• We provide services for
• Private clients
• Institutional clients

Positive investment returns for each and every measurement period, as opposed to relative returns being investment returns which are compared to market indices.

Alpha is the movement of a share price which is independent of the movement of the equity market. It is the expected return from a security or a portfolio based on the assumption that the return from the market is zero, sometimes known as stock specific risk. The measure shows a manager's ability to select securities which will perform independent of overall market movements. Good managers have a positive Alpha.

Investment in hedge funds and other non-traditional investment types such as private equity and venture capital.

To profit through the buying and selling of the same asset without risk, with no net outlay of capital. In reality, it requires the simultaneous buying and selling of the same asset and “earning” the difference.

The process whereby one decides which class of assets to invest in and the proportion of total capital to be allocated to each class of asset.

This is the currency in which shares in a fund are denominated.

Basis point is a hundredth of a percentage point and is used in currency and bond markets where large sums of money are moved.

A market that trends downwards over a lengthy period.

Beta is the movement of a share price that is explained by the movement of the equity market. It is used to measure the risk or volatility of a stock or portfolio relative to the specified benchmark. It represents the change in return for every 1% change in the index, sometimes known as market specific risk.

A price which the investor is willing to pay for shares in a fund.

Fundamentals of individual stocks or funds are studied in order for the fund manager to construct a portfolio from his/her best stock ideas rather than a top-down allocation to sectors or geographical regions.

A market that trends upwards over a lengthy period.

These are vehicles where a large number of small investors pool their money to form a large fund, which is placed under professional investment management.

This strategy involves the purchase of undervalued instruments that are convertible into equity (e.g. convertible bonds, convertible preference shares or warrants). The manager hedges out the various exposures created by the investment by selling the underlying shares, as well as hedging out other risks such as interest rate and credit risk, in order to lock-in the assessed "cheapness" of the convertible instrument.

Statistical measure of the degree to which the movements of two variables are related. A correlation of 1 between two different shares means that they move completely in line with each other (albeit at perhaps a different magnitude). A correlation of -1 between two shares means that they have moved completely in opposition to each other. A correlation of 0 means that the shares shown no relationship in the way that they move relative to each other.

A term used to group fixed income or bond instruments such as gilts, US Treasuries, notes, mortgage backed bonds etc.

These types of hedge funds undertake investment strategies which rely to some extent on market movements in order to create investment returns. Examples of such funds would include long/short equity and macro hedge funds.

See also Long-only strategy. Investment which is partly or entirely on the long side and therefore, is expected to have higher correlation to market direction.

A term referring to the shares, bonds, trade debt etc. of companies that are troubled or may be in the process of restructuring, or have filed for bankruptcy protection.

This strategy involves buying debt and other claims or distressed securities from companies in trouble due to excessive leverage or other problems and then initiating or participating in a capital re-organisation plan which refinances the company and often significantly improves the traded price of the formerly distressed securities.

Downside protection describes use of investment techniques to avoid loss of investor capital (i.e. a falling NAV per share).

A curve which describes the optimal combination of a portfolio of assets to achieve given levels of return, with the least amount of risk.

This strategy focuses on equity or fixed income investments in emerging markets around the world. Depending on the sophistication of the particular market and the corresponding regulatory environment, there may be hedging tools available.

This strategy focuses on taking both long and short positions in the equity markets, with a view to outperforming the relevant markets with reduced volatility. Managers tend to concentrate on either a geographical area or a particular sector of the equity market. See also Long/Short strategy.

This strategy seeks to exploit market inefficiencies and involves having simultaneously long and short matched equity portfolios. Portfolios are either beta and/or currency neutral and the use of leverage is common.

This strategy focuses on the actual or anticipated occurrence of an event such as a merger, corporate restructuring, spin-offs or bankruptcy. The key to the profitability of such investments is the ability to understand the likelihood of an event being completed as well as the time frame in which it will occur. The correlation to traditional markets is usually not particularly high. Typical strategies include merger arbitrage, distressed securities arbitrage and most strategies which include the term ‘special situations’.

An ETF is an investment fund that can be traded on a stock exchange. An ETF holds assets such as equities or bonds and trades at approximately the same price as the net asset value of its underlying assets. While most ETFs track an index, such as the S&P500 or MSCI World Equity Index, it can also provide an avenue to invest into commodities, like Gold or Platinum, without the investor actually having to hold the physical metal. ETFs are generally attractive because of their low costs, tax efficiency, and the ease with which it can be traded.

Fixed income arbitrage managers employ various techniques to identify and take advantage of discrepancies between various similar fixed income instruments that temporarily move out of line. Other arbitrage opportunities arise from discrepancies between the actual and theoretical value of a derivative instrument versus the underlying investment on which the derivative is based.

A fund which holds a portfolio of other funds.

Usually means to borrow money for investment purposes and is also known as “leverage”. It is normally stated as a multiple or percentage - three times is 300% gearing. It can also be achieved by buying on margin or by using derivatives such as futures and options.

Bonds and other debt issued by government or governmental organisations and agencies.

A portfolio's stated exposure when its long and short positions are added together i.e. long positions and short positions. See Net Exposure.

An absolute return oriented investment fund which seeks to produce investment returns from a particular investment strategy, with the manager partly or mostly remunerated in the form of a performance fee.

A term connected with the calculation of performance fees payable to hedge fund managers. The high water mark is the highest level that the net asset value per share of the hedge fund has reached in its life. A performance fee is usually only payable on increases in the NAV per share above this level.

This is the minimum level of return that is required from an investment before the performance fees become payable.

An index fund or index tracker is a collective investment scheme (this can take the form of either an exchange traded fund or a mutual fund) that aims to replicate the movements of an index of a specific financial market, e.g. the S&P500 or the FTSE100. This is done by trying to hold the exact same holdings of the index and replacing and reweighting them as the composition of the benchmark index changes. The success of an index tracking fund is measured by its tracking error, which is a measurement of how much the return on such a portfolio deviates from the return on its underlying or benchmark index. The key advantage of index trackers is that they are much cheaper than actively managed funds.

Shares with a large market capitalisation relative to the general market of which they form a part e.g. General Electric in the US, Vodafone in the UK.

Usually means to borrow money for investment purposes and is also known as “gearing”. It is normally stated as a multiple or percentage - three times is 300% gearing. It can also be achieved by buying on margin or by using derivatives such as futures and options.

The ease with which an investment can be realised. Hedge fund liquidity is determined by the frequency in which a fund deals in its shares.

Also referred to as traditional investing. The typical form of investing practiced by most investment managers. It does not have an absolute return focus.

This strategy focuses on bond or equity markets by combining long positions with short positions to reduce, but not necessarily eliminate, exposure to the market. These strategies are, therefore, somewhat directional and their returns may typically exhibit higher correlations with traditional markets than the returns of Relative Value or Event Driven strategies.

This strategy may include investments in both long and short positions in stocks, bonds, currencies and commodities in the form of cash investments and derivative positions. The typical strategy reflects individual views on the overall market direction as influenced by major economic trends. Many macro funds invest in both emerging and developed markets.

The percentage fee paid on a regular basis to a fund manager for his services in managing a fund or portfolio. This fee has is paid regardless of the performance of the fund.

See Relative Value.

The worst peak to trough that an investor could have incurred over any time period.

This strategy involves investing in securities that are the subject of a publicly announced acquisition, merger or tender offer. Such circumstances usually create an environment in which a disparity exists between a security's current price and its perceived value if the deal completes.

This strategy represents a combination of relative value or arbitrage strategies and is offered by some managers, who can move capital at short notice between strategies so as to take advantage of opportunities as they arise.

Net Asset Value - the assets of a fund minus its liabilities.

A portfolio's actual exposure when its long and short positions are calculated together e.g. long positions minus short positions. See Gross Exposure.

These types of hedge fund strategies seek investment returns independent of general market movements. Examples of such funds include arbitrage and equity market neutral hedge funds.

A fund structure offering shares in a company, rather than units in a Trust. Investors may realise their investment either by selling their shares back to the company (a share redemption) or by selling them to a third party.

A fee paid to the fund manager based on the fund's performance. The performance fee is usually based on fixed criteria (usually measured as the increase in net asset value per share of the fund). The performance fee is often only paid if performance exceeds the hurdle rate and the NAV increases above the high watermark.

Usually undertakes the back office functions of clearing, settlement and custody for a hedge fund. It also often undertakes the execution of the shorting and leveraging activities.

The use of judgement and experience by a fund manager to select his investments, using data and information researched and supplied by the fund in which he may invest.

The use of statistical methods (including an analysis of past performance) by a fund manager to select his investments.

A term covering strategies that invest in bonds and/or equities, but are not dependent on the general direction of the underlying markets. Typically the manager is seeking to exploit market inefficiencies by exploiting pricing disparities between related instruments. The focus can be very quantitative, focusing on security selection techniques. Such strategies should have a low correlation to general market movement. Typically strategies in this category include equity market neutral, fixed income arbitrage and mortgage backed securities arbitrage.

The chance that an investment's actual return will be different from the expected return. This includes the possibility of losing some or all of the initial investment. Usually associated with volatility or standard deviation (see below).

A measure of the return above the risk-free rate per return unit of return, usually calculated as the annualised rate of return minus the rate of return on a risk-free investment divided by the annualised monthly standard deviation. The higher the value the better the risk adjusted returns of that fund manager and an indication of the manager's ability at controlling volatility whilst delivering investment returns.

Selling a security that the seller does not own, but is committed to eventually repurchasing. It is used to capitalise on an expected decline in the security's price.

Shares whose market capitalisation is noticeably smaller than the average for their particular market.

Bonds issued by (or guaranteed by) a government.

See Event Driven.

The difference in price or yield between two instruments.

See also Volatility. A measure of dispersion of a set of data from its average. The higher the value, the more the overall data varies from its average. A fund with an annualised return of 10% and an annualised standard deviation of 5% indicates that over the performance period, returns in any 12 month period have been between 5% and 15% about 2/3rds of the time.

See Bottom-Up Investment Analysis.

Strategies focusing on the direction of market prices. Investments may include currencies, commodities, equities and/or bonds. Managers typically fall into one of the systematic or discretionary categories. This can be the most volatile category of hedge fund, particularly as many managers are often simultaneously long and short in their portfolios whilst also utilising leverage. The correlation of returns with traditional markets is normally low. Commodity Trading Advisers (CTAs) and global macro managers would typically fall into this category.

As opposed to bottom-up or stock selection based investing, this is an approach which invokes looking at the trends in economies and deciding which countries, markets or industries will benefit, before selecting individual companies in which to invest.

An investment fund with a common set of core operating rules (which are set out in its prospectus or private offering memorandum or trust deed) which has the ability to issue separate classes of share or sub-funds each of which has a different investment focus.

Often defined as the Standard Deviation of the return on total investment. It is the degree of uncertainty of returns on an asset.

The annual return from a bond or share or fund expressed as a percentage of its price.

A curve on a graph showing the relationship between the yields of fixed interest securities against time to maturity. The yield curve normally slopes upward to compensate investors for the loss of liquidity and the effects of inflation