Glossary

Term Definition
Asset class Category of assets, such as cash, equities, fixed interest and their subcategories, as well as tangible assets such as real estate. M&G's key asset classes are equities, fixed interest, multi asset and property.
Bear market/bearish A market in which the prices of securities are falling,  and widespread pessimism often causes the negative sentiment to be self-sustaining.
Bond A loan, usually taken out by 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.
Budget deficit Refers to government spending, and also referred to as the "national debt".
Corporate bond Bonds issued by a company. They can offer higher interest payments than bonds issued by governments as they are often considered more risky.
Credit rating An independent assessment of a borrower's ability to repay its debts. A high rating indicates that the credit rating agency considers the issuer to be at low risk of default; likewise, a low rating indicates high risk of default. Standard & Poors, Fitch and Moody’s are the three most prominent credit rating agencies.
Credit spreads The difference in the yield between a corporate bond and a government bond of the same maturity.
Exposure The proportion of an investment portfolio at risk in a certain area.
Financials Refers to companies operating within the financial services industry, eg banks.
Fiscal contraction Government financial policy that reduces the budget deficit, or increases the budget surplus. This is often achieved by increasing taxation or reducing government spending.
Fiscal policies Government policy on taxation, spending and borrowing.
Gilts Bonds issued by the UK government.
High yield bonds Bonds with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default than better quality, ie, higher-rated bonds, but have the potential for higher rewards.
Inflation The rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier. There are two inflation indices in the UK – the Retail Prices Index (RPI) and the Consumer Prices Index (CPI).
Investment grade bonds Bonds issued by a company with a medium or high credit rating from a recognised credit rating agency. They are considered to be at lower risk from default than those issued by companies with lower credit ratings.
Issuer An entity that sells securities, such as bonds and equities.
Monetary policy A central bank's regulation of money in circulation and interest rates.
Sovereign In this instance, a synonym for government.
Sub-investment grade bonds Bonds issued by a company with a low rating from a recognised credit rating agency. They are considered to be at higher risk from default than those issued by companies with higher credit ratings.
Underweight If a portfolio is ‘underweight’ a stock, it holds a smaller proportion of that stock than the comparable index or sector.
Yield Return on an investment over a given period (typically 12 months), relative to the current price of the asset.