Friday, June 22, 2012

Fixed Income Investments

Fixed Income Investments, or fixed interest, are investments in the debt obligations of businesses and institutions. These commonly take the form of bonds with many institutions offering bond funds, or even bond index funds. Fixed income investments generally pay a fixed or predetermined series of cash flows including principal and interest payments. Fixed income investments generally tend to have lower return and risk than investments such as equities, particularly when considered as a diversified portfolio, or a portfolio of high credit quality bonds. Fixed income investments are often included in multi-asset portfolios and are an important tool in efficient or optimal asset allocation. Fixed income investments can be traded on an exchange, or traded in the interbank market, or not traded at all.

Similar Fund Terms: 
Fixed interest, bonds, debentures, notes, treasuries, MBS, securities, debt securities

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Saturday, June 9, 2012

Alternative Investments

Alternative Investments are investments which fit outside the traditional asset classes of Cash, Bonds, and Equities. Alternative investments include funds like private equity funds, hedge funds, absolute return funds. Alternative investments include both liquid e.g. commodities, listed property, listed infrastructure, and non-liquid e.g. forestry, land, infrastructure assets, and even some of the more fringe investments such as fine wine, art, collectables, etc. Investors include alternative assets in their portfolio for a variety of reasons (specific to each type of investment such as capturing the illiquidity premium, lower correlations with other asset classes, better risk-return outlook, and other personal reasons e.g. being able to touch and feel the investment. Alternative investments tend to be relatively more risky than the traditional asset classes; and are prone to different risks also.

Similar Fund Terms:
Alternative investments, illiquid assets, direct investment, non-traditional asset classes

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Asset Consultant

An Asset Consultant is a company or individual which consults institutional and high net worth investors on asset allocation, investment strategy, and investment strategy implementation. Asset consultants will work with pension funds, endowment funds and community trusts, sovereign wealth funds, and other large institutional investors to assist with setting investment strategy; particularly where the institution has limited in house expertise, or seeks an independent expert's advice on managing funds. Examples of some of the larger asset consultants include: Mercer, Russell, and Towers Watson.

Similar Fund Terms: 
Investment Consultant, Investment Advisor

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Listed Infrastructure Fund

A Listed Infrastructure Fund invests solely in infrastructure companies that are traded on a public stock exchange. Listed infrastructure shares some of the characteristics of unlisted infrastructure, but due to it being listed is more liquid; allowing greater ease of buying and selling. Global listed infrastructure funds will generally benchmark against one of three indexes: the UBS Global Infrastructure (or the 50/50 Infrastructure and Utilities) Index, Standard & Poor's Global Infrastructure Index, or the Dow Jones Brookfield Global Infrastructure Index. Global listed infrastructure has been increasingly touted as a new asset class by consultants such as Mercer and Russell, and by fund managers such as Cohen & Steers, Brookfield,and others.

Similar Fund Terms: 
Alternative Assets, Infrastructure, Equities

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Long-Short Fund

A Long-Short Fund is a type of investment fund which can both go long (i.e. buy) and go short (i.e. sell-short). Typically Long-Short Funds will stick to a constant ratio of long to short positions; some funds will take a market neutral strategy by combining equal and offsetting long and short positions, while others may use a smaller amount of short positions e.g. in the case of a 130/30 fund which is long 130% of the portfolio and short 30%. Long-Short strategies are common among hedge funds and absolute return funds. The contrasting, or opposite type of fund is a long-only fund, which will only go long, or buy stocks.

Similar Fund Terms: 
Market neutral fund, 130/30 fund, Absolute return strategies, Hedge fund

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Saturday, April 21, 2012

MSCI ACWI

The MSCI ACWI refers to the global stock index compiled by the company MSCI. The acronym ACWI is "All Countries World Index". The MSCI ACWI has broader coverage than the MSCI World Index, and includes components of the MSCI Emerging Markets Index. Increasingly global equity mandates are being managed to the broader MSCI ACWI index due to the increasing importance of emerging markets, and higher expected economic growth rates. Over time it is likely that the MSCI ACWI will include greater influence from emerging markets.


Similar Fund Terms: Global Equities, Global Shares, Index, MSCI, MSCI All Countries World Index

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Saturday, April 14, 2012

Rebalancing

Rebalancing refers to the process by which a portfolio is brought back to its original asset allocation following a period of varying performance of assets which results in a deviation of weights from the original policy mix. The purpose of portfolio rebalancing is to restore the portfolio to its original mix; which is intended to maintain its original expected risk and return profile. If rebalancing is not done then the portfolio will take on different characteristics from when it was first put in place. Rebalancing strategies can be based on time e.g. every month/quarter/year, or threshold e.g. when portfolio weights deviate by more than 1%/5%/10% from the policy weight; or a combination of time and threshold. Rebalancing can add to returns, but it is typically thought of as a risk management strategy. Rebalancing will often involve selling the highest performing assets and investing into the lowest performing assets; and thus can be characterized as a contrarian strategy.

Similar Fund Terms: Reweighting, Tactical Asset Allocation, Asset Allocation

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