Glossary of terms

Passive management is a style of investment management that aims to replicate the performance of a benchmark or index. See also 'active management'.

The pay date is the date on which a dividend is distributed to share or unit holders.

Performance is a general term for the return on an investment. Most funds' performance is expressed as a 'total return'. The total return on an investment is made up of capital appreciation (or depreciation) and any income paid out by the investment. Measured over a set period, it is expressed as a percentage of the value of the investment at the start of that period.

A performance fee, also called an incentive fee, is a payment made to a fund manager for generating positive returns. The fee is usually dependent upon the manager achieving specified performance returns over a set period of time and is generally calculated as a percentage of investment returns.

A personal allowance refers to the amount of income an individual in the UK can earn which is not liable to income tax. This amount is generally adjusted on an annual basis in the government's budget.

PEP refers to a tax-efficient investment scheme whereby personal investors could invest a limited sum each year in shares or funds without liability for tax on dividends, interest or capital gains. The scheme was replaced in 1999 by the Individual Savings Account (ISA).

An investment ‘platform’ is an online service that allows investors to buy and sell shares and funds and view their investments in one place. The Investment Association’s website contains more information about investing via fund platforms and can also help find a platform; visit www.theinvestmentassociation.org/all-about-investment.

In fund management terms, a portfolio refers to a fund's collection of investments - the range of stocks/shares, bonds, and other assets which make up a fund.

Portfolio yield is the annual dividend from a fund's portfolio, divided by the current unit or share price of the fund and expressed as a percentage.

An investor can minimise the risk of purchasing all his or her shares or units at the top of the market by investing relatively small amounts of cash on a regular basis. By putting money into the stockmarket gradually, an investor can benefit from the smoothing effect of buying some shares at a lower price and others at a more expensive price at different times.

A preference share is a share issued by companies in a similar way to ordinary shares. It represents an interest in a company. Preference shares are different to ordinary shares in that they pay a predetermined fixed price dividend and preference shareholders receive priority over ordinary shareholders when receiving their dividends and in the distribution of assets.

The price-to-earnings ratio is a ratio used to value a company's shares. It is calculated by dividing the current market price of a company's shares by the company's earnings per share. In general, a high p/e suggests that investors are expecting higher earnings growth in the future compared to companies with a lower p/e. Different companies' p/e's can then be compared, though it is important to remember that p/e's vary significantly between different industries as each industry can have much different growth prospects. The p/e is sometimes referred to as the 'multiple', because it shows how much investors are willing to pay per currency unit of earnings. For example, if a company is currently trading at a multiple (p/e) of 18, the interpretation is that an investor is willing to pay £18 for £1 of current earnings.

The prime broker is a commercial brokerage firm that provides specialised services such as trade executions, cash management and securities lending.

A prospectus is a document issued by a company or fund intending to issue shares or units to the public. A unit trust, OEIC or an investment trust will issue a prospectus at its launch which will then be updated if any material changes occur. The prospectuses for funds provided by Artemis can be found in the literature library here on the Artemis website.