Glossary

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130/30
A strategy to short poor performing stocks to purchase shares that are expected to have high returns. A 130-30 ratio implies shorting stocks up to 30% of the portfolio value and investing the funds in stocks the investor expects to outperform the market.
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529 Plan
A United States program to help parents finance education expenses. Most states sponsor Section 529 plans. 
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Absolute Return
Investment strategies targeting a positive return in absolute terms rather than relative to an index, or other benchmark, usually associated with hedge funds. Also referred to as “cash plus” funds. 
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Active
The use of a human element to actively manage a fund's portfolio using analytical research, forecasts, judgment and experience in making investment decisions on what securities to buy, hold and sell. The opposite passive management, also known as "indexing". The goal is to outperform a particular index or benchmark. 
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Active Currency Management
An alternative investment strategy seeking excess returns from active currency management and taken independently of other investments. It is also known as active currency management alpha. The lack of correlation with underlying assets is intended to reduce portfolio risk. 
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Actuary
Professional who advises on financial issues relating to risk, probabilities, and mortality, most frequently in relation to the financing of pension plans and insurance companies. 
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Additional voluntary contributions (AVC)
Additional voluntary contributions made by employees to an employer sponsored pension plan, above the amount that an employer will provide a matching contribution for. 
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Age Based
Individual investment portfolio based on the age of the investor, usually offered as a default option in defined contribution plans. Typically the portfolio mix becomes lower risk as the investor nears retirement. 
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Aggregate
Investment in a broad base of traded investment grade bonds 
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Aggressive Growth
A strategy of portfolio management and asset allocation that attempts to achieve maximum return. An aggressive investment strategy attempts to grow an investment at an above-average rate compared to its industry or the overall market, usually by taking additional risk. 
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All-Cap
Investments in stocks of companies across all sizes of market capitalization, such as small-cap, mid-cap and large-cap. 
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Alpha
Investment seeking excess returns relative to a benchmark index. Alpha is the excess return relative to the return of the benchmark index. It is often considered to represent the value that a manager adds to (or subtracts) from a fund's return. 
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Alternative
A general description covering several asset classes, including Hedge Funds, Private Equity, Commodities, Distressed Debt, Infrastructure, Energy, Natural Resources and Real Assets. 
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American Depositary Receipt (ADR)
A negotiable certificate issued by a U.S. bank representing a specific number of shares of a foreign stock traded on a U.S. stock exchange 
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Annuity
Series of payments of set size and frequency, often to a retired person. 
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Annuity Fund
A fund set up to provide annuities to beneficiaries. 
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Asset Backed Securities
Bonds or notes backed by loan paper or accounts receivable originated by banks, or other providers of credit, but not mortgages. 
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Asset Study
Provision of advice on the choice of asset classes. 
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Balanced
Style of investment management which aims to provide both income and capital appreciation while avoiding excessive risk and outperforming a particular market index or benchmark. 
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Bank
Any lender or credit union. 
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Bank Loans
Investments in bank loans to companies, with a fixed maturity and often featuring amortization of principal. 
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Benchmark
Parameter to assess degrees of comparative performance, such as S&P 500 and FTSE All Share Indexes. 
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Biotech
Investment in companies involved in the application of biology to make products from living organisms or their parts, such as industrial enzymes, improved plants and animals, medicines, and pesticides, including genetic engineering. 
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Bundled
A pension plan, usually defined contribution, with pre-packaged funds, increasingly from other providers. 
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Buyout
A private equity investment in companies where the management is leading a buy-out from the previous owners backed by private equity finance. 
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Cash
Liquid investment in short term money markets. 
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Collateralized Debt Obligation (CDO)
One of a series of bond-type investments, backed by a pool of assets, which can be tailored to match one or more investor’s requirements in terms of credit rating, risk, duration, and timing of payments. 
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Commercial
Real Estate investment in land and buildings used for a commercial purpose, such as retail, hotels and offices. 
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Commodities
Investment in basic goods exchanged during commerce. The sale and purchase of commodities is usually carried out through futures contracts on exchanges that standardize the quantity and minimum quality of the commodity being traded. 
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Consultant
Provision of advice on an aspect of money management, often the choice of asset classes or the selection of an asset manager. 
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Convertible-Arbitrage
A hedge fund strategy involving the purchase of a portfolio of convertible securities and, in some instances, a short position in that portfolio. 
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Convertibles
Investments in bonds that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder. 
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Core
A substantial long-term holding in a portfolio or fund. A core holding is bought with the express purpose of being held for a long time, and is often a security with a history of fairly steady performance. 
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Core-Plus
A management style that permits managers to add instruments with greater risk and greater potential return - high-yield, or emerging market, for example - to core portfolios. 
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Core-Satellite
A method of portfolio construction designed to minimize costs, tax liability and volatility while providing an opportunity to outperform the broad stock market. The core consists of passive investments tracking an index with additional actively managed investments - satellites. 
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Corporate Bonds
Investment in a bond issued by a corporation. 
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Corporate Defined Benefit (DB)
A company pension plan to which contributions are usually made by the employee, the employer, or both, which pays retired employees an amount based on salary history and years of service. The employer bears the investment risk. 
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Corporate Defined Contribution (DC)
A company retirement plan for employees who choose to pay a small proportion of their salary into an investment fund to be used to purchase an annuity on retirement. The sponsoring company usually contributes to the plan but the employee bears the investment risk. In the United States plans are sometimes know as a 401(k) or 403(b). 
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Credit
Any form of deferred payment traded in financial markets. 
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Currency Overlay
A strategy to separately manage the exchange rate risks associated with the holding of foreign securities.
Active currency overlay seeks to make an additional return by taking a view on currencies, but, as a result, only partially neutralizes currency risk. This is higher risk, higher return strategy. Passive currency overlay neutralizes currency risk associated with holding securities in foreign currencies. There is no currency risk and no additional return. 
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Custodian
Service provider which takes legal responsibility for the assets of another entity, usually holding securities on behalf of asset managers and pension funds. 
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Debt
General name for bonds, mortgages and borrowings with an amount owed and payable on specified dates or on demand. 
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Derivatives/Futures
Investment in securities, such as an option or futures contract, whose value depends on the performance of an underlying security or asset. Futures are a standardized, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date. Futures convey an obligation to buy, which options do not. 
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Distressed Debt
An investment strategy involving short selling securities of companies where the price of securities is expected to fall because of a distressed situation. 
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Economically Targeted Investment
Investment opportunities that will benefit the economy of a specified region. 
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Education/Advice
Service offering investment to defined contribution plan participants. 
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Emerging Manager
Money management firm that is either new, small, boutique or women- and minority-owned. 
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Endowment
A permanent fund bestowed upon an individual or institution, such as a university, museum, hospital, or foundation, to be used for a specific purpose. 
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Energy
Investment in stocks that relate to producing or supplying energy, including companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. 
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Enhanced
A fund that aims to track an index, but also attempts to boost returns by taking advantage of market timing, specific stock selections, and/or leverage. 
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Equity
A stock or share or security representing an ownership interest. 
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Exchange-Traded Fund
An ETF is a security that tracks an index (or a basket of assets) like an index fund, but trades like a stock on an exchange. 
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Farmland
An investment in agricultural land. 
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Fixed Income
Fixed income is an investment that yields a regular (or fixed) return, including bonds 
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FTSE
A Financial Times Stock Exchange index of stocks traded on the London Stock Exchange. 
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Foundation
An entity which exists to support a charitable institution, and which is funded by an endowment or donations. 
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Fund-of-Funds
A mutual fund that invests in other mutual funds. 
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Fund of Hedge Funds
Pooled investments in several unregistered hedge funds. 
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Global Macro
A hedge fund strategy that makes leveraged bets based on anticipated price movements of stock markets, interest rates, foreign exchange rates and commodity prices. 
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Government Bonds
Investments in bonds sold by governments, such as US Treasury Bills. 
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Growth
An investment style that seeks stocks with strong earnings and/or revenue growth or growth potential. 
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Guaranteed Investment Contract (GIC)
A guaranteed interest contract is a debt instrument issued by an insurance company, usually in a large denomination. The interest rate paid is guaranteed, but the principal is not. 
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Health-Care
Investments in the health-care sector 
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Health Plan
A private health insurance plan funded by employee contributions. 
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Hedge Funds
Funds aiming for absolute returns rather than beating a benchmark and which tend to use aggressive strategies including selling short, leverage, program trading, swaps, arbitrage, and derivatives. Hedge funds are exempt from many of the rules and regulations governing other mutual funds. 
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High-Yield
Description of investments with high rates of return. Generally, a high yield bond will be ranked very low by a rating agency, because these are bonds which have a relatively high chance of default, and therefore have to offer higher returns. Similarly, a stock will offer a high dividend yield in order to compensate for lower expected capital gains, for example a large company in a mature industry which is no longer growing. 
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Hospital Plan
A non-profit entity that manages a hospital or similar healthcare facility. Refers only to the endowment/foundation portion of operations. 
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Hybrid DB-DC/Cash Balance
A cash-balance plan that exists alongside either a DB or DC plan (or both). 
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Inflation-Linked Bonds
Government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, as their yields are tied to the inflation rate. 
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Insurance
Insurer (referring to an insurer’s general account portfolio). 
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Infrastructure
A capital investment in constructed facilities, equipment, land and natural resources, such as transportation, water supply, energy supply, and waste removal. 
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Investment Grade
A bond with a high bond rating, such as BBB or above, and which is therefore considered relatively safe. 
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Large-Cap
Stocks of companies that have the largest market capitalization. Definitions vary, but are usually either $5 billion and above or $10 billion and above 
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Leveraged Buyout
Takeover of a company, or a controlling interest in a company, using a significant amount of borrowed money, usually 70% or more of the total purchase price. 
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Leveraged Loans
Loans to companies or individuals that already have considerable amounts of debt, usually with higher interest rates than typical loans. 
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Liability Driven Investment
Investing to generate sufficient assets to meet current and future liabilities. 
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Liability Fund
Insurance fund that sets aside assets in case of loss-causing event, such as an oil spill or lawsuit. 
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Long/Short
A strategy which involves holding long equities which are hedged by short sales of stock or stock index options. 
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Long-Term
A fixed income security with a maturity, or date of principle repayment, of more than a year. 
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Manager-of-Managers
A manager that hires other professional investment managers to oversee some or all of a client's investment fund. The Manager-of-Managers tracks the performance of each investment manager and can replace ineffective managers on the client's behalf. 
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Market-Neutral
A hedge fund strategy which attempts to hedge out market risk by taking offsetting positions, often investing in different securities from the same issuer to take advantage of pricing inefficiencies. Returns have little or no correlation to the equity and bond markets. 
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Merger Arbitrage
A hedge fund strategy based on event driven situations such as leveraged buy-outs, mergers and hostile takeovers. Strategy may include purchasing stock of the company being acquired and short-selling stock of the acquiring company. 
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Mezzanine
A hybrid debt issue subordinated to another debt issue from the same issuer with embedded equity instruments (usually warrants) attached. Frequently associated with acquisitions and buyout. 
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Mezzanine Finance
Venture capital investment in a company which is somewhere between start-up and an Initial Public Offering (IPO). Venture capital committed at this level usually has less risk but less potential appreciation than at the start-up level, and more risk but more potential appreciation than in an initial public offering (IPO). 
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Micro-Cap
Stocks of companies that have the smallest market capitalization. Definitions vary, but are usually from $50 million to up to $250 million or up to $300 million 
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Micro- to Small-Cap
Stocks of companies that have a small market capitalization. Definitions vary, but are usually either between from $50 million to $1 billion. 
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Mid-Cap
Stock with a middle-ranking market capitalisation within a market. Definitions vary but mid cap generally refers to stocks with a market capitalization of between either $1 billion-$2 billion up to either $5 billion or $10 billion. 
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Mid- to Large-Cap
Stock with middle to large market capitalisation within a market. Definitions vary but mid cap generally refers to stocks with a market capitalization of between $1 billion-to $10 billion and above. 
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Mid-Term/ Intermediate
A fixed income security with a maturity, or date of principle repayment, in three to 10 years. 
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Money Purchase Plan
A defined contribution plan in which employer’s contributions are proportional to each employee’s wages. 
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Mortgage-Backed Securities
An investment instrument that represents ownership of an undivided interest in a pool of mortgages, such as those issued by Ginnie Mae and Freddie Mac. Principal and interest from the individual mortgages are used to pay investors' principal and interest on the MBS. 
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MSCI
An index from Morgan Stanley Capital International. 
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Multi Asset
Mandate to invest in more than one asset class. 
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Multi-employer Defined Benefit (DB)
A defined benefit pension plan that covers the employees of more than one employer. The various employers are not financially related but usually in the same industry. 
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Multi-employer Defined Contribution (DC)
A defined contribution pension plan that covers the employees of more than one employer. The various employers are not financially related but usually in the same industry. 
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Multiple Arbitrage
A hedge fund strategy investing in more than one arbitrage strategy that attempts to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. 
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Multi-Strategy
A hedge fund style using various investment strategies to simultaneously attain short and long-term gains. Allows manager to overweight or underweight strategies depending on current investment opportunities. 
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Municipal Bonds
Bonds issued by a city or other local government entities below the state level such as counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports. 
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Natural Resources
Resources occurring in nature that can be used to create wealth, such as oil, coal, water, and land. 
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Non-Profit Organization
An incorporated organization which exists for educational or charitable reasons, also known as not-for-profit organizations. Shareholders or trustees do not benefit financially. 
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Nuclear Decommissioning Trust
Entity set up to oversee assets to fund decommissioning of nuclear power plants. 
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Operating Fund
Fund that oversees assets earmarked for specific purpose, such as a capital project. 
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Opportunistic
An investment style that is not restricted and changes strategy to take advantage of opportunities that arise from events. 
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Passive
An investment strategy with limited ongoing buying and selling actions which aims for long-term appreciation by mirroring a market index. Passive management is the opposite of active management and fees are lower. 
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Permanent Fund
Fund set up to pay make regular payments to beneficiaries in perpetuity. For example the Alaska Permanent Fund, which uses oil revenues and pays an annual benefit to all Alaska residents. 
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Portable Alpha
Investment strategy investing in securities that have little or no correlation with the beta of an existing portfolio. Alpha is the return achieved by a manager’s ability to invest in a portfolio that performs better than the market on which the portfolio is derived (beta).Portable Alpha implies that the extra returns (alpha) can be separated by actively trading in stocks which do not change the same way as the rest of the market. 
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Private Equity
Equity capital invested in a private company. 
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Private Equity Fund-of-Funds
Pooled investments in several private equity funds. 
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Profit-Sharing Plan
A DC-type plan in which an employer offers to share profits with employees by contributing a portion of them to a qualified retirement plan. 
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Public Defined Benefit (DB)
A state-sponsored or local authority pension plan to which contributions are usually made by the employee, the employer, or both, which pays retired employees an amount based on salary history and years of service. The employer bears the investment risk. 
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Public Defined Contribution (DC)
A state-sponsored or local authority retirement plan for employees who choose to pay a small proportion of their salary into an investment fund to be used to purchase an annuity on retirement. The sponsoring company usually contributes to the plan but the employee bears the investment risk. In the United States plans are sometimes know as a 401(k) or 403(b). 
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Real Assets
A broad range of investments including Commodities, Real Estate and Infrastructure, which iisearches classifies separately, where known. 
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Real Estate
Investments in land, including the air above and the ground below, and any buildings or structures on it. Also known as realty. 
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Real Estate Investment Trust (REIT)
A Real Estate Investment Trust is a pooled investment vehicle, a corporation or trust, to purchase and manage real estate. REITs are traded on major exchanges just like stocks, so they are liquid, and they often benefit from tax advantages. 
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Regional Development Agency Fund
A public body established for the purpose of economic development. 
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Record Keeper
A company that manages a defined contribution plan’s accounting from contributions, liquidations and appreciation. 
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Residential
A real estate investment in family homes, such as apartments and townhouses. 
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Russell 200
The Russell Top 200 Index is a market capitalization weighted index of the largest 200 companies in the Russell 3000 covering U.S.-based large-cap stocks. 
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Russell 1000
An index published by the Frank Russell Company. The Russell 1000 Index offers investors access to the extensive large-cap segment of the U.S. equity universe representing approximately 92% of the U.S. market. It includes the largest 1000 securities in the
Russell 3000. 
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Russell 2000
An index published by the Frank Russell Company. The Russell 2000 Index offers investors access to the small-cap segment of the U.S. equity universe. The Russell 2000 includes the smallest 2000 securities in the Russell 3000. 
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Russell 3000
An index published by the Frank Russell Company. The Russell 3000 Index offers investors access to the broad U.S. equity universe representing approximately 98% of the U.S. market. 
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S&P 400
The S&P 400 Mid-Cap Index is from Standard & Poor's covering U.S Mid-Cap stocks, known as the S&P 400. 
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S&P 500
An index published by Standard & Poor’s. It includes a sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market it is often considered to be representative of the US equity market and is frequently used as a benchmark. 
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S&P 1000
An index published by Standard & Poor’s. The S&P 1000 is a combination of the S&P Mid-Cap 400 and S&P Small-Cap 600 indices, where the S&P Mid-Cap 400 represents approximately 70% of the index and the S&P Small-Cap 600 represents 30%. 
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Securities Lending
Service to manage the lending of a fund sponsor’s securities to earn enhanced returns on the security through finance charges. 
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Self-Directed Brokerage
An account where the individual participant makes all investment decisions, usually in a 401(k)-type plan. All securities and investments are held in an account administered by a custodian or trustee. 
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Settlement Fund
Entity funded by legal settlement. For example the U.S. Tobacco Settlement Fund 
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Shariah Compliant Investment
Investment compatible with Shariah or Islamic law which regulates many aspect of a Muslim’s life including the type of investments allowed. 
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Short Term
A fixed income security with a maturity, or date of principle repayment, within a year. 
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Short Term Investment Fund
A type of fund that invests in short-term investments of high quality and low risk - such as cash, bank notes, corporate notes, government bills and safe short-term debt instruments - often used to temporarily park funds before moving them to another investment with higher returns. 
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Small-Cap
Refers to stocks with a relatively small market capitalization. The definition of small cap can vary, but generally it is a company with a market capitalization of between $300 million to $2 billion. 
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Small- to Mid-Cap
Refers to stocks with a small to medium sized market capitalization. The definition can vary, but generally includes companies with a market capitalization of more than $300 million up to $10 billion. 
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Socially Responsible Investment
An investment strategy seeking to maximize both financial return and social good. Also known as sustainable, socially-conscious, or ethical investing. 
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Sovereign Pension Fund
A state-owned fund established to support a country’s retirement system, although they often derive their income from surplus funds rather than pension contributions. 
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Sovereign Wealth Fund
A state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. 
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Stable Value
Stable value funds are comprised of mostly 'synthetic GICs' (wrapped bonds) because of their inherent stability. They are paired (or wrapped) with insurance contracts to guarantee a specific minimum return. 
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Stakeholder
Entity created to encourage employees without access to a corporate retirement plan to invest in a pension. Used to supplement Social Security or other government savings plans. 
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Statutory Compensation Fund
A fund set-up by Government statute to manage pension assets to support pensioners whose pension fund sponsor has become insolvent, such as the UK's Pension Protection Fund (the PPF). 
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Structured Bonds
A bond with a derivative component, such as a bond with an option contract. 
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Style Blend
Investing in a blend of value and growth stocks to create a fund portfolio 
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Style Rotator
An active asset management strategy which over-weights in some asset classes and under-weights in others based on expected performance. 
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Surplus Fund
Entity (usually governmental) that manages assets in excess of expenditures. 
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Tactical Asset Allocation
An active management portfolio strategy that rebalances asset allocations to take advantage of pricing anomalies or strong market sectors. 
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Technology
Investment in technology companies. 
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Timberland/Vineyards
An investment in forestry and/or vineyards. 
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Total Return
Bond investments seeking both interest and capital gains. 
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Transition Management
Service to manage the asset transfer from one asset manager to another, for example when an asset manager is replaced. 
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Treasury
A fund managing the non-pension assets of a government entity. 
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Treasury Inflation Protection Securities
A U.S. treasury security indexed to inflation as measured by the Consumer Price Index. 
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Trust Fund
A fund where assets are managed by one person (or persons, or organizations) for the benefit of another. 
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Unbundled
When referring to defined contribution plans, when services are separate and a plan employs multiple providers. Usually a package means – I will sell you my services as a record keeper and you get to pick the funds you want yourself, whether or not they are proprietary for me. (So in the II plan, for instance, there are Morgan Stanley funds even though our record keeper is Fidelity). 
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Unconstrained
Investment policy which allows managers to invest in whatever and wherever the manager believes to be the best available opportunities. 
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Union Defined Benefit (DB)
Union defined benefit plan (also known as a Taft-Hartley plan after the U.S. Labor Relations Act). 
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Union Defined Contribution (DC)
Union defined contribution plan (also known as a Taft-Hartley plan after the U.S. Labor Relations Act). 
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Value
An investment style which seeks securities that are believed to be undervalued in the market and that trade for less than their intrinsic worth. It uses valuation measures such as price to book ratio, price/earnings ratio and yield. 
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Venture Capital
Pooled investment in funds made available for start-up firms and small businesses with strong growth potential. Also called risk capital and known as VC. 
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Wilshire 4500
An index published by Dow Jones. It measures the performance of all small and mid-cap stocks. It is constructed using the Dow Jones Wilshire 5000 securities with the companies in the Standard & Poor's 500 Index removed. 
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Yankee Bonds
Dollar-denominated bonds issued in the United States by foreign corporations, banks and governments.