Glossary of terms

A hedge fund is an aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Investing in hedge funds is only suitable for sophisticated experienced investors. Also see ‘absolute return strategy’.

Hedging typically means taking an investment position intended to offset potential losses that might be incurred by another investment. For example, currency hedging seeks to protect against changes in currency exchange rates.

A high-yield bond is a bond issued by a company. It generally has a lower credit rating than an 'investment grade' bond, with a higher risk of default. and therefore pays a higher yield. Also see 'investment grade bond' and 'credit rating'.

Historic pricing is where managers will buy and sell shares on the basis of prices calculated at the last valuation point - investors therefore know the price they will receive when they deal. It is the opposite of forward pricing (also see 'forward pricing').

Historic yield is the calculation of the income return on an investment relative to its price. It is the amount of income paid by an investment, which is divided by the current price of that investment and expressed as a percentage of that price. Some funds offer the choice of withdrawing this amount (a distribution yield). The calculation of yields enables comparisons to be made of the level of income provided by different investments such as shares, bonds, cash or property, or between funds at any one point in time.