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Active Positions |
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The difference between a portfolio
weighting and the benchmark weighting. |
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AFFSI |
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The Adjusted Free Float Share Index is a
hybrid of the FTSE/JSE ALSI and the FTSE/JSE Financial & Industrial
Index (FINDI). The Resource component in the AFFSI has been reduced to
provide more optimal risk-return characteristics, especially regarding
single-share weightings. The AFFSI is used as the benchmark for the Pure
Equity Local Portfolio. |
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ALBI |
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Bond Exchange Association of South Africa
All Bond Index (Total Return Index). The ALBI is used as the benchmark
for the Pure Fixed Interest Local Portfolio. |
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ALSI |
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FTSE/JSE All Share Index. |
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Arbitrage |
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Arbitrage is the process of taking
advantage of mis-pricing between two related or highly correlated
instruments. Arbitrage returns are characterised by low volatility and
are neutral versus market movements (note that market neutral does not
mean risk free). Examples of arbitrage strategies are the exploitation
of distortions between: |
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The theoretical index futures price and
its actual price |
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The shares of a company that is due to be
taken over and the shares of the purchasing company |
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The price of a stock and the price of the
matching warrant |
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A convertible bond and its underlying
stock. |
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Asset Allocation |
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The allocation of a portfolio’s assets
between different asset classes, ie equities, bonds, cash and property. |
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Bonds |
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A debt note issued by government, local
authorities, or other organisations (for example, Eskom) to a lender,
promising to pay interest periodically and to repay the capital at a
predetermined date. |
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Cash Deposits |
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Short-term deposits. |
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Citi WGBI |
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Citi World Government Bond Index. The
Citi WGBI is used as 40% of the benchmark for the Global Bond Portfolio. |
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Comparative Indices |
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Indices that, in terms of applicability
to portfolios, are useful for comparison with a portfolio. |
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CPI |
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Consumer Price Index. |
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CTA |
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CTA investment managers started out as
commodity traders, hence the name commodity trading advisers. The
strategy has evolved and traders utilise all investment areas, including
futures and options on shares, bonds, commodities and currencies.
Managers may hold both long and short positions. CTAs generally have low
correlation with other hedge strategies. |
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Equities |
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Shares that represent ownership in a
listed company. |
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Event Driven |
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An Event-driven investment manager
invests in situations such as mergers, take-overs or re-organisations.
The strategy may involve the simultaneous purchase of shares in the
company being acquired, and the sale of shares in its acquirer, with the
intent to profit from the difference between the current market price
and the ultimate purchase price of the company. The manager may also
utilise derivatives to leverage returns or to hedge out risk. The
outcomes are generally not dependent on the direction of the market.
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Global Macro |
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The Global Macro investment manager
typically invests worldwide, without any limitations either in its
country allocations or in the types of assets or instruments traded
(shares, bonds, commodities, derivatives, currencies, etc), hence the
term “global”. Managers typically seek to profit from expected changes
in major macro-economic variables, including currencies and interest
rates. |
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GOVI |
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Government Bond Index. |
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Growth Shares |
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Typically shares that trade at higher
price:earnings multiples than those of the market. |
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Headline Inflation (CPI Metropolitan
areas only) |
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The overall measure of inflation, which
is calculated as the year-on-year percentage change in the prices of a
select basket of consumer goods and services. |
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Inflation-linked Bond |
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A bond issued by either government or
corporations which links the interest payable and the principal amount
payable at maturity of the bond to inflation. |
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LBGAI |
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Lehman Brothers Global Aggregate Index.
The LBGAI is used as 60% of the benchmark for the Global Fixed Income
Portfolio. |
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Listed Property |
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Property listed on the official
securities exchange that trades as listed shares. |
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Long/Short Hedge Equity |
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This strategy holds simultaneous long
(traditional buying of shares) and short (selling shares that are not
owned) equity positions in an attempt to reduce overall market exposure.
The investment manager will buy a company it favours and sell a similar
company it believes will underperform. The strategy allows the managers
to profit from both calls. The strategy's net gain will depend solely on
superior stock picking. If the long picks outperform during rising
markets and short picks underperform during market declines, the fund
will make positive returns regardless of overall market direction. The
strategy may hold a long or a short bias. |
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Market Capitalisation |
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FTSE/JSE Top 40 Companies Index |
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This index consists of the largest 40
companies by market value. |
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FTSE/JSE Mid Companies Index |
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This index consists of the next 60
companies ranked by market value, ie 41 to 100. |
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FTSE/JSE Small Companies Index |
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This index consists of the next 60
companies (after Mid Companies Index) ranked by market value, ie 101 to
160. |
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FTSE/JSE Fledgling Index |
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This index consists of the remaining
small companies ranking below the first 160. |
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Market Neutral |
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Investment managers follow the same
strategy as long/short managers, but generally invest equally in long
and short positions in similar shares or market segments to neutralise
market risk. Consequently, the “net exposure” or correlation to the
market is minimal and hence the direction of the market does not
determine performance. The strategy relies on superior stock picking
(long and short) to drive returns. |
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Maximum Drawdown |
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This is the maximum loss, calculated from
peak to trough, since inception of the portfolio. |
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MSCI World Index |
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Morgan Stanley Capital International
World Index (a global equity index excluding emerging markets). The MSCI
World Index is the benchmark for the Global Equity Portfolio. |
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Non-index |
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All shares that fall outside the FTSE/JSE
indices. |
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OTHI |
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Non-government Bond Index. |
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Peer Group |
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The investment managers making up the SA
Large Manager Watch. |
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Portfolio |
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The collection of shares, bonds, money
market securities and other financial instruments or types of assets
that make up the investor’s assets. |
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Regulation 28 |
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The legislation controlling
retirement-fund investments in South Africa. Intended to ensure a
conservative investment spread for retirement funding products, to
protect the investor from loss of value due to risky investment
selection. |
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Repo Rate |
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The repo rate is the interest rate at
which the SARB lends money to commercial banks. For example Standard
Bank borrows money at the repo rate and on-lends it to the public at the
prime rate. An increase or decrease in the repo rate places pressure on
banks to increase or decrease the prime rate. |
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Risk |
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In the context of this document, risk
typically describes the possibility that an investment may fluctuate
over time, ie the degree of unpredictability in the return of the
investment. |
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SA LMW |
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South African Large Manager Watch
(performance survey of the largest South African investment managers
published by Alexander Forbes). |
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SA LMW Average |
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The average return of the largest South
African investment managers as surveyed. The SA LMW Average is used to
calculate the benchmark for the Spectrum Local Portfolio. |
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SA LMW Median |
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If investment managers (as surveyed) are
ranked in order of performance, the median manager return is the manager
in the middle of the range. For example, if there are 11 managers in the
survey, the median will be ranked number six, meaning five investment
managers underperformed the median and five outperformed it. The SA LMW
Median is used to calculate the benchmark for the Performer Local
Portfolio. |
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SAPY |
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FTSE/JSE SA Listed Property Index. The
SAPY is used as the benchmark for the Property Portfolio. |
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Sector Allocation |
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The allocation of a portfolio’s assets
between the various FTSE/JSE-defined sectors, for example FTSE/JSE
Banks, FTSE/JSE Resources etc. |
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Standard Deviation |
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This is a standard risk measure
characterised by the volatility of portfolio returns. |
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SteFI Call |
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Short-term Fixed Interest Call Deposit
Index. The SteFI Call is used as the benchmark for the Banker Portfolio. |
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Value |
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Typically shares that trade at lower
price:earnings multiples than that of the market and/or may trade at a
discount to Net Asset Value. |
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Volatility |
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This is a standard risk measure
characterised by the standard deviation of portfolio returns. |
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Yield |
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Measure of income distribution typically
in equities, the dividend yield, ie dividends per share (historic) as a
percentage of price. In bonds, typically the coupon paid as a percentage
of capital. |
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