Glossary
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Accumulation units/shares
A unit or share that accumulates the amounts of income payable to the holder within its unit price instead of these amounts being paid out to holders (see 'income unit/share'). The price of accumulation units or shares will be higher than those of income units or shares. The letters 'acc' after a fund's name indicate accumulation units or shares ('inc' indicates income units or shares).
Acting as agent
If a firm that manages a fund states that it 'acts as agent' in relation to the buying and selling of shares or units in a fund, then if an investor buys units or shares in the fund the firm will arrange for the depositary or trustee to allocate new units or shares to that investor, and if an investor sells their units then the firm will arrange for the depositary or trustee to cancel units or shares and send the proceeds to the investor. This practice is relatively rare in the UK in contrast with 'acting as principal' below.
Acting as principal
If a firm that manages a fund states that it 'acts as principal' in relation to buying or selling units or shares in a fund, this means that if you buy units or shares, you will buy them from a stock of units or shares held by the firm. Equally, if you sell your units or shares in the fund, the firm that manages the fund will buy them back from you.
Actively managed
The fund's assets are managed through analysis of economic and corporate trends and selection of particular investments to meet a specified investment objective. Contrast with 'passively managed' or 'index tracking'. Annual management fees for actively managed funds are generally higher than those for passively managed or index tracker funds as it involves more individual analysis.
Active managed funds
The IMA definition of an active managed fund is: Funds which offer investment in a range of assets, with the Manager being able to invest up to 100% in equities at their discretion. At least 10% of the total fund must be held in non-UK equities. There is no minimum Sterling/Euro balance and equities are deemed to include convertibles. At any one time the asset allocation of these funds may hold a high proportion of non-equity assets such that the asset allocation would by default place the fund in either the Balanced or Cautious sector. These funds would remain in this sector on these occasions since it is the Manager's stated intention to retain the right to invest up to 100% in equities.
Administration
The provision of services to the fund such as maintaining the register of units or shares, sending distributions or information to investors, valuation or accounting. Such activities may be undertaken by the firm that manages the fund or by a specialist administrator working under contract to the firm that manages the fund.
Alpha
In relation to investments, returns earned that are in excess of the return generally available from the market concerned, which involves buying assets whose prices are more volatile (see 'volatility').
Annual management charge (AMC)
An annual fee paid to the firm that manages a fund, which is paid out of the fund. The fee covers the costs of investment management and fund administration. Currently, the firm that manages a fund may choose to pay commissions to advisers or to fund supermarkets or platforms out of this fee. The fee is expressed as a percentage of the value of a fund. It is normally calculated and accrued on a daily basis and payable monthly in arrears. The AMC forms part of the ongoing charges figure or Total Expense Ratio (TER) of a fund, required by regulation to be disclosed in the Key Investor Information Document or Simplified Prospectus of a fund respectively. As a management fee is based on a percentage of a fund value, the firm that manages the fund has an incentive to improve the value of the fund.
Annual Report and Accounts
The annual report prepared by the firm that manages a fund, which includes its audited accounts and a report on investments and results for the financial year (also known as the 'long report'). It is available from the fund manager within four months from the end of each financial year. See also 'Short Report and Half Yearly Report'.
Assets of a fund
Used generally to describe the investments that a fund owns.
Asset classes
The types of assets in which a fund may invest (eg. shares, cash, fixed interest securities (bonds) and property). Different asset classes have different characteristics in relation to income and capital generation, which may be better suited to different phases of economic cycles and to different investor risk appetites and needs.
| Asset class | Income | Capital |
| Cash | Varies with interest rates | Stable |
| Bonds | Fixed | Variable except upon the end of the life of the bond |
| Shares (equities) | Variable depending on profitability | Variable depending on corporate performance and levels of demand |
| Property (real estate) | Variable depending on general market rental rates | Variable depending on levels of demand |
Asset allocation
The allocation of a sum of money (or a proportion of the fund) for investment in particular asset classes - for example, as between shares, cash, fixed interest securities or property.
Asset value
The value of the assets that a fund owns at current market prices.
Audit
An independent examination of an entity's financial records. All authorised investment funds offered to the public in the UK are required to be independently audited and must prepare their accounts to certain standards (see 'Statement of Recommended Practice').
Authorisation
Permission granted by the UK financial services regulator to an entity that meets the regulator's requirements to conduct a specified financial sector activity or range of financial services activities. Those whose business it is to manage money for investors in the UK are required to be authorised, as are those who act as managers of investment funds, or as trustees or depositaries or custodians to funds. Funds that are offered to the public in the UK must also be authorised, as must entities providing financial advice. It is illegal in the UK to undertake investment actvity by way of business unless authorised or exempted.
Authorised Fund Manager (AFM) - see 'Fund manager'.
Authorised Corporate Director (ACD)
A fund that is created under UK law as an 'investment company with variable capital' (ICVC) - commonly called an OEIC - is required to have as a director of the fund a firm which is authorised by the UK financial sector regulator to manage such a fund. This firm is known as the 'Authorised Corporate Director' or 'ACD'.
Authorised investment fund
A unit trust or an investment company of variable capital (OEIC) created under UK law that has met the requirements of the UK financial services regulator for a fund permitted to be offered to the general public in the UK.