Glossary


Hedge funds	Despite the name, hedging transactions are not the primary purpose of such funds. Since these funds are aimed at generating absolute income, they make investments which conventional funds are not allowed to make (speculation on market declines, short sales, use of derivatives, financing investments by borrowing). This enables hedge funds to record positive returns irrespective of the market situation.
Hedging	Protecting investments against losses. UBS asset allocation funds specifically hedge against exchange-rate risks.
Hedging costs	These are costs that arise when a portfolio is hedged against losses using dynamic or static hedging. For portfolios with dynamic hedging, the expenses primarily consist of purchase and redemption costs for shifting investments between the Core Portfolio and the Opportunity Portfolio. For static hedging, the costs can arise from the purchase of derivative instruments.
High watermark	The high watermark is used in connection with the performance fee. The fund manager calculates his or her share of the profits on the basis of the value increment over and above the last peak in the NAV. As a result, the performance fee does not become payable until all losses incurred have been completely recovered.
High-yield funds	Bond funds which invest in bonds issued by borrowers with lower credit ratings. Such bonds offer higher rates of interest, but at the same time there is also a higher risk of default, i.e. that interest payments will not be paid or that the face value will not be repaid.
Historic pricing	Settlement method in the investment fund business. The investor knows the net asset value of the fund at the time of subscription/redemption. As opposed to forward pricing.

Top