Glossary


In this section we provide you with a comprehensive glossary of topics and terms.

Asset Allocation

Is the allocation of assets to different asset classes, regions and currencies.

Benchmark

Is a comparison or reference value.

Bondpicking

Targeted selection of bonds from different issuers.

Bonds

are debt securities where the issuer can take out a loan on the capital market. Bonds can be issued in different currencies and have different maturities and interest rates.

Call Option

In a forward transaction, the investor has the right, but not the obligation, to purchase a security at a previously determined price.

Convertible bonds

Are fixed-return securities. Aside from a fixed interest rate and the right to the reimbursement of the par value at maturity, convertible bonds additionally grant the right to convert the capital invested into shares of the underlying company.

Convexity

Is an indicator for convertible bond investors. Many convertibles are more involved in the upward trend of the underlying share price rather than its decrease. This can also be referred to as the “convex profile”.

Country risk

In some regions there are political, social or economic uncertainties that can jeopardize the value of an investment.

Covered bonds

Are issued by mortgage banks which are secured by a pool of mortgages.

Credit Spread

Is the difference in yield between a corporate bond and a risk-free bond of the same maturity.

Credit risk

is risk that the creditworthiness of a debtor deteriorates and leads to a payment default.

Creditworthiness

An assessment of the ability of a person, a state or a company to meet debt obligations.

Default risk

Is the risk that a borrower or the issuer of a security can no longer meet its obligations. In this case, the creditor or investor may even face a total loss.

Derivate

Financial instrument whose price depends on one or more underlying securities.

Dividends

Company profits paid to shareholders.

Drawdown

Is the peak-to-trough decline during a specific recorded period of an investment. It is usually quoted as the percentage between the peak and the trough. It describes the maximum loss in value after which an asset returns to its original value. Can be for investors who are interested in looking at risk and potential profit.

Duration

Is a measure of a bond’s sensitivity to interest rate changes. Duration is expressed as a number of years.

Foreign currency risks

The exchange rates of foreign currencies may fluctuate sharply and lead to losses for investors and companies.

Free Cash Flow

Is a business’s cash flow which can be used, for example, for acquisitions, dividend payments and share buybacks.

Futures

Are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date.

High-Water-Mark (HWM)

Designates the highest price reached by the net asset value (see “net asset value”) of an investment fund at the end of the period in question.

Investment Grade

Is a credit rating of fixed-income securities, to which rating agencies certify a good to very good credit rating (see also “Non-Investment Grade”).

Market risk

Is the risk to companies or investors when the valuation of certain securities changes, for example, in the case of equities, interest rates or currencies.

Maximum Drawdown

This is the maximum cumulative loss of a fund in a given time period. Maximum drawdown tells the investor how much would have been lost if they had bought at the peak value of an investment and sold at rock-bottom value.

Net asset value

Is the asset value of a fund minus the value of its liabilities.

Non-Investment Grade

Bonds to which rating agencies have given a less positive credit rating (see also "Investment Grade").

Price risk

Securities traded on the markets fluctuate in value depending on supply and demand.

Price-earnings Ratio (P/E Ratio)

Is a ratio for valuing a company that measures its current share price relative to its earnings per share.

Rating-Allocation

Explains how a bond portfolio is structured on the basis of the creditworthiness assessment by rating agencies of the issuers.

Share class

The assets managed in an investment fund may consist of several share classes. The investment concept in these funds is generally the same. There may be differences in the structure of the fees, the distribution of income, the currency or the limits of the investment.

Stockpicking

Targeted selection of shares in individual companies.

The New Fragile

Describes the fragility of the financial system, which results from a centralised network and is reinforced by the loose monetary policy of the central banks.

Total Return

Refers to the total return of an investment. In the case of bonds, it is composed of interest income and potential price gains.

Volatility

Is the mathematical quantity indicating the margin of fluctuation of the price of securities, commodities, interest rates or investment fund shares.

Warrants

This represents the right, but not the obligation, to buy (Call) or sell (Put) underlying securities at a pre-determined price.