ANNUALISED TRACKING ERROR
Tracking error measures the standard deviation of relative excess, i.e. the annualised fund return error less the annnualised benchmark return (calculated geometrically). Tracking error is often used as a measure of risk taken against the fund benchmark, with a larger tracking error indicating that greater risks were taken relative to the benchmark in achieving the return of the fund.
ALPHA
alpha is the term used to describe the risk adjusted outperformance of an investment. A large alpha indicates good performance relative to the market.
AVERAGE ANNUAL RETURN
Average Annual Return is used to compare returns over different periods on a consistent basis with the unit being years,, hence per annum. Normally only returns over periods greater than one year are annualised. The average annual return is the rate that an investor would have earned in each year to achieve the total cumulative return over the period.
ABS
Asset backed securities are bonds where the borrower backs the loan with assets, usually in a company such as buildings or machinery or land, that can be used to repay the lender in the event of default.
ANNUALISED VOLATILITY
Volatility is one measure used to assess the risk of a portfolio as it helps to describe the likely range of returns achieved by the fund. In statistical terms it is the annualised standard deviation of the return distribution. Greater volatility of monthly fund returns means that there is a wider range of likely returns in the future, or greater uncertainty regarding the fund return. Most investors would equate this greater uncertainty with greater risk.
ANALYST
person who studies particular stockmarkets or industry sectors and makes buy or sell recommendations regarding the shares of specific companies within them. These are arrived at through a combination of research, economic statistics and, frequently, visits to the companies themselves.
ASSET ALLOCATION
the different classes of investment held by a fund - such as shares/equities, bonds and cash. Assets - another word for the investments which a unit trusts holds within its portfolio.
AVERAGE MATURITY
the remaining lifetime of all bonds in a fund's investment portfolio, weighted by the amount of money invested in each bond. (See also Bonds)
AGENCY
Agency securities are issued by government-sponsored entities, such as mortgage and loan organisations that have government backing.
AVERAGE ANNUALISED RETURN
Average annualised return is used to compare returns over different periods on a consistent basis with return the unit being years, hence per annum. Normally only returns over periods greater than one year are annualised. The annualised average return is the rate that an investor would have earned in each year to achieve the total cumulative return over the period.