AIM (Alternative Investment Market) The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange designed for smaller, growing companies. Established in 1995, AIM allows these companies to raise capital with fewer regulatory requirements than the main market, making it attractive to new or innovative businesses. It serves as a platform for early-stage companies to gain access to public investment and provides investors with the opportunity to invest in high-growth potential firms. However, AIM-listed stocks can be more volatile and carry higher risk compared to stocks on the main market due to lower liquidity and less stringent listing requirements.
Accumulation Units Accumulation units are units in a fund where any income generated (such as dividends or interest) is reinvested back into the fund, rather than paid out to investors as cash. This reinvestment boosts the value of each unit, allowing investors to benefit from compound growth. Accumulation units are ideal for long-term investors who are looking to grow their investment over time, as opposed to income units, which pay out generated income regularly. They are often found in funds like pensions and ISAs, where tax-efficient growth is advantageous.
Active Fund Management Active fund management is an investment approach where fund managers actively select and trade securities to try to outperform a specific market index. In the UK, active fund managers research and analyse market conditions, individual company performance, and macroeconomic factors to make informed decisions about which stocks or bonds to buy, hold, or sell. This approach contrasts with passive management, which merely seeks to replicate an index. Active management can potentially lead to higher returns, but it also comes with higher fees and risks, as there is no guarantee of outperforming the index.
Advisory Broker An advisory broker is a type of stockbroker who provides investment advice to clients but does not make decisions on their behalf. Advisory brokers in the UK typically offer recommendations based on market research and analysis, helping clients decide which stocks or funds to buy or sell. This service is particularly useful for investors who want professional guidance while retaining control over their portfolios. Advisory brokerage services come with fees, which may be charged per trade or as a percentage of assets managed.
Alpha In investing, alpha represents the excess return of an investment relative to the return of a benchmark index, such as the FTSE 100. It is a key metric for evaluating the performance of fund managers, as a positive alpha indicates that the manager has added value beyond the market’s overall return. For example, if a fund’s return is 8% and the benchmark index returns 5%, the fund’s alpha would be +3%. Alpha is often used in conjunction with other metrics, like beta, to assess both performance and risk.
Alternative Investments Alternative investments refer to asset classes other than traditional stocks, bonds, and cash. In the UK, popular alternative investments include private equity, hedge funds, commodities, and real estate. These investments are often less correlated with traditional markets, which can provide diversification benefits within a portfolio. However, alternative investments can be complex, less liquid, and often require a longer investment horizon, making them suitable for experienced investors looking to enhance portfolio resilience or seek higher returns.
Annual General Meeting (AGM) The Annual General Meeting (AGM) is a yearly meeting held by a UK company, where shareholders gather to discuss the company’s performance, financial statements, and strategic direction. During an AGM, shareholders can vote on important matters, such as the appointment of board members, dividend payouts, and executive compensation. AGMs provide transparency and allow shareholders to hold company management accountable, making it a crucial event for investors in publicly listed UK companies.
Annual Management Charge (AMC) The Annual Management Charge (AMC) is a fee that investors pay to fund managers for managing an investment fund. In the UK, the AMC is typically expressed as a percentage of the fund’s total assets and is deducted annually. For example, a fund with an AMC of 1% will charge £10 per £1,000 invested per year. This fee covers administrative costs, research, and fund management expertise. While AMCs are standard, high charges can erode returns over time, so investors often look for funds with low AMCs to maximise net gains.
Arbitrage Arbitrage involves the simultaneous buying and selling of the same asset in different markets to exploit price discrepancies. For example, a UK investor might buy shares of a company listed on both the London Stock Exchange and a foreign exchange, selling the shares in the market where they’re priced higher. Arbitrage opportunities are often short-lived due to market efficiency, but sophisticated investors, such as hedge funds, use complex strategies and technology to identify and act on these opportunities quickly.
Asset Allocation Asset allocation is the process of dividing investments among different asset classes, such as equities, bonds, and cash, to balance risk and reward based on an investor’s financial goals, time horizon, and risk tolerance. In the UK, asset allocation is a fundamental strategy for portfolio management, as each asset class has different risk and return characteristics. For example, equities tend to offer higher returns but come with higher volatility, while bonds are generally safer but provide lower returns.
At-the-Money (ATM) At-the-money (ATM) refers to an options contract where the strike price is equal to the current market price of the underlying asset. For example, if a FTSE 100 option has a strike price of 7,500 and the index is trading at 7,500, the option is considered ATM. ATM options are often more sensitive to market movements, making them popular in short-term trading strategies due to their higher gamma, or rate of change in delta.
Authorised Corporate Director (ACD) In the UK, an Authorised Corporate Director (ACD) is the company responsible for managing an open-ended investment company (OEIC). The ACD oversees the day-to-day operations, compliance, and administration of the fund, ensuring that it adheres to regulations set by the Financial Conduct Authority (FCA). ACDs are pivotal in the UK’s fund management industry as they provide investors with assurance that the fund is professionally managed and compliant with regulatory standards.
Authorised Fund An authorised fund in the UK is an investment fund that has been approved by the Financial Conduct Authority (FCA) for marketing to retail investors. Authorised funds, such as OEICs and unit trusts, are subject to regulatory oversight, offering investors certain protections. These funds must follow strict rules on transparency, asset holding, and reporting, making them a popular choice for retail investors looking for regulated investment products.
Average Daily Volume (ADV) Average Daily Volume (ADV) refers to the average number of shares traded per day in a specific security over a set period, such as 30 days. For UK investors, a higher ADV indicates greater liquidity, making it easier to buy or sell shares without significantly affecting the price. ADV is an important metric when assessing a stock’s liquidity, volatility, and potential trading costs, especially for large institutional investors.
Ask Price The ask price, also known as the offer price, is the lowest price a seller is willing to accept for a security. In UK stock trading, the ask price is part of the bid-ask spread, which represents the difference between what buyers are willing to pay (bid) and what sellers are asking. The spread is influenced by factors like market liquidity, demand, and trading volume, with tighter spreads indicating a more liquid market.
Accumulated Dividend Accumulated dividends are unpaid dividends on cumulative preferred shares, which must be paid to shareholders before any dividends can be distributed to common shareholders. In the UK, accumulated dividends are common in preferred stock agreements, where companies must prioritise these dividends during profitable periods. This type of arrangement is favourable for preferred shareholders, as it guarantees that they will eventually receive their owed dividends, even if distributions are delayed.
Active Share Active share is a measure of how much a fund’s holdings differ from its benchmark index. In the UK, a high active share indicates that a fund manager is making distinct investment choices, rather than simply tracking the index. For example, a FTSE 100 tracker fund would have low active share, whereas a UK small-cap fund with unique stock selections would have a high active share. Active share is an important metric for investors seeking fund managers who deliver alpha through active management.
Averaging Down Averaging down is an investment strategy where an investor buys more of a stock as its price falls, reducing the average cost per share. In the UK, this strategy is commonly used in long-term investing, especially if the investor believes the stock will recover over time. While averaging down can improve the potential for profit if the stock price rebounds, it also increases exposure to a potentially underperforming asset.
Alpha Generation Alpha generation refers to the process of creating returns that exceed a market benchmark. In the UK, fund managers aim to generate alpha by identifying undervalued stocks, exploiting market inefficiencies, or using specialised knowledge. Alpha generation is often the goal of active management and is considered a measure of investment skill, though achieving consistent alpha can be challenging due to market competition and efficiency.
Alternative Investment Fund (AIF) An Alternative Investment Fund (AIF) is a collective investment scheme not regulated as a conventional fund, such as private equity or hedge funds. In the UK, AIFs are typically used by high-net-worth individuals and institutional investors seeking diversification or higher returns. The UK’s AIFMD (Alternative Investment Fund Managers Directive) provides a regulatory framework for these funds, ensuring transparency and risk management, although AIFs still tend to carry higher risk than traditional investments.
Annual Allowance The annual allowance is the maximum amount that can be contributed to a pension each year with tax relief in the UK. As of recent tax years, the allowance has been capped, with reductions applying to high earners. Contributing within this allowance provides tax-efficient growth, and exceeding it could trigger a tax charge. This limit encourages long-term retirement savings while maintaining tax benefits.
Accumulated Dividend Accumulated dividends refer to dividends on cumulative preferred stock that have not yet been paid out by the company. In the UK, if a company has cumulative preferred shares, it is obliged to pay any accumulated dividends to preferred shareholders before any dividends are paid to common shareholders. This ensures that preferred shareholders receive their promised returns, particularly in financially difficult times when dividend payments might be delayed.
Analyst Rating An analyst rating is an assessment provided by investment analysts on the expected performance of a stock, typically expressed as “buy,” “hold,” or “sell.” In the UK, ratings from financial analysts are widely followed by investors to gauge a stock’s future performance. Analysts conduct detailed financial analysis, considering factors like company earnings, market trends, and competitive positioning, to guide their recommendations.
AIM Rule 26 AIM Rule 26 is a regulatory requirement mandating that companies listed on the AIM market make certain information available on their websites. This includes details on business operations, board composition, corporate governance, and financial reports. Rule 26 ensures transparency for investors by making essential information readily accessible, which is particularly important given AIM’s focus on smaller, potentially higher-risk companies.
All-Share Index The All-Share Index is a market index that tracks the performance of all eligible companies listed on the London Stock Exchange’s main market. It is one of the broadest measures of UK market performance and includes companies of varying sizes across multiple sectors. Investors often use the All-Share Index as a benchmark to gauge the overall health of the UK economy and to measure individual portfolio performance against a comprehensive market indicator.
Annualised Return Annualised return represents the average yearly return on an investment over a specific period, expressed as a percentage. It is useful for UK investors to compare returns on investments held for different durations. For example, an investment yielding 20% over two years has an annualised return of approximately 9.54%. This metric provides a standardised measure of performance, allowing investors to assess and compare investments more accurately.
Arbitrage Pricing Theory (APT) Arbitrage Pricing Theory (APT) is a multi-factor asset pricing model that explains the expected return on an asset based on various economic factors. Unlike the Capital Asset Pricing Model (CAPM), APT considers multiple sources of market risk. In the UK, APT is used by analysts to understand and predict asset returns based on factors such as inflation, interest rates, and economic growth, offering a sophisticated approach to asset pricing.
Ask Price The ask price, also known as the offer price, is the lowest price at which a seller is willing to sell a security. In the UK stock market, the ask price is part of the bid-ask spread and reflects the current market supply for a particular stock. The spread between the bid and ask prices can indicate a security’s liquidity, with narrower spreads often suggesting high liquidity and ease of trading.
Asset Turnover Asset turnover is a financial ratio that measures how efficiently a company uses its assets to generate revenue. For UK investors, a high asset turnover ratio indicates that a company is effectively using its assets to drive sales, which is a positive sign for operational efficiency. It is calculated by dividing a company’s revenue by its total assets, and it varies by industry, with retailers typically having higher ratios than capital-intensive industries.
Attribution Analysis Attribution analysis is a performance measurement technique that assesses how a fund manager’s asset allocation and stock selection choices contribute to the fund’s overall return relative to a benchmark. In the UK, this analysis helps investors understand whether a fund manager’s decisions are adding value, making it a valuable tool for evaluating actively managed funds.
Average Daily Volume (ADV) Average Daily Volume (ADV) is the average number of shares traded daily over a set period. For UK stocks, ADV provides insights into a stock’s liquidity, as high daily volume suggests easier buying and selling without major price changes. UK investors use ADV to evaluate the level of market activity in a stock, which is particularly useful for high-frequency trading or large transactions.
Asset Allocation Fund An asset allocation fund is a mutual fund that diversifies investments across asset classes, such as stocks, bonds, and cash, to achieve a specific investment objective. In the UK, asset allocation funds are popular for providing balanced exposure and reducing volatility, making them ideal for investors seeking diversified portfolios managed by professional fund managers.
Authorised Unit Trust An authorised unit trust is a UK-based investment fund structured as a unit trust and regulated by the Financial Conduct Authority (FCA). These funds are popular with UK investors for pooling their money to invest in a diversified portfolio of assets. Authorised unit trusts must adhere to strict regulatory standards, ensuring transparency and investor protection.
Average Maturity Average maturity refers to the weighted average time until the bonds in a fixed-income portfolio mature. For UK investors in bond funds, average maturity indicates the fund’s sensitivity to interest rate changes. Longer average maturities mean higher sensitivity to interest rate movements, affecting the portfolio’s value as rates change.
Anchor Investor An anchor investor is an institutional investor who purchases a large portion of shares during an IPO, typically to boost confidence in the offering. In the UK, anchor investors play a key role in securing early interest in IPOs, helping to stabilise the offering by showing commitment to the stock, which can attract further interest from retail and institutional investors.
At-the-Market Offering (ATM) An at-the-market offering allows a company to issue new shares on an as-needed basis at current market prices, rather than at a fixed price. In the UK, ATMs are less common but can be useful for companies needing flexible funding. This approach is advantageous for maintaining steady capital flows without the need for a large, one-time public offering.
Active ETF An active exchange-traded fund (ETF) is a type of ETF that is actively managed to outperform a benchmark index rather than passively tracking it. Although passive ETFs are more common in the UK, active ETFs are gaining popularity as they provide flexibility and potential for higher returns while offering the liquidity and low-cost benefits of traditional ETFs.
Accumulation Index An accumulation index measures the performance of a set of stocks assuming that dividends are reinvested rather than paid out. In the UK, indices like the FTSE All-Share Total Return Index act as accumulation indices. They provide a more accurate reflection of an investor’s returns if dividends are automatically reinvested, useful for long-term growth comparisons.
Accretive Acquisition An accretive acquisition occurs when a company’s earnings per share (EPS) increase due to an acquisition. In the UK, companies make accretive acquisitions to enhance shareholder value. Such acquisitions add value by increasing earnings or offering synergies, often leading to a favourable market reaction if the acquisition aligns well with strategic goals.
Allotment In the context of UK IPOs, an allotment refers to the allocation of shares to investors. The allotment process occurs when a company determines how many shares each investor receives based on demand. This is particularly relevant in oversubscribed IPOs, where some investors may receive fewer shares than requested due to high demand.
Accelerated Book Build An accelerated book build is a fast process by which a company raises capital through the issuance of shares. In the UK, accelerated book builds are commonly used for secondary offerings, allowing companies to issue shares quickly, usually overnight, to institutional investors. This process helps avoid prolonged exposure to market fluctuations and can secure funds efficiently.
Allotment Letter An allotment letter is a document provided to investors confirming the number of shares allocated to them in an IPO or new issue. In the UK, this letter is typically issued after the allotment process and serves as official confirmation of ownership, outlining the number of shares assigned and the price per share.
Alpha Capture Alpha capture refers to investment strategies designed to systematically capture alpha by exploiting inefficiencies. In the UK, hedge funds and institutional investors often use alpha capture models to gain excess returns over benchmarks. These strategies focus on identifying mispriced assets based on quantitative analysis and fundamental research.
Acquisition Premium The acquisition premium is the difference between the price paid for a company in an acquisition and its pre-acquisition market value. In the UK, acquisition premiums are common in mergers and acquisitions, where buyers pay more than the market price to gain control of a company, typically due to expected synergies or strategic advantages.
Asset Swap An asset swap is a financial arrangement where an investor exchanges the cash flows of one asset for another, usually involving a bond with a fixed rate swapped for a floating rate. In the UK, asset swaps are used in portfolio management to adjust interest rate exposure or enhance yields while maintaining credit exposure.
Accumulation Phase The accumulation phase is the period in which an investor builds up their assets, typically in preparation for retirement. In the UK, the accumulation phase is crucial for pension planning, where contributions are made to retirement accounts, and investments are allowed to grow over time to build a sufficient retirement fund.
Appraisal Ratio The appraisal ratio measures the performance of a portfolio manager by assessing their ability to generate alpha relative to unsystematic risk. In the UK, institutional investors use the appraisal ratio to evaluate fund managers’ skills, comparing risk-adjusted returns and isolating returns generated by active management rather than market movement.
Average Price The average price is the total cost of all purchases divided by the number of shares purchased. For UK investors, calculating the average price helps understand the average investment cost per share when buying stock in multiple transactions. This metric is useful in cost basis calculations for determining tax liability on capital gains.
Attribution Report An attribution report is a document that breaks down a fund’s returns and shows how each decision or factor contributed to performance. In the UK, fund managers produce attribution reports to provide transparency to investors, helping them understand the impact of specific investment decisions on overall fund returns.
Asset Beta Asset beta is a measure of the sensitivity of a company’s assets to market movements, reflecting only the firm’s operational risk without the impact of its capital structure. UK investors use asset beta to understand the intrinsic risk of a company’s assets, particularly in unlevered (debt-free) conditions.
Allotment Advice Allotment advice is the formal notice provided to investors about the quantity of shares allocated to them in a share issue. In the UK, this document is typically issued by brokers or the issuing company, providing confirmation of the shares received and instructions on when and how they will be credited to the investor’s account.
At-the-Market (ATM) Order An at-the-market (ATM) order is a type of trading order that is executed immediately at the best available current market price. In the UK, ATM orders are popular among investors who prioritise the speed of execution over specific pricing, particularly in volatile markets where rapid changes can affect prices.
Automatic Execution Automatic execution refers to the electronic process where trades are automatically placed and fulfilled without manual intervention. In the UK, many exchanges and trading platforms offer automatic execution, providing retail and institutional investors with efficient and rapid access to the markets.
Active Risk Active risk, also known as tracking error, measures the volatility of a portfolio’s returns relative to its benchmark. In the UK, active risk is often used to assess the degree to which a fund’s performance deviates from its benchmark due to active management decisions, with higher active risk indicating greater divergence.
Accumulation Bond An accumulation bond is a type of bond that pays interest by increasing the principal rather than making periodic interest payments. In the UK, accumulation bonds are popular among investors looking to defer income and reinvest earnings for long-term growth.
Alternative Investment Fund Managers Directive (AIFMD) The Alternative Investment Fund Managers Directive (AIFMD) is a European Union regulation governing the management of alternative investment funds in the UK and EU. It sets requirements for fund transparency, risk management, and investor protection. The AIFMD affects hedge funds, private equity, and other alternative investments operating in the UK.
All Ordinaries Index (All Ords) The All Ordinaries Index, or “All Ords,” is an index representing Australian stocks, often used in UK contexts for international market comparisons. Though it’s an Australian index, the All Ords is referenced by UK investors as it provides insights into global market trends and is an important benchmark for funds with exposure to Australian equities.
Auction Market An auction market is a trading environment where securities are bought and sold through an open bidding process. In the UK, the London Stock Exchange operates as an auction market during certain trading periods, setting prices based on supply and demand dynamics in a transparent manner.
Adjusted Earnings Adjusted earnings are earnings calculated by excluding one-off or unusual items that are not expected to recur. UK companies often report adjusted earnings to give investors a clearer view of ongoing performance, as one-off items, such as restructuring costs, can distort net profit figures.
Annual Compound Growth Rate (ACGR) The annual compound growth rate represents the yearly growth rate of an investment, factoring in the effects of compounding. In the UK, the ACGR is widely used by investors to evaluate investment performance over multiple years, providing a consistent metric for long-term growth assessment.
Asset Protection Trust An asset protection trust is a legal arrangement in the UK that protects assets from creditors and other claims. Often used by high-net-worth individuals, these trusts are structured to safeguard assets from risks such as legal disputes or business liabilities.
Arbitrage Fund An arbitrage fund is a type of fund that seeks to generate returns by exploiting pricing discrepancies in different markets or securities. In the UK, arbitrage funds are popular among hedge fund investors, who aim to take advantage of inefficiencies and mispricings in stocks, bonds, or derivatives.
Adjusted Closing Price Adjusted closing price is the closing price of a stock adjusted for events like dividends and stock splits. In the UK, adjusted closing prices provide a more accurate representation of a stock’s historical performance, accounting for corporate actions that would otherwise distort the price history.
Algorithm An algorithm is a set of rules or calculations designed to automate trading decisions. In the UK, algorithms are widely used in high-frequency trading, enabling traders to execute large volumes of trades based on pre-set criteria, with minimal human intervention.
Active Trading Active trading involves buying and selling securities frequently to capture short-term gains. In the UK, active traders focus on market timing and technical analysis, contrasting with passive investors who buy and hold. Active trading requires expertise and is often more suited to experienced investors due to higher transaction costs.
Ask Size Ask size refers to the number of shares a seller is willing to sell at the ask price. In the UK, ask size provides insights into the liquidity and demand for a stock. A larger ask size can indicate a willingness to sell significant shares at a given price, potentially affecting market perception, as larger ask sizes may signal selling pressure.
Asset Coverage Ratio The asset coverage ratio measures a company’s ability to cover its debt obligations with its assets. In the UK, this ratio is commonly used by investors and analysts to assess the financial health and risk level of highly leveraged companies. A higher asset coverage ratio suggests stronger financial stability and a greater ability to meet debt obligations.
Accelerated Depreciation Accelerated depreciation is an accounting method where an asset’s value is reduced more quickly in the initial years of ownership. In the UK, companies may use accelerated depreciation to lower taxable income, especially for equipment or machinery that loses value quickly. This practice benefits companies in capital-intensive industries, enabling faster cost recovery.
Authorised Participant (AP) An authorised participant (AP) is a financial institution responsible for creating and redeeming shares in an exchange-traded fund (ETF). In the UK, APs play a critical role in ETF liquidity, as they facilitate large-scale buying and selling to ensure the ETF’s price aligns with the value of its underlying assets, benefiting retail investors with accurate pricing.
Auction Process The auction process is a method for buying and selling securities through competitive bidding. In the UK, auctions are used in government bond sales and certain phases of the London Stock Exchange’s trading day. Auctions ensure fair pricing based on demand and supply, providing transparency for market participants.
Adjusted Beta Adjusted beta is a modified beta value that accounts for the tendency of a stock’s beta to regress towards the market average over time. In the UK, adjusted beta helps investors better understand a stock’s historical volatility and future risk compared to the overall market, which is particularly useful for assessing high or low beta stocks.
Average Price Call Option An average price call option is an options contract where the payoff depends on the average price of the underlying asset over a specified period. In the UK, this option type is used for volatility trading, allowing investors to benefit from average price movements rather than short-term spikes or drops, useful in managing risk in unpredictable markets.
Anchor Point In technical analysis, an anchor point is a reference point on a price chart, often used to identify trends and support or resistance levels. UK traders and analysts use anchor points to establish trends, aiding in decision-making by marking significant price movements or reversals that indicate potential entry or exit points.
Amortised Cost Amortised cost is the original cost of an asset adjusted for principal repayments and interest expenses. In the UK, amortised cost is commonly applied to debt instruments, particularly bonds, allowing investors to track the value of the bond over time as payments are made, rather than using the bond’s current market price.
Arbitrage Opportunity An arbitrage opportunity is a situation where an asset is priced differently across markets, allowing investors to buy low in one market and sell high in another. In the UK, arbitrage is a common strategy among hedge funds and institutional investors who leverage small price discrepancies in stocks, commodities, or currencies for profit.
Annual Equivalent Rate (AER) The Annual Equivalent Rate (AER) represents the interest rate on savings accounts or bonds, taking compounding into account. UK investors use the AER to compare interest-bearing accounts, as it standardises the return rate, allowing comparisons of products with different compounding frequencies, thus simplifying yield calculations.
All Ordinaries Accumulation Index The All Ordinaries Accumulation Index measures the performance of stocks listed on the Australian Stock Exchange, assuming reinvested dividends. UK investors reference this index for insights into the Australian market’s total return performance, particularly those with international portfolios that include Australian stocks or funds.
Alpha Capture Program An alpha capture program is a system that aggregates stock recommendations from analysts and converts them into an actionable trading strategy. In the UK, hedge funds and asset managers use alpha capture programs to systematically implement high-conviction investment ideas, aiming to achieve excess returns over the market or a benchmark.
Accrued Dividend Accrued dividend is a dividend that has been declared by a company but not yet paid to shareholders. In the UK, accrued dividends are accounted for by investors tracking income from dividend-paying stocks, ensuring they receive any declared payments due to them even if they haven’t been paid out by the end of a financial period.
Adjusted Gross Income (AGI) Adjusted Gross Income (AGI) is an individual’s total gross income minus specific deductions, used to determine tax liabilities. In the UK, a similar concept is known as “adjusted net income,” which influences tax bands and allowances. Investors calculate AGI to determine their eligibility for various tax reliefs and to assess overall tax efficiency.
Analyst Consensus Analyst consensus is the average opinion of financial analysts regarding a stock’s rating, often expressed as buy, hold, or sell. In the UK, analyst consensus provides a collective view of a stock’s future performance, helping investors make informed decisions by considering aggregated opinions from market experts.
Anti-Dilution Clause An anti-dilution clause protects investors from a reduction in their ownership percentage due to new stock issuance. In the UK, these clauses are often included in venture capital agreements, ensuring that early investors’ stakes are preserved even if new shares are issued at a lower valuation.
Asset Turnover Ratio The asset turnover ratio measures how effectively a company uses its assets to generate revenue, calculated as revenue divided by assets. UK investors and analysts use this ratio to assess a company’s operational efficiency, with higher ratios indicating that a company is effectively using its assets to drive sales.
Attribution Analysis Report An attribution analysis report is a breakdown of a portfolio’s returns, detailing how specific investment decisions contributed to overall performance. In the UK, such reports help fund managers and investors assess the effectiveness of stock selection, asset allocation, and market timing, providing insights into the drivers of portfolio returns.
Adjusted Operating Profit Adjusted operating profit is a measure of a company’s profitability after excluding one-off expenses and non-operational costs. In the UK, companies often report adjusted operating profit to give investors a clearer picture of their ongoing profitability, making it easier to compare performance across periods without distortions from exceptional items.
Accumulation Phase Pension The accumulation phase in a pension context refers to the period when an individual contributes to a pension scheme, building up funds for retirement. In the UK, this phase is critical for long-term retirement planning, allowing tax-efficient growth of contributions over time through compound interest.
Accelerated Bookbuild Offering An accelerated bookbuild offering is a fast-tracked process for issuing shares, typically to institutional investors. In the UK, companies use this method to raise capital quickly by issuing shares at a slight discount, which reduces exposure to market fluctuations and allows companies to secure funding efficiently.
After-Tax Return After-tax return is the return on an investment after accounting for taxes. In the UK, after-tax return is particularly important for investors in high tax bands, as it reflects the actual earnings on an investment, including capital gains and dividend tax implications, making it essential for evaluating tax efficiency in investment choices.
Adjusted NAV (Net Asset Value) Adjusted NAV is the net asset value of a fund or REIT adjusted for specific factors, such as debt or property valuations. In the UK, adjusted NAV provides a more accurate valuation for investment trusts and property funds, as it accounts for liabilities and assets that may not be included in standard NAV calculations.
Active Share Management Active share management is the degree to which a fund manager’s portfolio differs from its benchmark index. In the UK, high active share indicates a strategy where the fund manager is making substantial active investment choices, aiming to achieve outperformance rather than replicating the index, useful for investors seeking unique stock selections.
Accumulation Option An accumulation option in a fund or investment product allows income generated by the investment to be reinvested, rather than distributed. In the UK, accumulation options are popular among investors seeking long-term growth, as reinvested income compounds over time, enhancing the investment’s total value.
Alpha Portfolio An alpha portfolio is a segment of a portfolio designed to generate returns above the benchmark through active management. In the UK, alpha portfolios are typically managed by experienced fund managers who aim to identify mispriced assets or sectors to achieve higher returns, contrasting with beta portfolios, which track the market.
Adjusted EBITDA Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a metric used to measure a company’s core profitability, adjusted for non-recurring items. UK companies report adjusted EBITDA to provide a clearer view of operating performance, helping investors understand the company’s true earnings potential by removing volatile or one-time effects.
Amortising Bond An amortising bond is a bond that makes periodic principal repayments in addition to interest payments. In the UK, these bonds are typically used by organisations looking to gradually reduce debt over time. For investors, amortising bonds offer steady cash flow and reduce the risk of a large principal repayment at maturity.
Arbitrage Pricing Arbitrage pricing is the strategy of simultaneously buying and selling equivalent assets in different markets to profit from price differences. In the UK, arbitrage pricing is common in currency and stock trading, as it leverages market inefficiencies for profit, often involving complex strategies and quick execution.
Accumulated Earnings Accumulated earnings are the profits that a company retains rather than paying out as dividends. In the UK, companies with accumulated earnings may reinvest in business expansion or innovation. Accumulated earnings indicate financial health and potential growth opportunities, appealing to investors looking for companies reinvesting in their operations.
Asset Backed Commercial Paper (ABCP) Asset Backed Commercial Paper (ABCP) is a short-term debt instrument backed by physical assets, like receivables or mortgages. In the UK, ABCPs are used by corporations to access working capital. Investors in ABCP typically benefit from high liquidity and relatively low risk due to the asset backing.
At-the-Market Fund Raising At-the-market fund raising allows a company to sell shares directly into the market at prevailing prices rather than setting a fixed price. This is a flexible option for UK companies seeking to raise capital gradually, avoiding the risk of issuing large amounts of shares at potentially unfavourable prices.
All-Time High (ATH) All-Time High (ATH) refers to the highest price reached by a stock or index over its lifetime. In the UK, an ATH can signify strong company performance or investor sentiment. It is closely monitored by investors and analysts, as stocks at ATHs may indicate bullish trends or potential for overvaluation.
Annual Reset Annual reset refers to the adjustment of rates or terms in certain financial products once a year, based on market conditions or benchmarks. In the UK, annual resets are common in adjustable-rate bonds or mortgages, allowing for periodic adjustments that align with prevailing interest rates, which can impact both payments and returns.
