Risk and Glossary
| Term | Definition | |||||||||||||||||||||||||||||||||||
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| Risk | The calculation of risk follows that of standard deviation. For analysis period that is less than a year daily price/return data is used and for a year and above, weekly price/return data is used. The analysis period for risk will start from weekly onwards. | |||||||||||||||||||||||||||||||||||
| Reward-to-Variability Ratio (RVAR) |
Reward-to-Variability Ratio (RVAR) as the name implies is a measurement of the fund's average return (less risk-free rate, in this case it is set as default 1% per annum) over a specific analysis period divided by the fund's risk (also known as variability).
The numerator of RVAR measures a fund's excess return, that is the return for bearing risk or commonly referred to as risk premium and the denominator is the standard deviation.
RVAR shows the excess return per unit of total risk.
The higher the ratio, the better the fund performance is as compared to its peers.
Background: William F. Sharpe, winner of the 1990 Nobel Prize in Economics, is a Professor of Finance, Emeritus at Stanford University's Graduate School of Business. A trustee of the AXA Rosenberg Mutual funds and serves as Chairman of the Board of Financial Engines, Incorporated Years back, Dr Sharpe introduced RVAR as a measurement for the performance of mutual funds (unit trust) which is also commonly known as Sharpe Ratio, Sharpe Index or Sharpe Measure. |
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| Ranking Grade |
The funds are ranked based on their returns/risk/reward-to-variability. The numbers (after each grade) are the position of the funds within the scope.
Example: There are 12 funds in a chosen scope, the ranks are as follow:
If a fund is ranked B5, it means that within the 12 funds, it is in the 5th position under Grade B category. |
The percentage movement in the value of fund units from one period to the next.
The percentage movement in the value of fund units from one period to the next, adjusted to a compounded basis.
A security issued by a company or a government which promises to give you a fixed sum at a future date in return for a regular, specified level of income until that maturity date.
The performance of a basket of stocks or securities over a time horizon, against which the performance of an investment fund is compared against.
Increase in the value of capital - the objective of most equity - invested unit trusts
Employee Provident Fund
The cash payment that a company or a unit trust pays out annually or half-yearly, if any.
The mathematical concept of regular investment of a fixed cash amount in a volatile asset (such as a unit trust), by which the average cost of acquisition is lower than the average value of the asset over a period of time.
The concept of investing various securities to reduce the risk of investing in one security.
The part of a company's capital which is owned by its shareholders; shares.
A short document produced by the fund managers containing useful information about a unit trust, such as recent performance, asset allocation etc. for the benefits of the investors.
The initial service charge paid by the investors when purchasing the funds.
The group of people or organisation managing the unit trust.
The total net asset value (NAV) of the fund.
The portion of dividends, interest and capital gains earned by the unit trust and paid out to unit holders.
What a financial instrument, such as unit trust, is trying to achieve, for example, to achieve a return of at least 3% within a time period of 6 months.
This is where an investor has a single amount of funds which he wants to invest in a unit trust. This may be the only investment the investor wishes to make.
The Investment Manager's remuneration, which is calculated as a percentage of the total net asset value of the portfolio and is usually accrued at each dealing day.
Not Applicable, unless otherwise stated.
The market value of the fund's total assets plus income less expenses.
This is usually quoted as the percentage movement in the value of units from one period to the next. This is usually presented in a percentage format on an Absolute Return basis or an Annualised Return basis. Performance may also be judged on a relative basis against a benchmark.
A collection of different types of investments.
The legal document that contains all the information about a unit trust. The purchaser indicates that he has read this document when he signs the application form.
Unit holders who opt for reinvestment instruct the Manager to use their income to buy additional units at the net asset value per unit of the fund.
A legal entity runs by a group of people or an organization to protect the interests of a person or a group of people.
The owners of a unit trust.
A pool of financial instruments that is sub-divided into smaller units, and managed by a fund manager.