Glossary

This glossary is also available in German, French and Italian.

A

Term

Term

Description

Description

Term

Activity Portfolio

Description

The Activity Portfolio is that part of the portfolio of a (dynamic) capital preservation fund that invests in international financial markets with the aim of participating in the movements on these markets. Investments are usually made in foreign-currency bonds and in equities.

Term

Affidavit

Description

See bank declaration.

Term

Annual report/semi-annual report

Description

For each fund it manages, the management company publishes an audited annual report within four months of the close of the financial year and an unaudited semi-annual report within two months of the end of the first half of the financial year. The annual report contains e.g. the annual financial statements, the statement of changes in the fund's net assets, the structure of the portfolio and the auditor's report. The semi-annual report contains the most important half-year results.

Term

Arbitrage

Description

Exploiting price differences in the same securities or related assets - be it locally or internationally - whereby the securities are bought on the market offering a lower price and sold on the market offering a higher price.

Term

Asset allocation

Description

The strategic investment of the available assets in different asset classes, such as money market instruments, bonds, equities, real estate, etc. The portfolio is also broken down by sector and according to geographic and currency criteria.

Term

Asset allocation funds

Description

Investment funds which replicate the investment strategies of the providers for the various risk classes. Asset allocation funds invest worldwide in various instruments, depending on the risk category equities or bonds are overweight. Also known as strategy funds, portfolio funds, investment objective funds, asset management funds or mixed funds.

Term

Asset manager

Description

See portfolio manager.

Term

Asset value

Description

The net assets of a fund divided by the number of units in circulation.

Term

Auditors

Description

An organisation independent of the fund management company and the custodian bank which regularly monitors compliance with the legal regulations. Auditors must be recognised by the supervisory authorities, which in Switzerland is the Federal Banking Commission.

Term

Average residual term to maturity

Description

The residual term to maturity is the remaining life of a bond up to its final due date. In a fund, the average residual term to maturity is calculated from the weighted residual maturities (weighted according to capital invested) of all bonds held in the fund.

C

Term

Term

Description

Description

Term

Call options

Description

See options.

Term

Capital preservation fund

Description

An investment fund that enables investors to benefit from advances on the financial markets while providing a large measure of protection against losses exceeding a specified percentage. UBS offers two types of capital preservation funds: Limited Risk Funds and Dynamic Floor Funds.

Term

Capitalisation rate (static discounted cash flow method)

Description

It is made up of the charges on a property (interest costs, fees, operating expenses, insurance premiums, maintenance and repair costs, amortisation/depreciation of buildings, risk of rental losses, administrative costs) and is expressed as a percentage of the capitalised-income value. As one of the elements used to calculate the capitalised-income value, the capitalisation rate is determined by an independent expert based on expenses which are expected to be incurred in connection with the property.

Term

Capitalised-income value

Description

This is calculated on the basis of current rental income and a property-specific interest rate (capitalisation rate). Rental income must seem appropriate and obtainable over the long term in order to be fully included in the calculation. The capitalised-income value is the major factor used in valuing income properties.

Term

Cash flow

Description

Cash flow represents the net income earned in a financial year before write-offs and provisions.

Term

Cash flow yield

Description

Net income earned before write-offs and provisions in proportion to the current market price, less the accumulated earnings included in this price.

Term

Certificate

Description

Collective security evidencing one or more investment fund units.

Term

Closed-end fund

Description

An investment fund in the form of a company (normally a stock company) with fixed capital. A closed-end fund is not obliged to redeem issued units at the request of the unitholder. Units of this type of investment fund may not be sold publicly under Swiss law. As opposed to an open-end fund.

Term

Collective investment contract

Description

The collective investment contract is the legal basis for the investment fund business in Switzerland. This agreement is concluded between the management company, the custodian bank and the investor. It is the legal basis for the management of the investment fund by the management company on the one hand and for the participation of the investors in the assets of the investment fund on the other. The collective investment contract is embodied by the fund regulations.

Term

Commission de Surveillance du Secteur Financier

Description

The "Commission de Surveillance du Secteur Financier" (CSSF) is the state supervisory authority which monitors the investment fund business in Luxembourg.

Term

Commissions

Description

Issuing commission and redemption commission. Fee charged on the subscription or redemption of fund units.

Term

Commodity funds

Description

Investment funds which invest the assets primarily in tradable commodities.

Term

Commodity Traded Advisor (CTA)

Description

CTAs invest exclusively in futures and other derivatives. The majority of CTAs pursue a trend-following strategy. This acknowledges the fact that temporary trends do exist on the financial markets. Trend followers replicate a trend and stand to gain during both bull and bear market periods. A further strategy is to identify exactly when these changes in trends occur and to profit from them.

Term

Contract form

Description

An investment fund which has no legal personality. By purchasing units, the investor concludes a collective investment contract with the management company and the custodian bank. The unit holder does not have any rights of ownership to the fund assets, but rather a claim to participate in the assets and income of the fund. As opposed to a corporate form.

Term

Convertible bonds

Description

Bonds which feature a conversion right entitling the holder to convert the bond into shares of the company in question at a certain point in time and at a conversion ratio set in advance. Following the conversion, the bond expires.

Term

Core Portfolio

Description

The Core Portfolio is that part of the portfolio of a (dynamic) capital preservation fund that serves to ensure that the capital is preserved. Investments are generally in money market instruments and bonds in the fund's reference currency.

Term

Corporate form

Description

An investment fund which has its own legal personality, usually a joint-stock company. The units are issued in the form of equities. The investors are shareholders and have both proprietary and membership rights. The Swiss Investment Fund Act does not recognise funds set up in corporate form, but it is widely used in other parts of Europe and the United States.

Term

Corporate governance

Description

According to an OECD study, corporate governance describes the ways in which mutual responsibilities are distributed between a company's management and its shareholders.

Term

Corporate social responsibility

Description

Corporate social responsibility may be defined as transparent corporate conduct, which is based on ethical values and takes into account the interests of employees, society and the environment, thereby seeking to create sustainable value for the company and its shareholders (Definition: Prince of Wales Business Leader Forum).

Term

Correlation

Description

A measure of the degree to which the price trends of various investment categories or instruments move in the same direction. The correlation quantifies the strength of the relationship as a figure between -1 and +1. The closer the coefficient is to 1, the stronger the correlation. If the coefficient is -1, the investments and the benchmark move in opposite directions. If the value is 0 there is no correlation.

Term

Cost averaging

Description

Cost Averaging. Strategic exploitation of price fluctuations. This method of investing takes advantage of regular payments. The investor invests the same amount every month, and thus acquires more units when the issue price is lower and less units when it is higher. Over the long term, the investor thus attains a more favourable cost price than with the regular purchase of a fixed number of units over the same period of time.

Term

Country fund

Description

An investment fund which invests primarily in equities of a specific country.

Term

Coupon

Description

The interest or dividend certificate attached to a security. These certificates enh3 their owners to receive the income on the respective due dates and also enh3 them to exercise the rights evidenced by these certificates.

Term

Credit rating

Description

Measurement of the quality of a borrower, particularly in respect of solvency and willingness to pay. The credit rating makes it possible to draw conclusions regarding the quality of bonds and the probability that interest payments will be made regularly and that the principal amount will be repaid at maturity.

Term

Credit risk

Description

Risk of the issuer of a bond becoming insolvent. See also credit rating.

Term

CSSF

Description

See Commission de Surveillance du Secteur Financier.

Term

Currency of account

Description

Currency in which the fund's accounts are kept and in which the net asset value and the issue and redemption prices are calculated. Not to be confused with the investment currency or the reference currency.

Term

Custodian bank

Description

The custodian bank is responsible for keeping the entire assets of the fund in its custody and for the issue and redemption of fund units. It ensures that the fund management company complies with the provisions of the Investment Fund Act and the provisions of the fund prospectus.

Term

Custody account administration fee

Description

Fee charged annually for the safekeeping and administration of securities.

E

Term

Term

Description

Description

Term

Eco-innovator

Description

A company whose products and services help to achieve a specific benefit with the greatest possible resource efficiency. Examples: a supplier of organic food or regenerative energies such as wind and solar power.

Term

Eco-leader

Description

Leading company with the best record of environmental achievement in its industry. Using a detailed analytical process, UBS identifies the leaders in each sector of the economy.

Term

Efficient frontier

Description

Modern financial theory sees the relationship between return and risk as two-dimensional, taking returns and volatility into consideration. The portfolio return corresponds to the weighted average of the returns from each of the individual securities. The volatility of the portfolio is not however calculated as a weighted average of the individual securities' volatility, as the valuations of the individual securities do not correlate perfectly. Through diversification, the investor can thus reduce risk without having to forego returns. Due to the close correlation of alternative and traditional investments, an existing portfolio is able to achieve a more favourable risk/return profile by adding alternative investments.

Term

Emerging economies bonds

Description

Bonds from Latin America, Eastern Europe and Asia that offer high potential yields but entail a higher risk exposure due to the political or economic uncertainty in these countries.

Term

Emerging markets

Description

Emerging markets or developing markets - mainly in Asia, Eastern Europe and Latin America - that are growing quickly, but whose economies and stock markets have not yet reached Western standards.

Term

Emerging markets fund

Description

An investment fund which invests in emerging markets, such as Asia or Latin America. See also emerging markets.

Term

Encumbrance

Description

The expenditure of a property for interest on investment capital, duties, real estate operating costs, insurance premiums, maintenance and repair costs, building amortisation/depreciation, risk of rental losses and administrative costs. Various properties may differ sharply from each other in terms of encumbrance, among other reasons due to the age structure and the related maintenance and repair costs, the type of building (residential or office building) and the tax burden on the location of the property.

Term

Environmental efficiency

Description

The key indicators for environmental efficiency are energy and resource consumption. Environmentally efficient management brings environmental benefits and, thanks to the savings it achieves, economic benefits.

Term

Environmental funds

Description

Investment funds that employ environmental criteria in their decisions.

Term

Equities

Description

Securities which evidence an equity interest in a company. As a joint owner, the shareholder has rights of participation (voting right, right to information) and rights to assets (right to a share of profits, subscription rights).

Term

Equity funds

Description

Investment funds which invest their assets primarily in equities. The main categories are country and regional funds, emerging market funds, small and mid cap funds, sector and theme funds, index funds.

Term

Equity Hedged

Description

Equity-based strategies with long and short positions (the weighting distribution between long and short positions can vary significantly from strategy to strategy). Hedging by means of short selling, options and futures.

Term

Eurobonds

Description

Bonds issued on the Euromarket which are exempt from withholding tax. Eurobond trading is centered in London for tax reasons. See also foreign bonds.

Term

Euromarket

Description

Term used to refer to money markets and capital markets where currencies and securities are traded outside their respective country of origin.

Term

Event-driven

Description

Event-driven strategies make rapid - and most importantly profitable - use of information on announced events. With this strategy, it is assumed that the markets will rate the information too optimistically or pessimistically. The key success factors in event-driven strategies are in-depth knowledge and experience in the valuation of securities and access to the latest information.

Term

Exchange-rate risk

Description

Risk of price fluctuations between the currency of account and the investor's reference currency.

Term

External costs

Description

Costs which are not incorporated in the market price are described as external costs since they are not borne by the responsible party, and include costs related to deforestation, damage to health, structural and material damage, climate change etc.

F

Term

Term

Description

Description

Term

Factor 4

Description

Demonstrates the benefits of the environmental efficiency principle. Double the prosperity using only half the resources.

Term

Fair trade

Description

Fair trade with farming associations and plantations includes paying prices which cover costs, ensuring guaranteed minimum wages for workers and establishing long-term trading relationships. In return, companies' production methods comply with stringent guidelines, thus ensuring quality standards remain high. Various organisations such as Max Havelaar define standards and check that criteria are being met.

Term

FCP

Description

See fonds commun de placement.

Term

Federal Banking Commission (FBC)

Description

The supervisory authority and executive body elected by the Federal Council, independent of the Federal Administration and Swiss National Bank, and responsible for the implementation of the Banking Law and the Investment Fund Act. The FBC authorises management companies, custodian banks, representatives and sales agents to commence business activities. The FBC is also responsible for authorising new funds and approves their fund regulations. It monitors compliance with the Investment Fund Act and the fund regulations. In cases of gross misconduct, the FBC can withdraw a management company's or custodian bank's licence to conduct business.

Term

Fiduciary responsibility

Description

The duty imposed by law on the management company and custodian bank as well as on their representatives to act solely in the interests of their investors.

Term

Financial year

Description

Period between one year-end closing and the next. A fund's financial year need not necessarily coincide with the calendar year. Also known as business year.

Term

Fixed-income securities

Description

Together with money market instruments, bonds are referred to as fixed-income securities because they make regular, fixed-interest payments and repay the principal amount in full at maturity.

Term

Flat fee

Description

UBS applies a so-called flat fee to most securities and money market funds. This fee is charged to the fund's assets and covers all expenses incurred in the management, administration and safekeeping of the fund's assets as well as costs incurred in the distribution of the fund (printing prospectuses, annual and semi-annual reports, costs for auditing and publication of prices, fees charged by the supervisory authority etc.). The only costs not covered are transaction costs incurred in the administration of the fund's assets (brokerage fees in line with the market, fees, duties etc. as well as any applicable taxes). UBS's flat fee is comprehensive and very client-friendly.
It cannot be compared with similarly named fees from other fund providers, because these often only cover part of the investor's effective costs. Also refer to "management fee". The flat fee is not charged to the investor, but directly to the fund's assets. As regards all UBS Funds domiciled in Luxembourg, Switzerland or Germany, except UBS Real Estate Funds, "Flat fee"

Term

Floating rate notes

Description

Securities with variable interest rates.

Term

Floor

Description

Lower limit below which the invested capital may not fall on a set date.

Term

Floor funds

Description

See capital preservation funds.

Term

Fonds commun de placement

Description

French term for investment funds established in contract form.

Term

Foreign bonds

Description

Bonds issued by a borrower outside its home country and denominated in the currency of the market where the issue is made. See also Eurobonds.

Term

Forward pricing

Description

Under this system, the fund assets are valued on the basis of the previous day's closing prices. As opposed to historic pricing.

Term

Fraction

Description

In the investment fund business, a fraction of a fund unit.

Term

Fuel cell technology

Description

A fuel cell generates electricity and heat by combining hydrogen and oxygen within an electromagnetic process. Unlike internal combustion engines, which emit waste gases, the only by-product generated by fuel cells is water.

Term

Fund assets

Description

"Fund assets" (also called "net fund assets") is the term used to denote fund assets based on their market values after deduction of liabilities. With real estate funds, mortgage loans and other debts must be deducted, as must the taxes that have to be paid when properties are liquidated.

Term

Fund domicile

Description

A fund is domiciled in the country in which the fund is established or registered with the local supervisory authority.

Term

Fund management company

Description

The fund management company administers investment funds for the account of the investors. It decides on investments and exercises all rights associated with the investment fund. It may delegate investment decisions and other tasks, but it is liable for actions of its appointed agents as if they were its own actions.

Term

Fund manager

Description

See portfolio manager

Term

Fund of funds

Description

An investment fund which restricts its investments to units of other investment funds. Not to be confused with an umbrella fund.

Term

Fund regulations

Description

See prospectus.

Term

Fund-linked life insurance

Description

In the case of fund-linked life insurance, the portion of insurance contributions which are normally invested in the unearned premium reserve (savings portion) is used to acquire fund units. There are life insurance policies which allow the policyholder to choose from a range of funds, as well as policies which allow the policyholder to simply select an investment focus (bonds, equities, real estate, etc.).

Term

Futures

Description

In the case of futures, the contracting party is obliged to buy or sell a standardised amount of an underlying instrument at an agreed price on a stipulated future date. See also derivatives, options.

G

Term

Term

Description

Description

Term

Gearing ratio

Description

Borrowed funds taken up for financing (mortgages and other interest-bearing liabilities) expressed as a percentage of the market value of the real estate (including building land and buildings under construction) at the end of the period under review.

Term

Gene therapy

Description

Gene therapy aims to definitively cure inherited or acquired genetic diseases by inserting "normal" genes into specific target cells within the body. Somatic gene therapy involves the treatment of the disease symptoms, while germline gene therapy enables genetic mutations to be passed on to future generations.

Term

Genetic engineering

Description

Branch of biotechnology. Generic term for all techniques which can be used to isolate, characterise and manipulate genes, the carriers of genetic information.

Term

Government bonds

Description

Bonds issued by governments to finance their national budgets.

Term

«Grandfathering»

Description

Bonds with "grandfathering" status i.e. principally bonds that were first issued prior to 1 March 2001 and for which no new tranches have been issued since 1 March 2002, are exempt from the EU Savings Tax Directive for a transition period up to the end of 2010.

Term

Gross yield

Description

With real estate funds, rental income as a percentage of market value.

H

Term

Term

Description

Description

Term

Hedge funds

Description

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.

Term

Hedging

Description

Protecting investments against losses. UBS asset allocation funds specifically hedge against exchange-rate risks.

Term

Hedging costs

Description

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.

Term

High watermark

Description

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.

Term

High-yield funds

Description

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.

Term

Historic pricing

Description

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.

I

Term

Term

Description

Description

Term

IFA

Description

See Investment Fund Act.

Term

IFO

Description

See Investment Fund Ordinance.

Term

IFO-FBC

Description

See Ordinance of the Federal Banking Commission on Investment Funds.

Term

Income

Description

Interest and dividends.

Term

Income property

Description

Property which is built or bought not for the owner's use but as a capital investment.

Term

Index

Description

Indicator of performance on one or more markets. The oldest and best-known stock market index is the Dow Jones. Indexes make it possible to compare the performance of a fund which is invested in a specific market with the development of this market. See also benchmark.

Term

Index fund

Description

An investment fund which replicates a chosen stock market index in its stock selection and weightings as exactly as possible.

Term

Information Ratio

Description

The information ratio is a measure used to assess an investment fund, and refers to the excess return relative to the tracking error. It is calculated by dividing the fund's return (expressed as alpha) by the fund's risk (expressed as tracking error). The alpha measures the fund's outperformance relative to its benchmark. The tracking error shows the volatility in deviations between the fund's return and that of the benchmark, and is thus a measure of the fund's risk. The higher the information ratio, the more rewarding this makes a strategy that deviates from the benchmark for investors.

Term

In-house funds

Description

Assets managed separately by the bank, for which no public advertising may be carried out.

Term

Innovator

Description

The majority of innovators are small, new companies whose products offer proven environmental benefits and high resource efficiency. Examples include suppliers of organic food and energy producers which use renewable energy sources such as wind and solar power.

Term

Interest withholding tax (Zinsabschlagssteuer)

Description

Since interest withholding tax was introduced on 1 January 1993, the custodian banks in Germany are generally obliged to deduct 30 percent of the interest revenue contained in the distribution (dividends are subject to capital gains tax), to retain this as a pre-tax deduction and to forward it to the Finance Department. Interest withholding is a type of collection tax which may be partly or wholly reclaimed by taxpayers by declaring it in their income tax assessments. For taxpayers acting as custodians of their own securities (in particular this affects investors who acquired their fund units on an over-the-counter basis), the deduction on the paid-out revenue is 35%. An exception here are reinvestment funds, which are subject to 30% interest withholding tax in all cases (for securities held by a custodian or by the owner of the securities).

Term

Interim profit taxation (Zwischengewinnbesteuerung)

Description

German finance authorities observed that many investors regularly sold their fund units prior to the year-end of the fund, in order to avoid taxation of earnings (considered a tax-free capital gain). German lawmakers therefore introduced the so-called interim gains tax on 1 January 1994. With each sale or redemption of units of foreign funds, the interest accrued until that date is taxed (does not apply to dividends). The sale or redemption of units before the end of the fund's financial year thus no longer allows investors to make tax-free gains.

Term

Intrinsic value

Description

See net asset value.

Term

Investment currency

Description

Currency in which an investment fund makes its investments. Not to be confused with reference currency or currency of account.

Term

Investment Fund Act

Description

In Switzerland, relationships between investors, the fund management company and the custodian bank are governed by the Investment Fund Act (IFA) and the related ordinances from the Federal Council and the Swiss supervisory authority (Federal Banking Commission, FBC). In Luxembourg and in Germany, investors are protected by the law regarding undertakings for collective investments. The Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg and the Federal Banking Supervisory Office (BaKred) in Germany are the supervisory authorities in these countries analogous to the Swiss Federal Banking Commission.

Term

Investment Fund Ordinance

Description

Investment Fund Ordinance (IFO) issued by the Federal Council on 19 October 1994, which contains detailed provisions regarding the Investment Fund Act.

Term

Investment funds

Description

Investment funds are assets solicited through public advertising, pooled by a great number of independent investors for the purpose of collective investment and managed by the fund management for the account of investors and in accordance with the principles of risk diversification.

Term

Investment grade

Description

Term used to denote securities with ratings of between BBB and AAA, indicating that their credit quality is satisfactory or good.

Term

Investment horizon

Description

The period of time for which investors want to commit a part of their assets.

Term

Investment instruments

Description

The various investment categories such as equities, bonds and money market instruments.

Term

Investment policy

Description

The investment policy describes the approach taken to achieve the investment objective (stock selection, timing, cash holdings, etc.).

Term

Investment principles

Description

The investment principles characterise and define the fund. The investor receives information about the securities held in the portfolio, the investment currency, the geographic mix of the investments and the risk diversification of the investment fund.

Term

Investor

Description

Holder of fund units. By purchasing units, the investor acquires the right to participate proportionately in the assets and earnings of the fund.

Term

ISIN number

Description

International Securities Identification Number. Internationally recognised securities number. Equivalent in Switzerland to a securities number.

Term

Issue

Description

Issue of new securities.

Term

Issue price

Description

Price at which investors can subscribe fund units. It corresponds to the net asset value per unit plus the issuing commission.

Term

Issuer

Description

Legal entity or public entity which issues securities in order to raise borrowed capital.

Term

Issuing commission

Description

The commission charged by the distribution unit to the investor upon subscription of units.

J

Term

Term

Description

Description

Term

Junk bond fund

Description

See high-yield funds.

L

Term

Term

Description

Description

Term

Large caps

Description

Companies with very large stock market capitalisation in relation to the market on which they are traded.

Term

Late stage

Description

Late-stage financing refers to mature companies that have been in existence for some years. Such investments typically involve relatively large amounts, but are more liquid and less risky, as the companies can be sold more quickly or floated on the stock exchange.

Term

Leader

Description

Leading company which is the best in its sector in terms of environmental and social performance.

Term

Leverage

Description

With derivative instruments, greater returns can be earned with a comparatively low capital investment than with an investment in the actual underlying instrument. This effect is called leverage.

Term

Liquidity

Description

Units of investment funds enable the unit holders to remain liquid, i.e. they can redeem their units as a rule at any time. The management company is obliged to redeem the units at the current redemption price without any notice of termination.

Term

Listing

Description

The admission of a security to official trading on a stock exchange, which is usually subject to the fulfilment of certain criteria. UBS's real estate funds are listed on the Swiss Exchange.

Term

Long/short

Description

The strategies that come under this heading invest in a combination of different financial instruments to optimise risk and return. The purchase of an equity that promises an increase in value (long) is combined with the sale of another equity where the value is expected to fall (short). Short selling and credit financing for investments are explicitly permitted.

Term

Long-term funds

Description

An investment fund which invests in bonds with a (term to) maturity of at least 5 years.

Term

Luxembourg-based funds

Description

An investment fund established under Luxembourg law and managed by a management company domiciled in Luxembourg.

M

Term

Term

Description

Description

Term

Macroeconomics

Description

In macroeconomics, the development of the economy as a whole is studied. Sectors and regional economic systems are looked at rather than individual economic units.

Term

Management fee

Description

The charge levied by the management company for the administration of an investment fund. The amount of the fee is expressed in percentage or tenth of a percentage of the fund assets or in basis points. Less comprehensive than UBS's all-in fee and covers only part of the costs due.

Term

Management style

Description

Manner in which the investment decisions are made to achieve the investment objective.

Term

Market capitalisation

Description

The market value of a listed company, corresponding to the current market price of its shares multiplied by the number of all the equity securities in circulation.

Term

Market risk

Description

Risk that depends on factors which influence the whole market and which cannot be reduced or excluded by diversifying the portfolio.

Term

Market value

Description

The current value of a property, assessed by independent experts, which would be obtained were the property to be sold in a conscientious manner at the time of the valuation. Valuations are generally carried out once a year in accordance with the valuation method used by the fund management company.

Term

Maturity

Description

Period of time from the issue of a bond to its due date or to the premature repayment of the bond. Not to be confused with duration. See also term to maturity.

Term

Medium-term fund

Description

At UBS, investment funds which invest in bonds with a (term to) maturity of 3-5 years.

Term

Medium-term notes

Description

Fixed-income investment instruments issued by banks, with maturities between two and eight years. Bond funds cannot invest in medium-term notes as they are not permitted for official stock exchange trading.

Term

Mid caps

Description

Companies with medium-sized market capitalisation. Also called secondary stocks.

Term

Money market funds

Description

Investment funds which invest in short-term fixed-interest paper (less than a year to maturity) in specific currencies.

Term

Money market instruments

Description

Securities with maturities of no more than one year which are traded on the money market. The classic money market instruments in Switzerland are domestic bills of exchange, treasury bills and treasury notes. Key foreign investments include commercial paper and certificates of deposit.

N

Term

Term

Description

Description

Term

Net asset value

Description

The net asset value of a unit is equal to the net fund assets divided by the number of units in circulation. In the case of securities and money market funds, the net asset value, which is generally calculated daily, is the basis for calculating the issue price and the redemption price. Also called intrinsic value.

Term

Net assets

Description

The net (fund) assets are the sum of the market values, minus liabilities and the anticipated liquidation taxes (property gains taxes).

Term

Net fund assets

Description

The fund assets calculated at market values less all liabilities.

Term

No-load fund

Description

An investment fund which does not charge any commission on the subscription or redemption of units.

Term

Notes

Description

Securities privately placed (i.e. without public advertisement) on the Swiss capital market by foreign borrowers.

P

Term

Term

Description

Description

Term

Paying agent

Description

The agent or bank which is explicitly appointed by the issuer and which is responsible for all ongoing transactions that arise for the owner of the securities concerned, such as the collection of dividends and coupons as they fall due.

Term

Payout ratio

Description

Expresses the ratio of cash flow to distributed income, which indicates how much of the funds earned during a business year has actually been distributed.

Term

Performance

Description

Total return of an investment expressed as a percentage of its market value at the beginning of the period measured. Performance is composed of price changes plus reinvested income (i.e. dividend distributions in the case of shares and coupon payments in the case of bonds). Performance is always reported in the currency of the fund. For distribution funds, the performance calculation is predicated on a reinvestment of distribution payments. The overall or absolute performance over 5 years (OP5) includes the compound interest effect. It can be computed using the following multiplication of the last 5 yearly performances (YP1 to YP5): OP5 = (YP1+1) x (YP2+1) x (YP3+1) x (YP4+1) x (YP5+1) – 1 (all performance figures in %). The annualised or average annual performance (AP5) is represented as a geometric rather than arithmetic average and can be computed with the following formula: AP5 = [1+OP5] 1 – 5 –1. For example, for an overall performance of 20% over 5 years, the annualised performance is 3.71%.

Term

Performance

Description

Percentage change in the value of an investment, plus any accumulated income, and corrected for inflows and outflows of funds during a defined period of time.

Term

Performance fee

Description

For non-classical investment funds such as hedge funds, the investor often has to pay, in addition to the conventional management fee, a supplementary performance fee in the form of a percentage (e.g. 20%) of the fund’s annual increase in value. A high watermark is usually set for this amount.

Term

Perpetual bonds

Description

Bonds with no maturity date. Perpetual bonds make regular interest payments, but never redeem the principal amount; to get back the capital invested in such bonds, investors must sell them on an exchange.

Term

Portfolio

Description

In the investment fund business, the composition of a fund's assets.

Term

Portfolio managers

Description

Investment specialists who manage the assets of an investment fund. They decide which securities to buy and sell within the defined investment principles. Also called asset managers.

Term

Portfolio theory

Description

The relationship between risk and return is a key tenet of modern portfolio theory. In principle, a higher return can only be "purchased" for a higher risk. However, the relationship between risk and return may be optimised via a broad spread of investments (diversification). By doing so, a higher return can be generated with the same level of risk, and a lower return can be achieved with a lower level of risk.

Term

Premium

Description

A figure, usually expressed as a percentage, to indicate, for example, how high the issue price of a security lies over a specific reference price, usually the nominal value. A premium can also mean the amount (often also expressed as a percentage) a buyer is willing to pay for a right (option price, option, subscription right) above the book value. For derivative instruments used for hedging purposes (put options), it is the price that the option buyer pays for the right to sell the underlying security. In the case of the put options used for the Limited Risk Funds, the premium rises as market volatility increases.

Term

Premium

Description

The premium is the percentage difference between the current stock exchange price and the net asset value adjusted for the distribution plus the last distribution (proportionate).

Term

Price differential

Description

See premium.

Term

Private equity

Description

A start-up company or a young company already in business requires capital, which it seeks from investors and private equity funds. Since these companies are usually ones that are not yet listed on the stock exchange, so-called private markets that receive investment are referred to here.

Term

Prospectus/ fund regulations

Description

The rights and obligations of the contracting parties are defined in the prospectus and fund regulations. In particular, these documents contain guidelines governing investment policy, the use of earnings and the costs the fund and/or the investor have to bear.

Term

Put options

Description

See options.

R

Term

Term

Description

Description

Term

Rate of rental loss (rate of income loss)

Description

Rental losses expressed as a percentage of targeted net rental income. Rental losses include losses due to vacancies (based on the most recently paid rent) and collection losses on rental income.

Term

Rating

Description

The measure of the creditworthiness of a borrower by special rating agencies such as Standard & Poor?s or Moody’s. As a rule, UBS bond funds principally invest in bonds issued by prime borrowers.

Term

Real estate funds

Description

Investment funds investing in residential and business properties. UBS real estate funds invest exclusively in Switzerland. These funds enable investors to participate in the real estate sector with just small sums of money without incurring the administrative expenses associated with direct investments.

Term

Real value

Description

Post facto calculation of the actual asset value of a property, i.e. the cost of reconstructing a building of the same standard, taking into account the depreciation due to age that has occurred in the meantime and the value of the land.

Term

Redemption commission

Description

The commission charged by the distribution unit to the investor upon redemption of units.

Term

Redemption of units / stock-exchange trading

Description

Real estate fund units may be traded daily on the stock exchange or presented to the fund management company for redemption at the end of a financial year subject to a 12-month notice period. The repayment is made two months after expiry of the notice period.

Term

Redemption plan

Description

Speciality of the UBS Investment Fund Account: Once the investor’s account has reached CHF/EUR/USD 100,000, he or she can regularly withdraw an amount. The investors determine the amount (by either receiving the gains the account generates or directly drawing down assets) they would like to have transferred, to which account, and on which dates

Term

Redemption price

Description

The price at which an investment fund is obliged to redeem units, which is charged to the fund assets.

Term

Redemption price

Description

The price at which the fund management is obligated to buy back units, subject to the period of notice prescribed by law (net asset value minus any commission in accordance with the fund regulations).

Term

Reference currency

Description

Currency in which an investor normally thinks, calculates and fulfils his or her liabilities. It is also the currency in which the performance of an investment is measured.

Term

Reference index

Description

See benchmark.

Term

Regional fund

Description

An investment fund which invests in a specific geographic region (e.g. Scandinavia) or a particular economic area (e.g. Euroland).

Term

Reinvestment

Description

The possibility of reinvesting the distribution in the same fund. Certain funds offer investors a special reinvestment discount on the issuing price if the annual distribution is reinvested. This is true of most Swiss-registered funds.

Term

Reinvestment discount

Description

See reinvestment.

Term

Reinvestment fund

Description

An investment fund that continuously reinvests its income in the fund rather than distributing it to unit holders, as opposed to distribution fund. See also tranche.

Term

Reinvestment, continuous

Description

The continuous reinvestment of the income generated by a fund in the same fund.

Term

Relative value

Description

This investment strategy aims to exploit market inefficiencies. Accordingly, simultaneous investments in long and short positions in strongly correlating portfolios are generally entered into.

Term

Representative

Description

In the case of investment funds established under foreign law that can be sold publicly in Switzerland, the representative is the individual or legal entity domiciled in Switzerland that represents the fund vis-à-vis investors and the supervisory authority in Switzerland. Representatives require prior authorisation from the Federal Banking Commission. See UBS Fund Management (Switzerland) AG.

Term

Resource efficiency

Description

Resource-efficient production uses fewer and/or more environmentally friendly resources. This helps protects the environment and offers financial savings.

Term

Return

Description

See performance.

Term

Return on investment

Description

Change in the net asset value of units, assuming that distributions are reinvested at net asset value.

Term

Risk

Description

In portfolio theory the risk of an investment is measured by the amount of volatility. Risk and return are directly related: Markowitz’s portfolio theory posits that a higher return can only be obtained with a higher risk.

Term

Risk

Description

In portfolio theory, risk tends to be defined as the standard deviation of performance values. The standard deviation is a statistical measure of the distribution around an average value over the period being observed. Markowitz’s portfolio theory posits that a higher return can only be "purchased" with a higher risk.

Term

Risk capacity

Description

An investor’s capacity to tie up his money (capital) for a specified period of time without getting into financial difficulties.

Term

Risk tolerance

Description

The degree of possible price fluctuations that an investor is willing to accept in order to attain a specific investment goal. Risk tolerance and an investor?s need for security are important factors when selecting an investment fund. The higher the risk tolerance, the greater the component of equities and foreign currencies.

S

Term

Term

Description

Description

Term

Sales agent

Description

Partner of a fund provider who sells the provider’s products to clients and redeems the products from clients.

Term

Savings plan

Description

Speciality of the UBS Investment Fund Account: This form of investment involves the regular payment of a specified amount to accumulate fund assets. See also cost averaging.

Term

Sector average

Description

The sector average is the unweighted average performance of all funds in the same investment category. Generally all funds of the same investment category which are authorized for sale in one country are considered together. Allocation to an investment category based on S&P Fund Services, revised using the criteria "same investment universe", "fund volume larger than CHF 20m" and "investment level higher than 85%".

Term

Sector fund

Description

An investment fund which invests its assets solely in securities of companies in a specific sector of the economy.

Term

Securities fund

Description

An investment fund that invests in securities and loan-stock rights that are traded on a stock exchange or on another regulated market open to the public. See also real estate funds and other funds.

Term

Securities lending

Description

The lending of securities against remuneration and on provision of collateral. Since 1992, securities lending has also been permitted for investment funds.

Term

Securities number

Description

Identification number of securities used in Switzerland to facilitate their trading and transfer. International equivalent ISIN number.

Term

Securities purchase fee

Description

There are certain funds which, owing to their special structure, may charge so-called securities purchase fees in addition to the issuing commission. This commission accrues to the fund and is used to cover the costs arising in the acquisition of securities. The fee is charged for UBS's capital preservation funds.

Term

Securities turnover tax

Description

See stamp duty.

Term

Security risk

Description

Risk of fluctuations in the price of a security.

Term

Segment

Description

See subfunds.

Term

Semi-annual report

Description

See annual report.

Term

SFA

Description

See Swiss Funds Association

Term

Sharpe ratio

Description

The Sharpe ratio expresses how much higher (or lower) a return an investor can expect compared to the risk-free rate of interest (e.g. interest rates on savings accounts) per unit of risk (volatility). The risk-free rate of interest varies from currency to currency.

Term

Short sale

Description

The forward selling of financial instruments which the seller does not yet possess, whereby the investment objective is to be able to cover the missing securities at cheaper prices before the delivery date. The risk involved in short selling is that the price of the underlying may rise.

Term

Short-term fund

Description

A fund which invests in bonds with a (term to) maturity of 1 to 3 years.

Term

SICAF

Description

Société d’investissement à capital fixe. An investment fund in the form of a joint-stock company with fixed capital. See corporation form.

Term

Sicav

Description

Société d’investissement à capital variable. An investment fund in the form of a joint-stock company with variable capital. The fund’s units are issued in the form of equities. See corporation form.

Term

Small caps

Description

Shares of companies with a market capitalisation of generally less than CHF 500 million. Also called secondary stocks.

Term

Small/mid cap funds

Description

Funds which invest in shares of companies with relatively small market capitalisation. See also small caps and mid caps.

Term

Socially responsible investments

Description

Socially responsible investments (SRI) include those investments which take into account social and environmental criteria in addition to traditional financial factors.

Term

Speciality fund

Description

A fund which differs from conventional investment funds in that it adopts a special investment approach or focuses specifically on certain countries, industries or investment instruments.

Term

Spread Duration

Description

For non-Treasury credit securities, the yield is equal to the Treasury yield plus a spread to the Treasury yield curve to compensate for additional credit risk. The price of a bond with credit risk can change even though Treasury yields are unchanged because the spread required by the market changes. The measure of how a non-Treasury issue`s price will change if the spread sought by the market changes is referred to as spread duration. It estimates the price sensitivity of a non-Treasury issue to a 100 basispoints movement (widening/narrowing) in its spread relative to Treasuries. For a Treasury bond portfolio the spread duration is 0. The spread duration for fixed-rate credit bonds equals normal duration.

Term

Stamp duty

Description

Subscriptions to investment funds domiciled abroad are subject to stamp duty in Switzerland. Redemptions are exempt from stamp duty. The issue and redemption of units of Swiss-based investment funds are not subject to stamp duty.

Term

Stem cells

Description

Stem cells are relatively undifferentiated cells which are not yet established as certain cell types and thus have no specific function. Stem cells retain the ability to develop into different cell types.

Term

Stock exchange price

Description

The price of units of investment funds which are listed on the stock exchange or traded over the counter (real estate funds). The price is governed by supply and demand in the market, whereas the issue and redemption prices of the units are determined by the management company on the basis of the net asset value.

Term

Straight bonds

Description

Bonds with a fixed coupon and fixed redemption date.

Term

Strategy funds

Description

See asset allocation funds..

Term

Subfund

Description

Part of an umbrella fund. For investment funds with different subfunds, investors are only entitled to the assets and income of the subfund in which they hold units. Subfunds are also called compartments or segments.

Term

Subscription

Description

In the fund business, subscription means the acquisition of fund units. As opposed to redemption.

Term

Supervisory authority

Description

The state body which supervises the activities of management companies. In Switzerland the Federal Banking Commission (FBC) acts as the supervisory authority for the investment fund business. In Luxembourg it is the “Commission de Surveillance du Secteur Financier (CSSF)”, in Germany the Federal Banking Supervisory Office (BAKred), in Austria the Federal Ministry of Finance (Bundesministerium für Finanzen) and in Liechtenstein the Office for Financial Services (Amt für Finanzdienstleistungen).

Term

Sustainable development

Description

Development which meets the needs of the present without compromising the ability of future generations to meet their own needs. (Report of the Brundtland Commission 1987).

Term

Swing Pricing

Description

Swing Pricing is an innovative method used to calculate the net asset values of investment funds. SSP allows an investment fund to settle the daily transaction costs arising from subscriptions made by incoming investors and redemptions made by outgoing investors. Existing investors will no longer have to indirectly bear these transaction costs because with SSP the charge of the estimated transaction costs is directly integrated into the calculation of the net asset value, with these costs borne by incoming and outgoing investors. Under SSP, the net asset value (NAV) is adjusted daily to take account of net transaction costs; the direction of the swing is determined by the daily net capital flows. Where there are net capital inflows, the swing factor is added to the NAV to take account of subscriptions of fund units; where there are net outflows, the swing factor is deducted from the net asset value to take account of unit redemptions. In both cases, the same NAV applies to all incoming and outgoing investors on a particular date. For the funds under Luxembourg law, a threshold value may apply. The NAV is thus only adjusted if this threshold value is exceeded on a trading day. The swing factors by which the NAV is adjusted are based on external brokerage fees, taxes and duties as well as estimated bid/offer spreads of the transactions which a fund carries out in accordance with the subscriptions or redemptions made on a particular day. Performance figures and portfolio statistics are calculated based on the adjusted NAV.

Term

Swiss Fund Association

Description

Association which represents the interests of the investment fund industry in Switzerland. It was established in Basel in 1992 under the auspices of the Swiss Bankers Association.

T

Term

Term

Description

Description

Term

Tax at source

Description

Tax levied directly at source, for example withholding tax in Switzerland.

Term

TER

Description

The ratio of total expense to a fund s average size over an annualised accounting period. Expenses are taken to include all expenses shown in the income account, including management, administration, custody, audit, legal and professional fees.

Term

Term to maturity

Description

Remaining life of a bond from the current date to the final due date or the premature repayment of the bond. Not to be confused with duration.

Term

Termination

Description

In the investment fund business, withdrawal of an investor from the collective investment contract. The redemption price is in principle to be paid immediately. Special regulations apply to real estate funds, see redemption of units/stock-exchange trading.

Term

Theme fund

Description

An investment fund which invests in securities which meet a specific criterion (environmentally friendly, ethical commitment, etc.) or which all have the same characteristic (e.g. companies which are undergoing restructuring programmes).

Term

Theoretical yield to maturity (gross) for asset allocation funds

Description

In contrast to bond funds and money market funds, the theoretical yield to maturity in this case is reported as a gross figure to allow meaningful comparisons, as the asset allocation funds can vary considerably with regard to weighting of their interest-bearing investments as well as to their fee structure.

Term

Theoretical yield to maturity (net) for bond and money market funds

Description

The theoretical yield-to-maturity figures published for our bond funds and money market funds represent the yield expected for the next 12 months based on the current fund portfolio. This yield is an estimate and corresponds to the weighted average yield to maturity on all the fund s investments. In the process, the fund s own administrative costs are calculated and subtracted from the gross yield to maturity. The theoretical yield to maturity is also affected by changes in the composition of the portfolio and fluctuations in interest rates. In other words, no conclusions can be drawn from a fund s yield to maturity concerning a possible distribution.

Term

Total risk

Description

See risk.

Term

Tracking error

Description

Measure of the deviation of the return of a fund compared to the return of a benchmark over a fixed period of time. Expressed as a percentage. The more passively the investment fund is managed, the smaller the tracking error.

Term

Trading (strategy)

Description

Generally active yield strategies. Potential for high absolute returns and significant draw downs . Low Sharpe ratio and low correlation with equities and bonds.

Term

Trading opportunistic

Description

This term comprises strategies which, depending on the situation, invest in a large number of financial instruments, sectors and markets, according to the opportunities available to the managers. Macro hedge funds follow a trading-opportunistic strategy and attempt to identify and exploit global profit opportunities using macro-economic analysis. Due to the variety of strategies used, the correlations to the markets are also different.

Term

Tranche

Description

A fund or subfund may be divided up into several tranches, i.e. with separate securities numbers, which differ from one another in one or a number of factors such as distribution practice, conditions, or fund currency. However, all tranches of a fund/subfund are always invested in the same portfolio.

U

Term

Term

Description

Description

Term

UBS Fund Management (Switzerland) AG

Description

This company serves as the management company of all UBS Investment Funds established under Swiss law and also acts as the representative of all UBS foreign-based funds in Switzerland vis-à-vis the investors and the supervisory authority. The management company is domiciled in Basel.

Term

Umbrella fund

Description

An investment fund which comprises several subfunds. Together the subfunds form one single legal entity, meaning that only the umbrella fund needs to be submitted for authorisation. The subfunds are governed by the same fund regulations and prospectus. Once the umbrella fund has been approved, other subfunds can be created. All UBS Investment Funds domiciled in Luxembourg are umbrella constructions. Not to be confused with fund of funds.

Term

Underlying instrument

Description

A financial instrument (security, currency, index, commodity, etc.), which forms the basis for an option or future.

Term

Unit

Description

A unit is a security which evidences the investor's right to participate in the assets and income of the fund in proportion to the units acquired.

Term

Unit certificate

Description

Physical certificate which evidences a unit of an investment fund. In general, however, units exist as a book entries only.

V

Term

Term

Description

Description

Term

Value of land

Description

Value of a piece of land in relation to the economic possibilities for use. The value of land depends on location and geological properties as well as on the legal and technical possibilities for building on it.

Term

Variable-interest bonds

Description

Bonds whose coupons change every quarter or every six months in line with the development of the respective reference interest rates. A commonly used reference interest rate is the Libor (London Interbank Offered Rate).

Term

Venture capital

Description

This term refers to the provision of equity capital and also comprehensive management support for young companies with above-average growth potential. The capital is typically tied up in the company for five to ten years. An investment in venture capital is not without its risks, as there is often no balance sheet or other key financial statistics available on the companies. The valuations therefore mainly reflect the future prospects.

Term

Volatility

Description

See risk.

W

Term

Term

Description

Description

Term

Warrant bonds

Description

Bonds with a warrant attached. The warrant enh3s the holder to buy a specific number of shares of the company in question during the exercise period at a price fixed in advance. Once the warrant is exercised, the bond continues to run until its maturity date.

Term

Withholding tax

Description

In the case of Switzerland, a 35% federal tax on domestic capital income levied on the distributions of income made by Swiss investment funds. These deductions can be wholly or partly reclaimed depending on the source of the income and the domicile of the investor.

Y

Term

Term

Description

Description

Term

Yield curve

Description

The yield curve represents the relationship between the maturities of bonds traded on the market and their yield to maturity. The yield curve is basically divided into three segments: a short end, a long end and a middle segment (for UBS bond funds, this corresponds to maturities of 1 to 3 years for Short-Term Bond Funds, over 5 years for Bond Funds and 3 to 5 years for Medium-Term Bond Funds). The shape of this curve allows conclusions to be drawn regarding the current state of the bond market. Normally, the curve rises for longer maturities: the investor enjoys higher returns as a result of investing his money over the longer term. If the yields in the shorter-dated segment are higher than at the long end, this is called an inverse yield curve.The fund manager controls the interest-rate risk of the fund according to the positioning of his portfolio on the yield curve. See duration.

Term

Yield on distribution

Description

The yield on distribution is the ratio of distributed income to the current market price.

Z

Term 

Term 

Description

Description

Term 

Zero-coupon bonds

Description

Bonds that make no interest payments. Instead of interest payments, the buyer of a zero-coupon bond purchases the security at a discount. Redemption is made at 100%.