies ("shares");
bonds and other forms of securitised debt ("debt securities");
other negotiable securities which carry the right to acquire any such transferable securities by subscription or exchange
other than the permitted UCITS efficient portfolio management (EPM) techniques and instruments


U

Undertakings For The Collective Investment Of Transferable Securities -UCITS

A public limited company that coordinates the distribution and management of unit trusts amongst countries within the European Union. These funds can be marketed within all countries that are a part of the European Union, provided that the fund and fund managers are registered within the domestic country. The regulation recognizes that each country within the European Union may differ on their specific disclosure requirements.

Υ

Yield Curve

The yield curve represents borrower’s bond yields across different maturities. The curve is thus plotted with yields on the y-axis and the time to maturity on the x-axis. The yield curve is normally positively sloped (long term yields higher than short term yields). In rare cases, the curve can be negatively sloped (inverted curve), which is often considered as a sign of recession. There is a wide range of yield curve movements; however 3 main types of movements explain changes in yield curve: the parallel shift, the twist (change slope) and the butterfly (change in curvature).

Yield to Maturity (YTM)

The yield to maturity (YTM) is the discount rate which returns the market price of a bond without embedded optionality. YTM is thus the internal rate of return of an investment in the bond made at the observed price. Since YTM can be used to price a bond, bond prices are often quoted in terms of YTM.