GLOSSARY

F- J

Fiduciary

A person with a duty to act in the best interests of another person, e.g. and executor of a deceased estate must act in the best interests of the beneficiaries and in accordance with the terms of the will of the deceased.

Financial assets

Assets that people invest in, and that a value can be placed on. They're divided into broad categories called assets classes.

Financial Information Service (FIS)

A not-for-profit financial education and information service that's available to anyone.

Financial Services Guide (FSG)

A document that can assist you in deciding whether to use the services of an adviser. The document explains what services the adviser offers, how she operates, how the advisers gets paid (including any commissions), how she deals with customer complaints, and any interests, associations or relationships that might influence the advice the advisers give.

Financial services licensee or license

A person who holds a financial services license

Financial product

defined in Division 3 of Part 7.1 of the Act

Fixed income bonds

Fixed income and bonds are the world's biggest asset classes. Understanding how they work will help you see how they can fit into your investment portfolio.

Fixed interest investments

Relatively low-risk investments that are effectively like term deposits, but not necessarily as secure. A person gives money to a bank, company or government and, in return, it promises to pay the person a certain amount at set periods and repay the original amount after an agreed period of time. These investments can be traded before they're due to be repaid.

Fixed model portfolio weighting

When a provider makes trades during rebalancing to ensure the proportions of the personal portfolio, attribute to each model portfolio, remain as originally selected.

Floating model portfolio weighting

When the model portfolios perform differently from each other, relative to the proportion of their personal portfolio, and move (float) away from the model portfolio weights that were originally selected and are not adjusted by the provider.

Forex / FX

An abbreviation of 'foreign exchange'

Foreign sourced income

As a general rule, Australian tax residents pay tax on income from foreign sources, but how this works in practice can be affected by the operation of Australian double taxation agreements (DTA) with various countries. On top of this, Australia's tax legislation contains a range of tax concessions and exemptions for specific items of foreign source income.

Forward exchange contract

An agreement to exchange one currency for another currency on an agreed date (for any date other than the 'spot' date)

Forward points

The interest rate differential between two currencies expressed in exchange rate points. The forward points are added or subtracted from the spot rate to give the forward or outright rate.

Forward rates

The rate at which foreign exchange contract is struck today for settlement at a specified future date.

Forward contract

The contract undertaken at the forward rate as specified above.

Franked dividend income

Australia's dividend imputation system allows companies to attach franking credits to dividends in proportion to the amount of company tax already paid in the earnings. A fully franked dividend means that the dividend is paid out of earnings on which the full 30 percent company tax rate has been paid. Investors can claim a credit for the company tax paid before paying income tax on the dividend income.

Franking credits

Pre-paid tax on franked dividends from shares. This pre-paid tax can count towards any other tax that a super fund has to pay, reducing any tax payable on concessional contributions or capital gains.

Fringe benefits

Items such as cars, low-interest loans and car parking, this individual may include in salary packages

Fringe benefits tax

One of those Johnny-come-lately taxes that the Australian Government introduced to claw back taxes lost due to workers reducing the income tax they paid by packaging fringe benefits.

Full vesting

Where a member is entitled to the full benefit accrued in their name in a superannuation fund.

Fund

Pooled investment product

Fund Choice

A person having a say over what type of superannuation fund he can join. Fund choice is different from investment choice, which means a person has a say over where a fund invests his super.

Functional currency

The currency that a business prepares its accounts in. This may not be the domestic currency of the country in which the business is mainly based.

Fund of fund investment option

An investment option where the investor selects a general risk profile but the super fund or master trust provider selects the underlying investments from a range of products managed by external investment managers. Can also be referred to as multi-manager options.

Fund manager

An organisation that specialises in the investment of a portfolio of assets on behalf of individuals and organisations, subject to the investor's guidelines. Also referred.to as an investment manager.

Gearing ratio

The proportion of the market value of the security that the debt represents, expressed as a percentage. Lenders apply a maximum gearing, or loan to valuation, ration to margin loans, depending on the volatility of the securities in the portfolio.

Genuine redundancy payment

A payment that represents the amount that exceeds what the person who has been made redundant would have received had he voluntarily resigned in other circumstances

Genuine redundancy tax-free amounts

The amounts of the genuine redundancy payment that an individual can receive tax-free

GDP

The total value of all the goods and services produced within a country's borders.

Glossary

A list of complex definitions made up by superannuation experts to confuse their customers.

Gorillas

A company that has the greatest market share in a particular industry without having monopoly. A gorilla usually has greater leeway in its decisions. For example, it may charge a higher price for its products without fear of losing too much business.

Governing documents

These documents set out the rights and obligations of product providers and unit holders and include:

  • scheme constitutions and compliance plans for managed investment schemes
  • insurance policies for investment life insurance products
  • governing rules of the fund, including the trust deed, for superannuation funds.

Statements made in PDSs and other documents relating to the product need to be consistent with statements in the governing documents.

Governing rules

See Trust Deed

Government bonds

The largest sector of the bond market by size are bonds issued by governments. Investors like lending money to governments because, in theory, they can just increase taxation rates if they need money. As a result, governments should never run out of money to repay their debts - this makes them low-risk borrowers and highly favoured by investors.

Government Superannuation Plan

A fund run for government employees. Similar to corporate funds except the members are public servants.

Gross income

Income before any tax is deducted

Group life insurance

Insurance arranged for a group associated in some way (e.g. superannuation fund members), for whom certain assumptions about an average state of health can be made. Premiums are often cheaper for each individual in the group than if the person had arranged their own insurance. Most funds acquire group life insurance for each member up to certain levels (the automatic cover limit) without having to provide evidence of insurability or good health.

Growth assets

Growth assets are those that are expected to grow in value over time. The reason their value grows is that the income they produce (usually in the form of profits and dividends) also grows. Investors know that an asset that produces a growing income is worth more to them than an asset that produces an income that doesn't change.

Growth investment manager

An Investment manager that picks stocks in which to invest where prices are likely to move with the market and economic trends. Sometimes referred to as 'momentum managers'.

Growth options

See balanced Option

Growth pensions
See term allocated pensions.

Guaranteed payment period

A period of time that another person can continue to receive income payments, or a lump sum, after the person originally receiving the income stream dies.

Hedging

A hedging transaction is one which protects as asset or liability against a fluctuation in the market.

Hedge fund

An investment fund that invests into financial instruments not normally available to mainstream investors, e.g. derivatives and options, and trades on these tactically and strategically. Reflecting these approaches, hedge funds generally do not follow normal benchmarks.

Holding lock

When an investor transfers an existing stock holding into the SMA and fixed this holding at a level of their choice . When the investor's personal portfolio is rebalanced, the nominated stock holding is maintained at, or above, the selected level. This is often used to protect tax parcels.

Home equity loan

A loan that allows people equity in their homes to borrow against that equity for personal or investment purposes. Investors may also be able to nominate a portion of the equity in their home (the availability equity) as security for a margin loan. The maintenance of separate home loan and margin loan accounts helps keep the borrower's tax position simple.

Implemented consulting

An extension of traditional asset-consulting services where investment advice and funds management are combined into the one service. Effectively, this allows a superannuation fund to delegate the role of selecting investment managers to the asset consultant. It is an extension of a super fund outsourcing its administration function.

Imputation credit income

Imputation credits are itemised separately and included in taxable income. These are credits investors receive if a company they invest in directly or indirectly through a managed fund has already paid tax on income from which they have received a distribution. These credits can be used to offset other tax liabilities.

Income stream

The cash flow of an asset. Usually paid to the owner on a regular basis and may represent a large part of the return (as in the case of bonds) or a smaller part.(as in the case of equities).

Independent review

Independent reviews can be undertaken by parties that are not directly involved in the unit pricing functions. For example, independent review may be undertaken by internal audit, the compliance unit, the risk management unit, external auditors, actuaries or by the other external advisers, depending on the circumstances. Product providers must decide who is the appropriate entity to undertake the independent review, based on the circumstances and taking account of legal obligations.

Indexation

A method of adjusting thresholds or prices by linking them to a certain measure such as inflation or a rise in wages. The aim of indexation is to reflect amounts in today's dollars.

Indexed

An income levels or rates or amounts that are adjusted annually in line with increases in average weekly earnings or inflation or another measure.

Indexed income stream

See indexed pension

Indexed investment management

When your super fund's investment managers try to match, or replicate the performance of the investment markets. E.g. if the Australian share market returns 10 per cent, an indexed investment manager should have earned 10 per cent. The main reason for using an indexed investment manager is that their fees can be lower.

Indexed pension

An income stream that increases in line with inflation or increases in average weekly earnings.

Individually Managed Account (IMA)

A managed account where the professional investment manager manages investment portfolios and implements different investment decisions across the accounts based on the personal circumstances and objectives of each investor.

Industry fund

A multi-employer superannuation fund, in many cases established by parties.to an industrial Award, e.g. employer associations and unions, usually covering a specific industry or range of industries.

Inflation-linked

Revenue is linked to inflation. In many infrastructure contracts the government or regulator allows the operator to increase prices on tolls in line with changes in the cost of living.

Infrastructure

The physical assets which society requires to facilitate its orderly operation. These come under the heading of transport, energy, water, communications and social.

Inherited tax liabilities

When an investor purchases a pooled unitised fund, they also buy the realised and unrealised gains. Accordingly, a portion of the price may be attributed to previously derived Capital Gains Tax (CGT) income. The investor would then be entitled to a distribution of this income which be taxable.

Investment philosophy

A manager's investment philosophy represents the firm's basic set of investment beliefs.

Investment risk profile

Investment risk profile is a description of what type of investor you are. This can encompass how much investment risk you are willing to take, your investment time horizon and what level of volatility (performance variability) you are prepared to accept.

In-house superannuation fund

The same as a corporate superannuation fund.

IMAP

Institute of managed account providers. The industry body representing managed account professionals set up in 2006.

In-the-money option

An option with intrinsic value. A call option is in the money if its strike price is below the current spot price. A put option is in the money if its strike price is above the current spot price.

In-specie contribution

A non-cash contribution to a super fund; for example, transferring the title of an office into the name of the fund's trustees or transferring ownership of shares

In-specie transfer

When an investor's existing stocks are transferred into their personal portfolio.

Instalment gearing

A loan that can be drawn down in regular instalments, usually monthly, and used to accompany a savings plan.

Insurance

Financial protection against a possible future event with the terms of coverage specified in the policy document. Insurance normally offers protection for individuals, families and other dependents in the case of death and disability where the protection is against injury or ill-health which would prevent normal employment.

Interdependency relationship

A close personal relationship between two people who live together, where one or both provides for the financial and domestic support, and care of the other. This definition can include parent-child relationship that don't fall within the definition of death benefits dependant, and sibling relationships.

Intellectual property

From an SMA perspective, this is the stock picking strategy of the model provider

Inter-vivos trust
A trust established by deed during the lifetime of the settlor, in contrast to a testamentary trust.

Interstate/Intestacy

A person who dies without leaving a valid will dies interstate. The person's deceased state is managed by an administrator.

Intrinsic value

The value of a security, justified by factors such as assets, dividends, earnings, and management quality.

Invalidity component

An invalidity payments known as concessional component or a post-June 1994

Investment choice

Where members of a superannuation fund are able to choose from a range of investment options how their money is invested. Same as Member Investment Choice.

Investment manager

An organisation that invests a portfolio of assets on behalf of other individuals and organisations, subject to the guidelines set out by the individual or organisation. Also referred to as a fund manager.

Investment option

One of the investment choices from which the member may choose to invest if the fund offers investment choice.

Investment menu

The full list of a super fund's investment choices.

Investing

The act of purchasing an asset or an interest in an asset.

Investment choice

A feature of a fund through which a member has a say over where his super fund invests his super

Investment income tax

Tax payable by a super fund on assessable income, including a fund's investment income

Investment manager

An investment specialist hired by a trustee to invest super money on the trustee's behalf.

Investment strategy

A formal plan identifying the super fund's financial goals (investment objectives) and the fund member's tolerance for risk and the investment time horizon

Issue price

The amount a person pays to subscribe for a warrant. May also be called 'premium'.

ITS

Integrated Trading System is the name of the computerised trading system used by ASX to trade equities, options, warrants, interest rate securities and some futures.

Legal disability

A person who is unable to give a legally enforceable promise is under a legal disability. This includes persons under the age of 18 and individuals who are insane or otherwise mentally impaired.

Legal personal representative

Also referred to as a personal representative, executor, or administrator.

Licensed adviser

An adviser that has satisfied specified criteria and certain standards under the Financial Services Reform Act 2001. Only licensed advisers can call themselves a 'financial adviser' or a 'financial planner.'

Life expectancy

A statistically based average of the number of years a person is expected to live. Statisticians can measure life expectancy at birth or during a person's life.

Life expectancy age

You're expected to live to this age, on average

Life expectancy pension

A guaranteed income stream for a fixed period representing a person's life expectancy

Life income streams

See lifetime pension

Life interest

A beneficial interest in the income of a testamentary trust for the lifetime of the beneficiary. The capital of the trust passes to the remainder man on the death of the tenant. Likewise, a life estate is an interest in the land that terminates on the death of the beneficiary.

Life Insurance

See death cover

Life tenant

A beneficiary who has a life estate; also known as life beneficiary

Lifetime indexed pension

An indexed pension payable for life. Many lifetime pensions also pay a reversionary pension.

Lifetime pension (or lifetime annuity)

A guaranteed income stream for a person's lifetime and maybe the spouse's lifetime too.

Limited Liability Company (LLC)

A

Limited Partnership (LP)

Most private equity firms structure their funds as limited partnerships. Investors represent the limited partners and private equity managers the general partners. Australian private equity funds are often structured as unit trusts.

Liquidity

Publicly traded assets, such as trusts and companies whose securities are listed on stock exchanges, provide investors with the ability to enter and exit the investment relatively easily.

Liquidity support vehicle

Mechanism that allows investors in illiquid assets to quickly convert their holdings into cash if they wish.

Liquidity premium

This is the additional return for investing in a security that cannot easily be turned into cash.

Listed asset

A company that is publicly owned and listed on a recognised exchange.

Listed debt

Debt traded on an active exchange. Listed debt can include corporate bonds and hybrids.

List investment companies

These are type of investment fund that is incorporated as a company listed on the ASX. Investors buy or sell units in a LIC by buying or selling shares in the company listed on the ASX

Listed property

Constitutes shares in property companies or units in property trusts listed on the Australian Stock Exchange.

Loan to Valuation Ratio (LVR)

Also called 'loan to value ratio' this is the amount you can borrow as a percentage of the value of the security. For example, a loan of $50,000 secured by a portfolio valued at $50,000 would be 50 per cent LVR.

Lock-up

A provision in the underwriting agreement between an investment bank and existing shareholders that prohibits corporate insiders and private equity investors from selling at the time of the offering.

Long and short positions

When you buy a financial instrument, you have a long position. When you sell a financial instrument, you have a short position.

Longevity risk

The chance of a person out living their retirement savings.

Lost member

A member whom a super fund is unable to contact.

Lost member register

A central register keeping records of lost members and their super accounts

Lower transitional ETP Cap

An ETP paid under transitional rules receive the maximum concessional tax treatment available up to this cap. Note that an ETP is not a payment from a superannuation fund. Contact the Australian Taxation Office for more information.

Low Income Tax Offset (LITO)

A tax offset available to all taxpayers on lower incomes

Low-rate cap

A lifetime limit that applies to superannuation lump sum paid from a taxed benefit after the age of 55 but before the age 60.

Lump sum

In superannuation terms, the benefit taken as a single payment, rather than taken as a pension or annuity.

Lump Sum Reasonable Benefit Limit (RBL)

The limit on the amount of concessionally taxed benefits an individual is able to receive over their lifetime from one or more superannuation funds, RSAs or other sources when taken as a lump sum. In an attempt to discourage the taking of lump sum benefits, the lump sum RBL is lower than the pension RBL.

Lump sum tax

The tax payable on a lump sum superannuation payout. There can be as many as six components of an Eligible Termination Payment for tax purposes.

Macroeconomic

Focuses on the major aggregates, such as gross domestic product and the balance of payments, and the links between them in the context of the national economy.

Managed Discretionary Account (MDA)

An umbrella term used to refer to any services where the clients hand in their money or other assets to the MDA operator and give that operator the discretion to managed those assets on their behalf.

Managed fund

A financial product where the money of many investors is pooled into one investment vehicle and the assets are invested according to a single investment strategy.

Management Expense Ratio (MER)

The expenses of a fund (e.g. investment, administration, trusteeship) as a proportion of the fund's asset value.

Management fee

The fee charged by a superannuation fund's operator(s) for investment management, administration, trusteeship.

Managed growth funds

To obtain a greater return through capital growth; lower income streams.

Managed Investment Scheme (MIS)

Also known as 'managed funds', 'pooled investments' or 'collective investments'. It is a scheme where money is pooled together with that of other investors in exchange for an interest in the scheme.

Managed Treasury Fund

One of the ranges of wholesale trusts offered the funds.

Management group

This comprises the lead manager and co-managers

Margin

The difference between buying and selling rates/prices of investments, e.g. units in an investment trust.

Margin call

A margin call occurs when the loan to valuation ratio exceeds the borrowing limit and the buffer. When the markets fall and asset values go down the LVR will go up. Once a margin call is made the investor must take action to restore the account to its appropriate LVR.

Marginal rate of tax

The rate of income tax payable on a person's top portion of income earned.

Mark to market

A valuation method where, at then end of each trading day, security holders re-price their assets in line with the market value. Listed assets immediately reflect current valuations on their securities . Unlisted assets are re-valued on a periodic basis

Market-linked income stream

See term allocated pension

Market-linked pension

See term -allocated pension

Market maker

A firm quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread.

Master trust (fund)

A trust, which allows a large number of unconnected individuals and/or companies to operate their superannuation arrangements under a common trust deed. This allows economies of scale in the operation of the trust resulting in cheaper costs for individual investors and/or companies. Life companies, banks and other specialist superannuation service providers promote master trusts. Effectively a retail super fund with member investment choice.

Maturity

Bond maturity refers to how long until the bond, or the debt, is fully repaid.

Maximum Deductible Contribution (MDC)

The maximum amount of superannuation contributions that can be made by a self-employed person, or an employer for an employee, to a complying superannuation fund or RSA and claimed as a tax deduction.

Maximum superannuation contribution base

An indexed limit, up to which an employer can contribute 9 per cent of an employee's salary. If a person's income for Superannuation Guarantee purposes exceeds this base, the employer makes contributions on the basis of the maximum superannuation contribution basis of the maximum superannuation contribution base.

Means Testing (or means test)

An assessment of any resources a person may have available to support himself. In relation to the Age Pension, whether a person already has enough and resources to look after himself.

Medicare levy

A tax that the Federal Government imposes on Australian taxpayers to help fund the country's public health system.

Medicare levy threshold (seniors)

If the income of an individual of Age Pension Age is under the this threshold, the individual is not required to pay the Medicare levy.

Medium-term investment

An investment which generally matures between two and five years.

Megatrend

Major developments with huge and potentially enduring implications globally, like urbanisation, climate change, the scarcity of fossil fuels and the burgeoning population growth

Member Contributions Statement (MCS)

A special form your super fund must lodge with the Australian Taxation Office and the details all contributions to the fund.

Member investment choice

Where members of a superannuation fund are able to choose from a range of investment options how their money is invested. Same as Investment Choice.

Member protection rule

A requirement that super fund must follow and that means super fund's annual administration fee can't be greater than the investment return credited to a member's account, if the account balance is less than $1,000

Member statement

An Annual summary of a member's benefit in the super fund, including how much money is in the member's super account and contributions made during the year.

Mezzanine Finance

A form of finance that combines debt and equity components to provide flexibility to the investor and the company. Mezzanine investing is riskier than traditional senior debt since the debt portion is in the form of subordinated debt (the level of financing senior to equity but below senior debt). Thus, if a company goes into liquidation subordinated debt financiers will rank below senior debt financiers in the credit chain.

Minimum trade size

When securities in a personal portfolio are only traded if the trade size meets the specified size. It is the smallest trade that can be done in a personal portfolio.

Model portfolio

Model portfolios are similar to regular retail managed funds. The difference is that in a retail managed fund, the investor buys in the fund and investment decisions are made collectively by the investment manager on behalf of all the managed fund's investors. In a model portfolio, the investor owns or has 'beneficial ownership' of the underlying investments.

Model portfolio manager

The manager of the model portfolio (referred to as the model portfolio adviser, model provider or the fund manager).

Monitoring body

defined in section 910A of the Act

Mortgage funds

Mortgage credit funds offer yields above that of cash term deposits and most offer

MSCI World Index

A benchmark for international equity performance typically used by traditional equity fund managers.

Multi-manager investment option
An investment option where the monies are assigned to several investment managers. See also Fund by Fund Investment Option.

Negative gearing

The income produced by the investment is less than the interest on the borrowing used to purchase the investment.

Net Asset Value (NAV)

The value of a fund's holdings, which may be calculated using a variety of valuation rules.

Net IRR

The internal rate of return net of management expenses and fees.

Net Present Value (NPV)

A project's net contribution to wealth. It is the present value minus the initial investment. It computes the expected value of one or more future cash flows and discounts them at a rate that reflects the cost of capital.

Netting

When buys and sells are matched and off-set against each other. Can be done at both portfolio and scheme level.

No-negative equity guarantee

A mortgage contract guarantee that the debt is never going to exceed the value of your home.

Nominal interest rate

The interest rate expressed in money terms.

Nominal return

The rate of return in simple monetary terms with no allowance for inflation. For example, in a year where the investment return was 10 per cent and inflation.8 per cent, the nominal return is 10 per cent but the real (after inflation) return is 2 per cent.

Nominated beneficiary (or nominated beneficiaries)

A person (or persons) whom a fund member nominates to receive the super if the member dies. Anyone nominated must be a dependent or a person's legal representative

Nominated representative

Generally a financial adviser, or professional adviser, who will provide all instructions to the SMA provider on behalf of the investor

Non-beneficial ownership

As opposed to beneficial ownership. Usually when the clients invests in shares within a unitised managed fund.

Non-binding nomination

A type of nomination that helps the trustee to decide who is eligible for a death benefit, especially when a lot of people may claim to be financially dependent.

Non-commutable income streams

An income that can't be converted into a lump sum payment

Non-commutable lifetime pension

A lifetime pension (or annuity) that can't be converted to a lump sum amount

Non-complying fund

Where a superannuation fund fails to meet prescribed Government standards and conditions, and as a result does not qualify for concessional tax treatment. Funds can be non-complying either through choice or because there are operational shortcomings.

Non-concessional contributions

After-tax contributions including spouse contributions and contributions made under the Super Co-contribution Scheme

Non-concessional contributions cap

The level of non-concessional contributions that can be made each year before penalty tax is payable.

Non-contributory superannuation

Type of superannuation in which the member does not personally contribute.

Non-dependants

Individuals who aren't dependants and, ordinarily, can only receive a death benefit when first paid to the deceased member's estate

Non-preserved benefit

A benefit that is either restricted or unrestricted.

Non-resident

Anyone entering Australia on an eligible temporary resident visa

Not-for-profit funds

Super funds such as industry funds, public sector funds and corporate funds

Offer

The rate at which a dealer is willing to sell the base currency

Omega ratio

While both the Sharpe and the Sortino ratios rely on an assumption of returns being normally distributed, the Omega ratio does not make such an assumption. As a result it is a relative measure of the likelihood of achieving a given return. The higher the ratio the better.

Ongoing fees and charges

Same as management fee.

Online calculators

A calculator that's accessed via the internet, and that can be used to work out how much a person is likely to need in retirement, or how much life insurance he may need, or how much a fund charges in fees.

Open position

Any transaction that has not been settled by a physical payment or is matched by an equal and opposite deal for the same value date.

Opportunity sets

Market dynamics providing investors with significant upside opportunity and limited downside risk that focus more on the long-term than today's trading fundamentals

Options

Options are similar to an insurance contract. For a premium, the purchaser can insure against an adverse exchange rate. If the insured exchange rate moves adversely for the purchase, the purchase can exercise the option. If the exchange rate moves favourably, the purchase can abandon the option and take advantage of the favourable exchange rate. The buyer has the right but not the obligation to exercise the option.

Organisation for Economic Cooperation and Development (OECD)

Formed in 1961 to promote cooperation among industrialised member countries on economic and social policies. The 25 members are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, UK and USA.

Out-of-the money option

An option with no intrinsic value, i.e. a call whose strike price is above the current spot price or a put whose strike price is below the current spot price. Its value is solely time related.

Outright forward

A foreign exchange transaction involving either the purchase or the sale of a currency for settlement at a future date. It is the same as a forward contract.

Outright rate

The forward rate of a foreign exchange deal based on the spot price plus or minus the forward point, which represents the difference in interest rates between the two currencies.

Over-the-counter

Over the Counter ("OTC") means that you do not trade in a CFD through an exchange or market; rather, it is a transaction between you and the CFD provider.

Uncertified securities

Electronic record of share ownership; original share certificate is not issued.

Underinsurance
When there is not enough insurance to cover the value of the insured property.

Under/outperformance

The measure of performance against an index, competitor or any other benchmark.

Under/overweight

Underweight is less than the benchmark holding in an asset class; overweight is greater than the benchmark holding.

Underwriter

An institution that supports the issue of securities by a client and agrees to buy any securities not bought by investors.

Underwriting banks

Banks that agree to purchase any unsold notes at the issue and future rollover dates

Undistributed income

Generally, where some of the income is retained in the unit trust, the trustee is held responsible for tax on that amount, and the undistributed income in the unit trust is taxed at the top marginal rate. Such high tax rates apply to discourage investors hiding income inside trusts.

Unfunded

Relates to unfolded public sector arrangements, which means the Government hasn't coughed up the cash for super contributions

Unified Managed Account (UMA)

Comprehensive portfolios of individual separate accounts and packaged products, such as mutual funds and exchange-traded funds (ETFs), with a complete asset allocation in a single account.

Unit linked investment

Funds directly link the value of the plan's investments in the fund to the market value of the underlying assets.

Unit price

The value of a company or investment expressed as a single unit. A unit is similar to a company share.

Unit trust

A form of pooled investment trust governed by a trust deed has trustees and is promoted and managed by professional investment managers. Investors purchase units whose value is set either by the market (if the trust is listed) or by the trustee who adjust price according to valuations (if it is unlisted). Unit trusts can include property trusts, equity trusts, cash management trusts.

Unrestricted benefit

This type of benefit isn't subject to preservation and can be accessed at any time, subject to the rules of the super fund.

Untaxed benefit (or untaxed element)

A benefit that hasn't been subject to contribution tax or earnings tax. The benefit is subject to a higher rate of tax than a taxed benefit.

Untaxed Fund

A super fund where the Government hasn't yet paid in the cash for the additional employer contributions it has agreed to pay on behalf of employees.

Untaxed plan cap

The recipient of the untaxed benefit can receive concessional tax treatment of superannuation lump sum benefits up to this limit.

Urbanisation

Denotes the redistribution of population from rural to urban settlements, notably within emerging economies like China and India that have a burgeoning consumer class.

Unlisted asset

A company that is privately owned and not listed on the stock exchange. Unlike a listed company that is publicly owned and listed on a recognised exchange.

Unlisted debt

Debt that is not traded in an active market such as the stock or bond market. Typically the term unlisted debt market refers to the private structured debt market. This type of debt implies complex legal arrangements between share holders, borrowers and lenders.

Unlisted mortgage scheme

A mortgage scheme that is not listed on a public market, such as the Australian Securities Exchange.

Unlisted property trust

A property trust that is not listed on a public market, such as the Australian Securities Exchange.

Unsecured loan

A loan for which no asset has been used as security. The interest rate is usually higher than for a secured loan as there is a higher risk to the lender of not getting their money back.

Unsecured note

A type of fixed interest investment issued by a company whereby it promises to pay regular interest payments and return the capital at the end of the investment term. There is no security offered for the investment.

Unsolicited calls

An unexpected call or visit by an unknown person, trying to sell something.

Unsystematic risk

Exposures that specifically impact on the share price of a particular corporation

Uptrend line

Achieved by connecting the lower points of a rising price series

Utilities

A sub-class of infrastructure assets that includes power, water, sewerage and communications facilities.

Value at risk (VaR)

A statistical probability model that measures financial risk exposures based on historic observations.

Value date

Settlement date of a spit or forward deal

Value investment manager
Investment managers that pick stocks on the basis of the company's inherent potential value. In a low return market value investment managers often outperform because they better identify quality companies.

Vanilla swap

A swap of a series of fixed interest rate payments for variable interest rate payments.

Variable interest rate

An interest rate on a loan that changes from time to time; based on a specified reference interest rate

Variable-rate debt

The interest rate payable on a debt facility may vary from time to time

Vertical bear spread

A combination options strategy; buy a put and sell a call with a higher exercise price

Vertical bull spread

A combination of option contracts with the same expiration date but different exercise prices

Vertical takeover

When the target company in a merger and acquisition operates in a business related to that of the takeover company.

Vested benefit

The amount of vested benefit is the minimum sum which must be paid to a member of a superannuation fund when the member becomes entitled to a benefit on withdrawal.

Volatility

The extent of fluctuation of security prices, interest rates, exchange rates and so on, It is usually calculated by measuring standard deviation, which is the degree of variations of returns around the mean return . Increasing levels of dispersion around the mean lead to higher standard deviation, indicating a higher level of risk.

Voluntary contributions

All contributions other than compulsory superannuation contributions. Individuals under the age of 75 can make voluntary contributions to a complying superannuation fund.

Vintage year

The year a fund was formed.

Warrant

A financial instrument that conveys a right in the form of an option

Warrant code

A six letter code assigned to a warrant by ASX to identify it on ITS.

Warrant issuer

The institution that issues the warrant

Warrant series

All warrants with the same of issue and underlying instrument and having the same warrant issuer, exercise price, expiry date and settlement procedure. each warrant series has a separate warrant code.

Weak form efficiency

Share price changes are independent and not based on historic price data

Wealth channel

The effects of monetary policy changes on asset values.

Weighting

Percentage or proportion of the portfolio invested in each asset class.

Weight average issue yield

The average of the proportional yields bid on a bond issue

White-labeling

Also called "badging". When a party, independent to the SMA provider or responsible entity (such a dealer group, acccountant or broker) badges the SMA services as their own services (eg the third party can choose their own name for their services, the model portfolios they wish they wish to offer, and fee structure).

Wholesale fund

Wholesale funds are designed to cater for professional investors with significantly higher minimum investments amount, typically in excess of $100,000 per fund.

Wholesale investment manager

An investment manager that focuses upon large investments, often from super funds. Wholesale investment managers generally are specialised companies restricted to customers with very large amounts of money to invest.

Whole-of-life policy

A life insurance policy that incorporates a risk component and an investment component, thus accumulating bonuses and a surrender value.

Wholesale market

A direct financial flow transactions between institutional investors and borrowers.

Will

The Last Will and Testament is a formal statement of a testator's wishes as to the disposition of assets of the testator on death. To be valid and effective it must comply with strict conditions.

With-holding tax

Tax levied on dividends paid abroad.

With-recourse factoring

The factor company can recover future accounts receivable bad debts from the firm

Working capital

Finance required by a firm to fund its day-to-day operations

Wrap account

An investment consulting relationship for the management of a client's funds by one or more money managers that bills all fees and commissions within one comprehensive fee.

Write downs

A decrease in the market value of an investment established by a valuation.

Yankee bond

A foreign bond issued into the US capital markets; issued in USD by a foreign borrower.

Yield curve

A graph, at a point in time, of yields on a particular security with a range of terms to maturity

Yield to maturity

The return received on an investment held until its maturity date; expressed as a percentage

Yield

The total rate of return on an investment, comprises investment income and capital gains (or losses)

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