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Through this investment strategy the portfolio manager tries to gain positive profits - independently of the performance of a certain benchmark. On the contrary, the more traditional managed funds aspire to outperform their benchmark.
Arbitrage transactions are characterized by taking advantage of price differences of equal or similar objects at a certain point of time and different trading venues. Occasionally a trader can use information advantages to buy a share at a lower price at stock market X than the offered rate at stock market Y. Similar chances can be taken through the purchase of bonds with various maturities, options as well as warrants, convertible bonds and currencies.
ABS are instruments, which are collateralized with assets. These can be loans or receivables like car loans, mortgages, credit card receivables and many more. Dependent on the type of the assets the ABS are labeled differently.
Asset Management is the professional administration of assets. Asset manager invest the available capital corresponding to their investment principles and the risk/return expectations of their clients.
Based on a Benchmark as a reference value a portfolio manager’s success is measured. If the manager deals with securities the Benchmark can be a stock exchange index. A successful manager is able to outperform his respective Benchmark. This does not mean that the rate of return has to be positive in all possible cases. If the Benchmark’s rate of return indicates a negative value of 12, a negative value of 10 is a success and outperformance for the manager. Otherwise, if the Benchmark’s rate of return indicates a positive value of 25, a value of 20 is little successful.
Bridge Financing is a possibility to bridge the time and financial requirements until the scheduled IPO commences. Afterwards the raised capital can be returned with the earnings through the IPO.
A Buyout is the acquisition of a company or parts of it through purchase.
Dachfonds investieren ihr Fondsvermögen nicht direkt in einzelne Wertpapiere, sondern erwerben ihrerseits Anteile an anderen Fondsvermögen.
Derivatives are financial instruments, whose price development depends on the development of other instruments called underlyings. Different instruments as securities, indices, commodities, currencies and many more can be used as an underlying. Derivatives are forward contracts with which two counterparts determines the conditions of a future transaction. These conditions are underlying, duration, maturity, exchange ratio, the contract’s volume and price. Transactions that are realized without delay (e. g. the purchase of a security) are called spot transaction.
This kind of investment is linked to the overall market development. Therefore every kind of share investments is a Directional Investment. Non directional investments are called market neutral as well.
Means the distribution of the invested capital on many different single investments. Generally the aim is a reduced aggregate risk. For instance Diversification can be realized in regard to asset classes, issuers, regions, sectors or currencies.
Means a structural analysis of a company, manager or fund with the aim of supporting an investment decision.
Early Stage Financing is provided to an emergent company that is not listed (as) yet. The capital given is designed to build-up manufacturing and distribution units.
Efficiency or market efficiency is a rather general concept in economic theory. A market is efficient, if any relevant information for a valuation of the traded object is reflected by the prices in any point in time. An efficient portfolio is characterized by a condition, in which – on the basis of the expected rate of return and volatility – there is no other portfolio that has either the same volatility and a higher rate of return or the same rate of return and a lower volatility.
The designation Emerging Markets is used for stock markets in emerging countries. Particularly these are markets in Latin America, South-East Asia and Eastern Europe.
Is a fund whose strategy is to invest in renewable energy projects as solar, wind power, biomass, hydro power or geothermal energy. Also known as regenerative energies.
This strategy is a hedge fund-strategy that is built on certain incidents on markets. Events, which are the base for this strategy, are primarily takeovers as well as financial or operational restructuring.
Expansion Financing is provided to a company for the extension of manufacturing and distribution units.
Debt is a type of capital that is usually raised as an interest-bearing loan and provided for a certain period in time (e.g. for consumption purposes or for an investment in financial instruments). The latter is risky, because of the fact that debt along with interest has to be repaid to the creditor independently of the performance of the acquired financial instrument.
The decision process in this trading strategy is based on data that are directly related to or arise from the trading object (e. g. corporate data for an investment in shares or the demand for commodities respectively their quality.
A Future is a bilateral binding contract that stipulates the terms of the contractual item and the price for the prospective trade. The factual accomplishment (delivery and payment) takes place at a future date. Since there is only a certain quota of the actual value provided as a deposit, the Future allows an investment that amounts a multiple of the initially available financial resources.
A Global Macro Strategy is a hedge fund strategy that is based on a macroeconomic analysis of developments in the Economy and in Politics. This strategy tries to predict economic, political or societal caused changes of stock prices and to use them profitably.
A Hedge Fund is a special kind of an investment fund, which invests its capital not in accordance with traditional but sophisticated strategies. The main differences in relation to conventional investment funds are in particular their complex strategies and investment techniques. Hedge Funds uses sophisticated risk management systems, leverage for investment purposes and short positions to take an advantage of market inefficiencies. Summarizing Hedge Funds invest into traditional asset classes (like shares and bonds) but employ alternative strategies.
Leverage means that the invested capital depends in a proportion higher than one on changes in stock prices. Conditional on the magnitude of the Leverage marginal changes of the stock prices can already double the loss or lead into a complete loss of the invested capital. Leverage effects can be realized through the use of Derivatives or by raising and deploying debt financing.
High-Frequency Trading (HFT) denotes the automatic trade with securities and a very short holding period. The trade is executed by computerized systems and enables transactions within split seconds and very high volumes.
Is a portfolio that covers a certain index concerning its composition. An Index Portfolio that is identical with its respective Benchmark will generate exactly the same rate of return as the Benchmark. A Benchmark-oriented investor loses the opportunity of excess returns, if he invests his capital into an Index Portfolio. On the other hand he is hedged against an inferior performance compared to the Benchmark.
These are funds that invest into infrastructure projects like
ILS are bonds that securitize insurance risks and whose payout and refund profile depends on the occurrence of specific risks. The issuer transfers these risks to other market participants through the placement of ILS. Basically insurance or reinsurance companies as well as industrial and transportation enterprises act as issuers.
The profession of Institutional Investors is investing as their business activity. Amongst others insurance companies, pension funds and company benefit and pension scheme institutions belong to this group.
Displays the value of an investment as a proportion of total assets. Through the use of Derivatives and by raising and deploying debt financing it is possible to achieve an Investment Ratio above 100 percent. A negative ratio will be reached through leveraging.
An Investment Fund is a portfolio that combines and invests the money of many investors. The so-called Community Assets are trusted by an investment company for the account of the investors. For their investments they get shares of the company’s assets, whereby they become co-owners of the Investment Fund. These shares can be returned to the investment company or sold.
The Correlation shows a statistical relation between two different series. Diversification effects can be realized, if weakly correlated assets are combined in a portfolio.
It is spoken about Later Stage Financing, if capital is given to a more advanced company. This can happen during the preparation of an IPO (Bridge Financing), on purpose of an improvement of the financial structure, to finance the further development of a company, for acquisitions or restructuring.
It is spoke about Later Stage Financing, if capital is given to a more advanced company. This can happen during the preparation of an IPO (Bridge Financing), on purpose of an improvement of the financial structure, to finance the further development of a company, for acquisitions or restructuring.
The Lock-up Period is a lapse of time after an emission, meanwhile an investor cannot return the financial instrument to the respective issuer. In particular the length of this period is relevant, if there exists no or quite thin trade between the investors. In this situation the only feasible way to divest is the return of the financial instrument to the issuer.
Is a part of economics, which deals with the behavior of the economy in its entirety. Subject of the analysis are for instance the formation and growth of income, the business cycle, inflation and unemployment, the balance of payments, exchange rates or the impact of monetary and fiscal policy.
A Managed Account is a possibility to invest in hedge funds. It is a separately managed client portfolio, which invests with the strategies of hedge funds. The client only needs to pay the transaction costs of his actual investments. Furthermore, he is not affected by redemptions of other investors.
CTA is a governmental registered designation for fund managers in the US, which are acting in the futures market (derivatives) exclusively. Compared to share investments the trading in future markets only ties up a small proportion of the fund capital and a majority of this capital is invested in the money market. However, this means not that the risk of this kind of investment is low.
Investment strategy, whose success does not depend on stock market developments and which is execute through Arbitrage transactions. Market Neutral means not risk-free or low-risk because debt financing is widely used to achieve Leverage effects.
A hedge fund, which is managed by a Multi Manager Strategy allocates his capital into different management styles.
Options are Derivatives, which occur in two different forms: call and put option. They are standardized and traded at futures exchanges. A Option certifies the right to purchase (call option) or sell (put option) an underlying at a certain point in time, to a fixed price and in the agreed quantity. The investor has to pay an option fee for the mentioned right.
The Performance (rate of return) quantifies the value of an investment or a portfolio over time. To classify the success compared to the market or a certain sector it is usual to compare the Performance with a Benchmark. The Performance is measured in percent.
Private Equity is an investment in equity capital or the acquisition of a company that is not publicly traded on a stock exchange. The main characteristic is the high debt ratio to finance the acquisition or participation. The required debt is taken by bank loans and/or by issuing bonds. The debt service of the loans will be covered by the future income of the target company or the sale of assets.
Public equity is defined as equity, which investors provide to companies in the form of shares in a stock market placement.
In the case of a real estate investment, real estate is acquired for whatever purpose (for example, office or residential real estate) with the aim of generating a return. Real estate investments can be made by direct investment or through specialized real estate funds, which in turn invest in real estate or stocks of real estate companies. These can be structured as Real Estate Investments Trust (REITs). REITs are listed stock corporations that derive their revenues predominantly from the management or trading of real estate.
The risk-return profile shows the ratio of an expected return to its risk for a particular investment or portfolio.
Real assets are e.g. real estate, energy, commodities, infrastructure, agricultural and timber investments. Also exotic investments like diamonds, art or patents fall under this category.