is a security which represents a share in a company´s assets. A shareholder (share owner) has the right to participate in management of the company, to a share in its profits (dividend) and to a share in the liquidation balance of the company.
represent different forms of property (bonds, shares, fixed-term deposits, commodities, real estate, etc.).
measures the outstanding historical performance of a fund (added value) above a benchmark. A higher alfa means a higher relative fund performance in relation to the benchmark.
Annuity, annuity payment, annuity repayment
Annuity payments or repayments are equal repayments paid at regular intervals, most frequently monthly, throughout the entire loan repayment period. Annuity repayment of a loan comprises two parts – repayment of the principal and repayment of interest. At the beginning of a loan relation, interest repayment represents the largest proportion of repayment; in contrast, at the end it is repayment of the principal.
is an indicator which represents the market in which a fund invests. Benchmark is usually one of the market indices or their combination. When we compare performance of the fund with performance of the benchmark we may assess the fund management’s quality.
is an indicator of fund sensitivity with regard to performance of the benchmark. Any benchmark movement downwards or upwards will result in a “beta multiple” of the fund’s movement in the same direction (if the “beta” indicator is positive).
Current (authorized) account
A current account is a bank product, the main function of which is performance of everyday banking operations. Basic operations include depositing, withdrawing and transferring money to different accounts. Standard services related to current accounts include standing orders and direct debit. Banks usually charge a fee for maintaining current accounts. Balances may bear interest though the interest rates for current accounts are low.
BIC (Bank Identification Code)
The International Bank Identification Code which has 8 or 11 characters and is used for identification of financial institutions in financial transactions, e.g. payments to foreign countries.
are the largest companies in the relevant market.
BRIBOR was an interest rate for which banks borrowed Slovak crowns from one another until the end of 2008. Changes in such rate would influence interest rates at which banks lent funds to their clients. After EURO was introduced BRIBOR rates were replaced by EURIBOR rates.
Abbreviation for the group of five largest developing countries: Brazil, Russia, India, China and the Republic of South Africa.
Central and Eastern Europe
NAV – Net Asset Value
represents the value of all assets owned by a mutual fund as of a particular date minus the fund’s liabilities. It is the basis for calculating the value of a fund share.
Customer Price Index
is a bank which maintains the accounts of a fund and of a manager and oversees if the manager (management company) uses the money of its shareholders in accordance with relevant laws and the fund’s statute. Depositories have to check every transaction because managers give them instructions regarding transactions in the mutual fund’s account.
means spreading investment into several securities or other assets. It is a tool which helps decrease the portfolio risk level. Even though it is not possible to “cut out” all kinds of risks related to investments, certain risks may be considerably decreased thanks to diversification.
is a share in profits which joint-stock companies pay to their shareholders. General assemblies of shareholders decide on the amount of dividends and their payment.
The yield from shares which shareholders will receive in the form of dividends. It is expressed as a percentage as an annual dividend to the current share price.
is a security related to the right of its owner to request repayment of an outstanding amount and payment of yields related to it (coupons – interests) as of a certain date. By purchasing bonds the bond owners (investors) are lending money to the issuer.
is an average maturity usually of a fund portfolio investing in bonds. It is an indicator which measures the sensitivity of the price of bonds to changes in interest rates. The higher the duration, the higher such sensitivity, and vice versa. For example, if interest rates in the market drop by 1%, the price of a previously purchased bond with duration 3 will increase by about 3%, while the price of a bond with duration 5 will go up by about 5%. Duration depends mainly on the maturity date of the bond but also on the frequency of payment of interests, etc. Duration of financial market funds is usually lower than 1. Duration of bond funds is usually higher than 1.
European Central Bank
is an entity (state, town, legal entity) which issues securities (bonds, shares, etc.) with the aim of acquiring money for its further development.
US central bank (Federal Reserve System)
are financial tools created by derivation from products tradable on the so-called spot market. Financial derivatives denote swaps, options, fixed-term contracts and securities containing such tools. Financial derivatives may be bound to an interest rate, currency, commodity, share or other securities.
IBAN is an International Bank Account Number used for foreign transactions within the EU; it has the same structure in all EU countries.
is a minimum recommended period of time for a particular type of investment in years.
IPO (Initial Public Offer)
is a process where a company offers its shares publicly in the capital market for the first time.
A hedge means to secure by “hedging”, i.e. securing relevant investment tools against major market fluctuations. Derivative tools (options, futures) are used most frequently for hedging, particularly in relation to covering the interest-rate, exchange-rate or currency risks.
is a bond with high yield which usually has a lower than investment rating level at the time of its purchase, i.e. it is a risk bond.
is a four-digit identification number defined by the National Bank of Slovakia which denotes the nature of the payment (first three digits) and the form of payment or clearance (fourth digit). A constant symbol is not a mandatory part of national payment orders.
is interest paid by issuers of bonds.
Fund exchange rate (price of an allotment certificate)
expresses a net value of fund assets per one share after the management fee has been deducted.
is a risk of changes in the fund exchange rate as a result of fluctuation of the exchange rate, e.g. EUR to a different currency. If a fund is denominated, e.g. in USD, any weakening of USD towards EUR affects the fund performance recalculated into EUR since the value of assets in USD is lower after it has been recalculated into EUR.
International Monetary Fund
n.a. (not available)
means that the indicator value is not available.
p.a. (per annum)
means “annually”, e.g. yield in a fund or interest rates in a bank recalculated on an annual basis.
P/B (price/book ratio)
is an indicator which calculates the proportion of the price (exchange rate) of a share to the accounting value of the company per share.
P/CF (price/cash flow)
is an indicator which calculates the proportion of the capitalization value of a company to its cash flow for the previous fiscal year.
P/E (price/earning ratio)
is an indicator which calculates the proportion of the price (exchange rate) of a share to a company’s after-taxation profits per one share.
Mutual fund (MF)
is property formed by assets which are jointly owned by investors and which are separated in accounting from the assets of a management company managing such assets. Mutual funds have no legal capacity.
is a set of securities or other assets in a fund.
is sale of a security before an investor actually owns it. The investor will lend such security and then undertakes to return it in a future purchase in the market. If the price is higher during the first sale than during the later purchase, the investor makes a profit.
is an official document detailing the conditions for issuing and redeeming fund shares by a management company.
Average fund portfolio rating
is a weighted average of ratings of issuers of securities which are included in the fund portfolio. See “loan quality”.
is re-purchase (payment) of allotment certificates which a shareholder has returned to the management company for the current price.
expresses a certain degree of insecurity for investors that they may not achieve the expected yields or that they may not get back their entire original deposit. Risk (volatility) is an inherent feature of financial markets. Though it may be lowered to a certain extent, it cannot be eliminated completely. The reward for any risk which investors take is usually a higher yield potential of the particular investment in a mutual fund.
compares the behaviour of a fund compared to a benchmark. It expresses to what extent the variability of fund performance is explained by the variability of benchmark performance. It is calculated as a square of a correlation coefficient of the fund and the benchmark. If R2 equals 0.75, then 75% of fund performance variability may be explained by the behaviour of the benchmark. The higher the R2 is, the higher representational ability the alfa and beta indicators have.
evaluates a “premium” for risk. It is calculated as a proportion of fund performance adjusted for a risk-free interest rate and fund volatility. A higher value means better relative performance of the fund with regard to its risk.
Management company (manager)
is a legal entity which accumulates funds from the public based on public invitations with the purpose of investing them in assets as specified by the Collective Investment Act. It creates and manages funds from such accumulated assets.
is a fee which every management company continuously charges for managing mutual funds.
Standard deviation (volatility) of a fund
is a statistical indicator which measures the volatility of monthly performances of a fund exchange rate with a certain likelihood (66.67%). The bigger the changes in the fund exchange rate, the higher the risk (volatility) for investors.
Company size indicator; product of a market price and the total number of shares.
Standing payment order
A standing payment order is used for regular (usually monthly) settlements where the price to be paid is known in advance. When creating standing payment orders, account owners determine the beneficiary’s account number, the amount, the period of validity, payment periodicity and the payment date.
Loan quality (bond rating)
is an indicator of the trustworthiness of certain bond issues. Such evaluations are often interpreted as an indicator of the likelihood of a failure to pay a part of the liability of the company which has issued the bond. E.g. if a state has an AAA rating, it is very likely that if we lend it money, it would be able to return the money back to us.
is a one-off fee which management companies may charge when issuing allotment certificates.
is a fee payable in addition to the management fee as a reward for the Portfolio Manager for an outstanding fund performance. The criteria for charging performance rewards include: the fund performance must be positive and at the same time higher than a benchmark or a performance limit, and at the same time the value of the capital is higher than the so-called High Water Mark (i.e. the highest value until that moment for which a performance reward was charged).
Yield to Maturity – YTM
represents the expected gross yield of a bond or a fund portfolio providing that it is held until its maturity and that coupons are re-invested at an unchanged interest rate.
means “from the start of the year until today”.