Can be described as the outperformance or excess return over a specific underlying benchmark or “risk-free” investment.
A term that has come to be understood as an investment in precious objects or other assets not considered in so-called traditional asset classes. These may include assets with an expectation of growth in value such as jewellery, art, antiques, infrastructure etc.
Asymmetry in returns
Asymmetry in returns refers to returns that are skewed, either toward the upside or the downside.
A contract between two parties that gives an investor the right (but not the obligation) to buy an asset at a specified price, at or within a specified date in the future.
Collective investment schemes
A type of investment vehicle used by investment managers to pool investors’ money to enable them to access assets which they might not otherwise be able to access in their individual capacities e.g. for the purchase of commercial property.
Degrees of freedom
These investment strategies can assume both the long and short position in a financial instrument and may use leverage to gain desirable exposure to securities, over above that which their invested capital would have permitted i.e. unconstrained.
A security with a price that is dependent upon or derived from an underlying asset.
The financial risk associated with the potential to incur losses.
The peak-to-trough (maximum point of return to minimum point of return) decline during a specific recorded period of an investment.
Equity long-short strategy
An investment strategy that aims to buy stocks that are expected to go up in future and sell stocks now that are expected to go down in future. These strategies may utilise derivatives such as futures, forwards, swaps etc.
An investment strategy that aims to generate investment returns regardless of market direction. They normally match long and short stocks to the same value in the same sector by buying stocks in a sector, that are expected to go up in in value in the future and selling stocks now, in a sector that are expected to go down in value in the future.
Financial Services Board
The South African financial services industry regulator.
Fixed income hedge fund strategy
An investment strategy that aims to generate returns using instruments related to interest rates. The strategies may be approached in various ways: taking views on interest rate cycles, taking positions in bonds that are cheap and (shorting) selling bonds that are expensive; taking positions in bonds that present good yield opportunities. Derivatives such as swaps and forward rate agreements (FRA’s) can be used to execute such trades.
A custom contract entered into between two parties to buy or sell an asset at a specified price on a specified date in the future.
Forward rate agreement
An over-the-counter contract between parties that determines the rate of interest or currency exchange rate to be paid or received at a specified future date.
Fund of hedge fund
A pooled investment vehicle based on investment in a collection of underlying hedge funds.
A standard contract entered into between two parties to buy or sell an asset at a specified price on a specified date in the future.
Similar to other mutual funds in that they are pooled investment vehicles. The difference is that these funds can assume both the long and short position in a financial instrument and may use leverage to gain desirable exposure to securities, over above that which their invested capital allows i.e. unconstrained.
Hedge fund strategies
Refers to the methods and processes that hedge funds employ to make investment decisions.
Generally referred to as investors that are people who seek returns for personal gain.
Generally referred to investors that are companies or organisations. Usually these companies invest for reasons other than personal gain.
Key market indices
Includes indices of listed securities in the JSE All Share Index (ALSI), JSE Al Bond Index (ALBI), etc.
The legal prerequisite for a financial institution that wishes to carry life insurance business activities.
Not a homogenous set
The underlying securities have differing characteristics in terms of risk, return, liquidity, etc.
The range of possible securities available for investment purposes e.g. hedge funds, equities, bonds, property, infrastructure etc.
Pooled investment vehicles
The pooling or accumulating of capital from many investors for larger overall investment in assets.
A contract that gives the owner of an asset the right (but not the obligation) to sell an asset at a specified price, at or within a specified date in the future.
In the context of hedge funds, defined as per the regulator’s Board Notice 52 as an individual, company or organisation who can demonstrate knowledge and experience in the business of hedge funds.
Investment schemes which are bound by the rules and regulations specifically set by the regulator.
The authoritative body that governs the financial services industry. In terms of regulation of the South African market, the Financial Services Board (FSB) is considered such a regulator.
In the context of hedge funds, defined per Board Notice 52 as individuals who seek investment return for their own personal gain. Such investors usually engage in investment of smaller capital amounts.
The forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact.
An adjective describing behaviours or activities widely considered indecent.
An agreement between two parties to exchange a series of cash flows for a specified period of time.
These investment strategies can assume both the long and short position in a financial instrument and use leverage to gain better results.
The financial risk associated with the potential to make gains.
Measure of how much the value of an investment is expected to fluctuate over the investment period.