Investment Terms

A broad index of global bond issues that are of investment grade. The index includes both government and non-government (corporate, mortgage backed etc) issues.

A company whose shares may be traded on the stock exchanged by members of the public.

A security (such as a share) that may be bought and sold via a public exchange.

In the context of superannuation, a benefit payable in full in cash, rather than over a period of time as a pension or annuity.

The tax payable on the lump sum component of a superannuation payout.

Morgan Stanley Capital International Indices, a collection of equity indexes for a range of, and groups of countries.

An investment vehicle in which multiple investors pool their money, which is then managed by a professional fund manager on their behalf.

The total fees and expenses payable by investors in a managed fund expressed as a percentage of the average net value of the fund’s assets.

A strong rise in the level of a share or market following on from a decline.

Active trading in securities, such as shares, in order to take advantage of temporary market opportunities, price fluctuations and perceived price patterns.

An investment vehicle structured to allow investors to invest in several underlying investments. Also known as Master Trusts.

The date upon which a debt or security (such as a bond or loan) is due to be repaid.

More recently, the term member choice has been used to describe the Liberal Government’s push to allow all individuals the right to choose their own superannuation fund to which their Superannuation Guarantee Contributions are made. Member choice can also describe the process where members of a superannuation fund have the ability to choose the way their superannuation benefits are invested from a menu provided by their fund.

Actions undertaken by the Reserve Bank in order to influence the availability and cost of money (e.g. interest rates).

These managers outsource the management of their funds to one or more established fund managers. The managers are continually assessed and if performance lapses or the fund strays from its investment style the manager may be replaced with another fund manager. Managers are usually combined to provide diversification not investment style.

These managers employ a number of different investments styles when managing their portfolios.

North American terminology for a managed fund. See managed fund .

National Association of Securities Dealers Automated Quotation. An automated system for providing price details and buy/sell order execution for the most actively traded securities in the United States.

An investment made using borrowed funds where the interest payable on the borrowings exceeds the income generated by the investment.

Total value of a company’s assets after liabilities are deducted.

The current value of an investment income over the period of the investment, discounted by any influencing factors (such as inflation).

The popularly quoted Japanese Share Price Index, cover thing the top 225 shares listed on the Tokyo Stock Exchange.

A superannuation fund that does not meet the prerequisites established under the Superannuation Industry Supervision legislation for concessional tax treatment.

An instrument that gives the right but not the obligation to buy or sell an underlying security or commodity at a stipulated price on or before a specified future date.

Achieving a higher rate of investment return than an accepted benchmark (e.g. earning a 10% return over a period in which the All Ordinaries Index rose only 3%).

A security that is not traded on an exchange. For such securities, broker/dealers negotiate directly with one another over computer networks and by phone.

Having a greater exposure to a particular investment sector or stock compared with an established benchmark.

A style of investment management that seeks to achieve performance equal to the relevant market index and therefore reduce the amount of active decision making and the costs incurred in managing the fund. By doing this they aim to achieve returns which will mirror the performance of the reproduced index.

An ongoing, periodic income payment, from either the Government or an investment.

A superannuation fund that pays an income stream upon retirement rather than (or in addition to) a lump sum.

A stock’s market price divided by its current or estimated future earnings per share. The PE Ratio is used by the investing public as a fundamental measure of the attractiveness of a particular security versus other securities. The lower the ratio the relative to the average of the sharemarket, the lower the market’s profit growth expectations.

Any form of investment in which two or more individuals invest their money with a fund manager to invest on their behalf.

A superannuation trust that complies with the requirements of the Superannuation Industry Supervision legislation

That part of a superannuation benefit relating to employment or superannuation fund membership since 30 June 1983.

Part of the Eligible Termination Payment that relates to future service loss through invalidity. Termination from the workforce has occurred because of mental or physical incapacity.

That part of a superannuation benefit relating to employment or superannuation fund membership before 1 July 1983.

Is the term used to describe the rules that determine when individuals can voluntarily gain access to their superannuation, and when it is compulsory for them to take their benefit. Generally speaking, preserved superannuation benefits can only be accessed on permanent retirement from the workforce after reaching age 55.

Superannuation benefits, which cannot be accessed until a condition of release has been met ie; Attained Preservation age.

Process by which a deceased's will is authenticated and implemented by an Order of the Court.

Is the date for which the displayed unit prices are applicable.

A disclosure document required to be provided to retail investors under the Corporations Act prior to the issue of financial products, setting out prescribed information required by retail investors for the purpose of making a decision whether to acquire the financial products.

A legal document that was required to be lodged with the Australian Securities and Investments Commission that detailed to potential investors the nature of an investment (such as a managed fund) and how investors may have expected it to perform prior to the introduction of the FSRA regime on 11 March 2004.

Abbreviation for Quantitative Analyst, which is an individual that specialises in quantitative management of investments.

An investment approach that uses mathematical methods to create portfolios with the optimum balance between expected risk and expected return.

A statistical measure dividing a sample group into four equal parts.

To sell or trade an asset.

An investment return adjusted for inflation.

The lump sum and pension RBLs dictate the maximum concessionally taxed benefit that can be received by each individual from superannuation over their lifetime. Once these limits have been exceeded, any additional benefits become excessive, and are subject to a higher rate of tax.

The refund of a portion of a payment.

The price at which an investor can sell his or her units in a managed fund or unit trust.

A significant slowdown in the economy, but not of the same severity or duration as a depression. The rule of thumb for a recession is a period in which a nation’s Gross Domestic Product declines over two consecutive quarters.

A superannuation fund which falls under the regulation of the SIS Legislation. A fund becomes a regulated superannuation fund when it elects to adopt a corporate trustee structure, or when its principal activity is the provision of age pensions to its members. Although not compulsory, the transition to a regulated fund is necessary to achieve complying fund status and to be eligible for concessional taxation treatment.

Superannuation benefits which, in the case of employees, can be paid on termination of employment. These funds can only be released if the employer has made a contribution to the client’s superannuation fund which holds a restricted non preserved benefit.

The money generated annually by an investment, usually expressed as a percentage of the total investment.

The volatility inherent in an investment vis-à-vis the expected return.

The processes and procedures adopted by an investor or fund manager to monitor and control or minimise risk.

In the context of superannuation, the depositing of an eligible termination payment into an approved fund in order to minimise or avoid payment of a lump sum tax.