Glossary


Term Definition
Absolute return The return  achieved by an asset  over a specified period of time.
Bear market A downward trending market, where widespread pessimism often causes the negative sentiment to be self-sustaining.
Bond A loan, usually made to a government or company, which normally pays a fixed rate of interest over a given time period, at the end of which the loan is repaid.
Bull market A market trending upwards - characterised by optimism and confidence in continuing strong returns.
Capital structure Refers to the way a firm finances its assets, through a combination of debt and equity.
Credit
Is used in this video to refer to the asset class ‘credit’. It is often used as a synonym for corporate bonds. However, pure credit reflects the risk of lending to a company, unlike corporate bonds which have an element of credit risk as well as an element of interest rate risk.
Credit risk Financial risk that an obligation will not be paid and a loss will result.
Debt An amount of money borrowed, and therefore owed, by one party to another.
Duration A measure of the sensitivity of a bond or bond fund to changes in interest rates.
Duration risk The longer a bond or bond fund’s duration, the more sensitive it is to interest rate movements.
Government bond Bonds issued by governments.
High-quality bonds A bond issued by a company with a medium or high rating from a recognised credit agency. They are considered to offer lower risk than bonds issued by companies with lower credit ratings.
Long A way for a fund manager to express their view that the market is likely to rise in value.
Low-quality bonds A bond issued by a company with a low rating from a recognised credit agency. They are considered to offer higher risk than bonds issued by companies with higher credit ratings.
Risk-free asset An asset with a certain future return.
Risk-to-reward A ratio comparing the expected returns of an investment to the amount of risk undertaken.
Short A way for a fund manager to express their view that the market is likely to fall in value.