Understanding
financial jargon

Absolute Return Objective

Absolute return funds aim to make a positive return whether markets are rising or falling. They aim to do this by holding shares (“long”) positions but also by using derivatives to hold negative or “short” positions which profit from falling prices. This combination means that they will often perform better than long-only funds in falling markets but in rising markets they are likely to have lower long exposure and will profit less from the upside. 

Accumulation

A share class which accumulates and reinvests net investment income and net realised capital gains and does not pay dividends.

Authorised Corporate Director (ACD)

A UK term for the operator of a UK OEIC. Waystone Management UK is the operator of the WS Blue Whale Growth Fund.

Active Management

When managers actively pick investments in an effort to outperform a benchmark, usually a market index.

Administrator

A specialist service provider who normally provides fund valuation services and accounting and maintains the register of shareholders.

Annual Management Charge (AMC)

Paid to the Investment Manager (normally calculated daily and paid monthly in arrears).

Asset Allocation

The process of dividing investments among asset classes, geographies or industry sectors to optimise the balance between risk and reward based on investment needs and risk tolerance.

Asset Class

A broad category of assets such as cash, equities (company shares - also known as stocks), fixed income securities (bonds) and property.

Assets Under Management (AUM)

The total of all investments, including cash, which are managed by a fund manager for its customers. The term is also used for the total within a specific fund.

Average Market Capitalisation

The average market capitalisation of a fund's equity portfolio gives you a measure of the size of the companies in which the fund invests. Market capitalisation is calculated by multiplying the number of a company's shares outstanding by its price per share.

Bear Market

A prolonged drop in investment prices - a falling market becomes a bear market when a broad stock index closes 20% or more below its most recent high.

Benchmark

A benchmark is a standard against which the performance of a security, mutual fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indices are used for this purpose.

Bonds

A loan normally in the form of a tradable security issued by a government or company which usually pays a fixed rate of interest over a period at the end of which the initial amount borrowed (known as the principal) is repaid.

Bottom-Up

An investment style where the manager focuses its analysis primarily on specific characteristics and micro attributes of an individual company seeking to identify profitable opportunities through the idiosyncrasies of a company’s attributes and its valuations in comparison to the market. The manager will additionally consider sector and macroeconomic factors including the the competitive environment, actions of industry rivals and risks from changes in technology or regulations.

Bull Market

A prolonged rise in investment prices - a rising market becomes a bull market when a broad stock index closes 20% or more above its most recent high.

Capital Growth

Also called capital appreciation, is an increase in the value of an asset or investment over time. Capital growth is measured by the difference between the current value, or market value, of an asset or investment and its purchase price or the value of the asset or investment at the time it was acquired.

Comparative / Comparator Benchmark

A benchmark or similar factor against which a fund's performance is compared.

Concentrated Portfolio

A concentrated fund holds a lower number of stocks. The fund concentrates on the fund manager's best high conviction ideas and takes higher exposure to these companies with the objective of generating outperformance. The less concentrated a portfolio, the more likely it is to follow the index. Concentration means meaningful exposure to high conviction holdings. This works well when markets are performing well but can cause underperformance for example in a period of rotation. 

Consumer Discretionary

The term given to goods and services that are considered non-essential by consumers, but desirable if their disposable income is sufficient to purchase them.

Currency Exposure

The potential for a fund to lose or gain money purely through its exposure to shares denominated in another currency.

Cyclical Investing

A strategy that puts money into sectors of the economy according to the stage of the economic growth cycle. During recessions or times of slow growth, more conservative investments may be more appropriate, while the reverse is true in times of fast economic growth.

Depositary

Depositaries for funds act in a trustee-like role overseeing the fund's adherence to its investment restrictions, overseeing service providers, undertaking cash monitoring and ensuring the safe-keeping of assets.

Derivatives

Financial instruments whose value, and price, are dependent on one or more underlying assets. Derivatives can be used to gain exposure or leverage to, or to protect against, expected changes in the value of the underlying investments.

Developed Markets

Generally describes markets which are well developed in terms of their economy and capital markets with a high degree of industrialisation. They are open to foreign ownership, ease of capital movement, and have efficient regulatory and market institutions. Various lists exist but often include the following: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Hong Hong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, United Kingdom, United States.

Diversification

A risk management strategy that spreads risk by being invested in a variety of investments that typically perform differently to each other; essentially not having all your eggs in one basket. It can be applied at the overall portfolio level / asset level so spreading investment across equities, bonds and property or at the fund level within an asset class and by geography. The more diversified a portfolio, the lower the risk BUT also the lower the chance of outperformance. Investment theory suggests that in a portfolio or fund of shares, around 30 shares is the most efficient to provide a balance of diversification and potential outperformance.

Emerging Markets

Generally describes markets that are progressing towards being developed markets.

EPS

Earnings per share is a company's profit divided by the number of shares in issue.

Equities / Shares / Stocks

When you buy shares, you're buying a share of the company's assets and its profits. In a fund, you own a share of the fund which has an interest in the fund's underlying portfolio BUT you do not own a proportion of the fund's underlying holdings.

ESG (Environmental, Social, and Governance)

It refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies. Included in social issues are a company’s labour practices, talent management, product safety and data security. It covers governance matters like board diversity, executive pay and business ethics.

FAANG

The acronym for the market's five best-known "tech" stocks, namely Facebook (now Meta), Apple, Amazon, Netflix and Alphabet's Google.

Financial Modelling

The process of creating a summary of a company's expenses and earnings in the form of a spreadsheet that can be used to analyse and anticipate how a company's share price will perform in future and might be affected by future events or executive decisions.

Fundamental Analysis

A method of valuing the shares of a company by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.

Gearing / Leverage

The process whereby investors borrow money (or invest in derivatives) to trade assets in order to magnify their investment returns. Gearing increases risk as it will magnify both positive and negative returns. The Blue Whale Growth Fund does not use gearing/leverage. The term "gearing" also refers to the relationship, or ratio, of a company's debt to equity. Gearing shows the extent to which a firm's operations are funded by lenders (those loans being repayable) versus shareholders - in other words, it measures a company's financial leverage.

Growth

The increase in value of investments.

Growth Investing

An investment strategy that involves picking growth stocks whose rate of growth the manager expects to significantly outperform average growth in the market. 

Growth Stock

Any share in a company that is anticipated to grow at a rate significantly above the average growth for the market. These stocks generally do not pay dividends.

Hedging

Using some investment positions with a view to offsetting potential losses or gains that may be incurred by another holding in the portfolio. Hedging may be used to offset the risks of assets held in currencies other than a fund's base currency.

High Yield ("Junk") Bonds

A bond issued by a company with poorer credit quality which has to pay the investor higher returns because there is a greater risk that it may default on interest and/or capital repayment.

IA Global Average

A simple average of the performance of all funds in the IA Global sector.

IA Global Sector

The Investment Association is a UK trade body for investment managers. It groups the UK and some EU funds into sectors to allow investors to compare performance and charges. The IA Global sector includes funds which invest at least 80% of their assets globally in equities.

ICAV

A corporate vehicle designed specifically for Irish investment funds, providing a tailor-made corporate fund vehicle for both UCITS and AIFs. An ICAV is akin to a UK OEIC (Open Ended Investment Company).

Income

An income from investment is company dividends or interest from bonds or other loans.

Income / Distributing Shares

An income or distributing class of shares will distribute any net interest or dividend income normally on an annual or quarterly basis. The fact that a fund has income/distributing share classes does not necessarily mean that it is suitable for investors seeking income. Growth Funds typically will not make distributions.

Index

It represents a particular market or a portion of it, serving as a performance indicator for that market. An example is the FTSE 100 Index which measures the performance of the largest 100 companies listed on the London Stock Exchange.

Initial Charge / Front End Fee

It is deducted from an investment at the time of the initial purchase. Blue Whale does not apply any such charge.

Investment Trust

An investment fund is akin to an OEIC but described as "closed-ended" as it does not allow for daily dealing at the net as asset value. Instead, it can be traded throughout the business day on the London Stock Exchange. Investment Trust pricing which is affected by supply and demand can result in prices that are at a significant premium or discount to the net asset value.

ISIN Code

An International Securities Identification Number (ISIN) is a code that uniquely identifies a specific securities issue/share class.

KID (Key Information Document)

An explanatory document, is required for EU UCITS funds and other retail products.

KIID (Key Investor Information Document)

A brief explanatory document for a UCITS fund.

ISIN Code

An International Securities Identification Number (ISIN) is a code that uniquely identifies a specific securities issue/share class.

Leverage

An investment strategy that uses borrowed money and/or financial instruments to increase a fund's exposure above 100% of its NAV. Leverage increases the potential for profit but also increases the risk of loss. Blue Whale does not use leverage.

Liquidate

Converting assets to cash.

Liquidity

The ease with which shares can quickly be bought or sold without affecting the price. The term is also applied to the frequency with which investors can buy or sell a fund. Blue Whale's funds have daily liquidity (subject to market holidays).

Long-Only Funds

They are dedicated to buying investments in the market. Long-only funds do not "short" investments. The value of investments in long-only funds is likely to fall in a prolonged downturn in the markets although good active management will mitigate losses.

Macroeconomic

Analysis focuses on broad issues such as growth, unemployment, inflation, and trade balance.

Microeconomic

The study of decisions made by people and businesses regarding the allocation of resources and prices of goods and services. In investment analysis, it is used to examine a company's production, capacity, management and financial position.

Net Asset Value (NAV)

A fund's Net Asset Value is calculated by taking the current value of a fund's assets and subtracting its liabilities.

Ongoing Charges Figure (OCF)

Ongoing Charges Figure represents the ongoing costs to the fund, which includes the Annual Management Charge and other charges for services such as keeping a register of investors, calculating the price of the fund's shares and keeping the fund's assets safe.

OEIC

UK Open Ended Investment Company, the most popular vehicle for UK funds.

Passive (tracker)

Passive management is when a fund manager attempts to mimic a benchmark, replicating its holdings and its performance.

Performance Fee

An extra fee is payable to the investment manager, normally a percentage of absolute or relative gains. Blue Whale does not charge any performance fee.

Platform

An investment platform is an online service which allows you to buy, sell and hold funds. It's possible for you to do this yourself directly on a non-advised basis via a D2C (direct to customer) platform, or on an advised basis using a financial adviser who will invest on your behalf. Platforms may charge a dealing fee and an annual ad valorem charge. Blue Whale investors can buy the WS Blue Whale Growth Fund on the Fund Management Centre with no platform fees.

Portfolio

A collection of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, held individually or through funds. In respect of the Blue Whale Growth Fund, the portfolio is the list of investments including shares, cash and any exchange traded funds held.

Prospectus (Fund Prospectus)

A detailed explanatory constitutional document describing the fund's investment objective, risk factors, service providers, fees, charges and dealing arrangements.

Redemption

Sale of shares in a fund.

Relative Return

The profit or loss on an investment compared to how other investments (or benchmarks) have performed.

Revisions

Earnings per share (EPS) plays a pivotal role in the long term viability of a company, as well as its investment prospects. The market is forward-looking and stock prices are established, in part, on the basis of analysts' expectations for the company’s future. Investors are attracted to shares with strong and positive earnings revisions. Over time, prices adjust as expectations change or are proven wrong. Investors follow revisions in the consensus outlook for EPS.

Rotation

Sector rotation is an investment strategy of moving money from one sector to another or from growth stocks to value stocks or vice versa with a view to outperforming the index.

Sector

Companies are categorised according to their activities. Categories vary but often include Energy, Basic Materials, Industrials, Consumer Discretionary, Consumer Staples, Healthcare, Financial, Information Technology, Communications, Media, Utilities and Property (Real Estate in the US).

Sector Bias

A preconceived or unreasoned attraction to or aversion to a particular investment sector.

SEDOL

A SEDOL number (Stock Exchange Daily Official List) is a unique security identifier used in the United Kingdom and Ireland for settlement/clearing purposes.

Share

An equal portion representing part ownership of a company or of a fund.

Share Class

A designation applied to a specified type of security such as shares in a fund. Differing classes may have differing minimum investments, differing management charges and may be offered in a variety of currencies, hedged or unhedged. Each share class has its own rights. Blue Whale offers currency share classes but they are unhedged.

Short Position

A way for a fund manager to express his or her view that an investment might fall in value. This may be effected by selling borrowed securities or gaining negative exposure via derivatives with the expectation that values will fall. In the case of borrowed securities they are bought back and returned to the lender.In the case of derivatives, the negative exposure will be cancelled out by a purchase of the same derivative.Shorting is viewed as a higher risk strategy.

Since Inception

Since the date the fund was open to investment or commenced trading.

Stocks

The term is interchangeable with equities+B83.

Style Bias

A bias towards an investment style be it growth, value or technical.

Subscription

A purchase of shares in a fund.

Technical

An investment style which relies on technical analysis of charts (looking for repetitive price patterns), momentum indicators, moving averages etc.

Top-down

An investment approach where managers look at the "big picture" first, e.g. the economy, before working their way down to analysing individual stocks.

Total return

Total return, when measuring performance, includes interest, capital gains, dividends and distributions realised over a period of time.

Tracker

Tracker funds (also known as passive funds) are index funds used to track a market index (such as the FTSE 100) and are designed to replicate the performance of the index.

UCITS 

Undertakings for Collective Investment in Transferable Securities, an EU regulatory framework creating a harmonised regime for the management and sale of public mutual funds.