HSBC France

Glossary

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

ACTIF NET (OPCVM) - NET ASSETS (MUTUAL FUND)

A mutual fund's net assets are equal to the overall sum of its portfolio of financial instruments.
The securities held are valued at market price (stock market prices), minus debts.

ACTION

Financial security issued by a company which offers to its owner the right to vote and / or an interest in the revenues of the issuing company (dividends).

ALLOCATION D'ACTIFS – ASSET ALLOCATION

Asset Allocation means distributing a portfolio between several asset classes (equities, bonds, money market instruments, etc) to achieve a given risk level.
An asset class is a homogenous group of financial assets: euro zone equities, for example, are an asset class.

Top of the page


INDICE DE RÉFÉRENCE – BENCHMARK

A benchmark is a reference indicator used to evaluate the performance of a portfolio. The benchmark may take the form of a simple index or a composite index:

  • the main simple indices for the equity market are: the NIKKEI 225 in Japan, the S&P 500, the Dow Jones or the NASDAQ in the US, the CAC 40 in France (reference index for large-cap French equity portfolios), the DJ EuroStoxx 50 for the euro zone, the DAX in Germany and the FTSE 100 in the UK.
  • in general, composite indices are made up of several simple indices.
    For example:
  • a composite portfolio of French equities (large caps) would use the CAC 40 or the SBF 120 as benchmarks.
  • a diversified fund made up of 40% euro zone equities, 35% international equities and 25% euro zone bonds might have the following composite benchmark: 40% DJ EuroStoxx 50 + 35% MSCI World + 25% EGBI (Emu Government Bond Index).
Top of the page


CAPITALISATION - CAPITALISATION

Capitalisation is the reinvestment of the earnings generated by a financial investment.
Capitalisation should not be confused with market capitalisation.

CAPITALISATION BOURSIÈRE – MARKET CAPITALISATION

Market capitalisation is the valuation of a company according to its stock market price.
Market capitalisation is equal to the number of shares making up a listed company's share capital, multiplied by its stock market price.

CLASSEMENT EUROPERFORMANCE – EUROPERFORMANCE RANKING

The ranking of a fund compared to the other mutual funds in the same Europerformance category.
This ranking is based on performance.

CLASSIFICATION AMF - AMF CLASSIFICATION

This ranking scheme divides mutual funds into 5 families.

COMPLEX FINANCIAL PRODUCT

Instrument whose value does not result directly from the confrontation between supply and demand on the market at a given moment, but also from a range of other factors that the investor should consider when he decides to buy or sell the fund (eg, derivatives, structured products, etc.)

COUPON OU DIVIDENDE – COUPON OR DIVIDEND

The amount of interest received by the shareholder.

Top of the page


DATE DE LANCEMENT – LAUNCH DATE

The date from which the public may buy into mutual fund.

DÉCIMALISATION - DECIMALISATION

Mutual fund decimalisation means splitting up its shares or units.
It is then possible to buy fractions of shares or units in the mutual fund (a tenth, a hundredth or a thousandth of a share).

DÉPOSITAIRE – CUSTODIAN

A custodian is a legal entity. It is different from the management company and has its headquarters in France. Its duties are:

  • to ensure the preservation of assets and to centralise subscriptions and withdrawals;
  • to monitor the compliance of management decisions affecting the mutual fund;
  • and, potentially, to centralise subscription and withdrawal orders for shares or units in the mutual fund.

DISTRIBUTION - DISTRIBUTION

Through this option, investment funds and OEICs can distribute the earnings generated on securities held in portfolios in the form of dividends.
A fund may be mixed, offering distribution shares known as "D" shares and capitalisation shares, known as "C" shares.
This gives rise to various possibilities:

  • pure capitalisation: only 1 ISIN code
  • pure distribution: only 1 ISIN code
  • pure capitalisation and pure distribution: 2 ISIN codes
  • capitalisation and/or distribution: 1 ISIN code, at the discretion of the mutual fund at year-end.

DIVERSIFIÉ - DIVERSIFIED

Diversified mutual funds are made up of various asset classes: money market instruments, bonds and equities.
The balance between the different asset classes is subject to discretionary management, unlike allocation funds, which generally post benchmark allocations by asset class (3 categories are usually listed: cautious, balanced or dynamic).

DUREE CONSEILLÉE – RECOMMENDED DURATION

The investment duration recommended when you make a savings investment.

Top of the page


ÉLIGIBLE AU PEA – PEA ELIGIBLE

A fund is PEA-eligible if it conforms to certain management criteria. For an OEIC, this means that 60% of the portfolio must be made up of shares held in a company headquartered in an EU state. This percentage increases to 75% for investment funds. Capital gains earned then benefit from the advantages of the PEA.

ÉMETTEUR - ISSUER

A company that issues securities is an issuer. In the case of a mutual fund, the issuer is generally the mutual fund itself.

Top of the page


FAMILLE, TYPE ET CATÉGORIE EUROPERFORMANCE – EUROPERFORMANCE FAMILY, TYPE AND CATEGORY

The Europerformance ranking is organised in the following way : the mutual funds belong to families, each family contains types and each type is divided into categories. This breakdown in based on the fund's investment policy. Given that the ranking is based on Europerformance categories, we can compare the performance of mutual funds for any given target.

FCP – MUTUAL INVESTMENT FUND

Mutual investment funds are collective funds of securities that issue units. The investor does not have any of the rights bestowed on a shareholder. The management of the fund must be entrusted to an outside company that acts for and in the interest of shareholders.

FINANCIAL MARKETS

There are two types of financial markets :

  • The regulated market: it is a multilateral system which allow or facilitates the meet of multiple buying and selling interests expressed by third parties about financial instruments, according to specific rules on the relevant market.
  • And the unregulated market: this market is called “OCT” when the buyer and the seller are directly put into contact, for example the foreign exchange market (or Forex) and the derivatives market.

FINANCIAL WEALTH

All the investments owned (cash, life insurance, securities, savings, ...)

FRAIS D'ENTRÉE – SUBSCRIPTION FEES

Also known as entry costs. These increase the net asset value per share of the mutual fund when shares are purchased.

FRAIS DE GESTION – MANAGEMENT FEES

Fees associated with the management of the mutual fund securities portfolio. In France, management fees are included in the net asset value per share.

FRAIS DE SORTIE – EXIT FEES

Also known as redemption fees. These reduce the net asset value per share of the mutual fund when shares are resold.

FREQUENCE DE VALORISATION – VALUATION FREQUENCY

The NAV of a mutual fund is calculated every trading day if its net assets are at least equal to €80 million. The valuation frequency is therefore daily.

Top of the page


GESTION DES REVENUS – EARNINGS MANAGEMENT

Through capitalisation or distribution: these are the ways in which the profits or earnings of a mutual fund are managed. If earnings are capitalised, the money is reinvested in the portfolio. In the case of distribution, dividends are paid out to shareholders.

GESTION QUANTITATIVE – QUANTITATIVE MANAGEMENT

Quantitative management draws on a methodical, objective analysis of information. This involves the development of decision-aiding tools, derived from econometric modelling of financial markets, based on economic and financial theories.

GESTIONNAIRE - MANAGER

The financial institution in charge of managing the mutual fund's portfolio of securities, in line with the investment goals.

Top of the page


INDICES BOURSIERS – STOCK MARKET INDICES

Stock market indices are statistical indicators representative of the share price of companies traded on a stock market or organised market. Stock market indices are the property of their sponsors.

INDEX UNIT

Unit trust whose investment objective is to replicate the evolution of a market index. By purchases and sales of securities, it replicates closely the composition of this index.

Top of the page


MANIPULATION DE COURS – MARKET MANIPULATION

This occurs when someone acts, directly or through an intermediary, with the aim of impeding the normal operation of a financial instrument market, going against market regulations (this applies to transactions directed by issuers on their own securities or stabilisation operations, in some circumstances).

Top of the page


NOMBRE DE PARTS – NUMBER OF UNITS

The number of mutual investment fund or OEIC units in circulation.

Top of the page


OBLIGATIONS CONVERTIBLES – CONVERTIBLE BONDS

Convertible bonds are hybrid products, with a both a fixed income and equity component. The bondholder has the right to convert the bond (once only) into shares in the issuing company or in a group company, according to the terms set down in the issue contract. This exchange option means that convertibles are halfway between traditional bonds and equities. Convertible bonds let you benefit from bullish stock markets whilst offering protection against downturns, thanks to the coupon.

OBLIGATIONS A HAUT RENDEMENT – HIGH YIELD BONDS

High yield bonds are speculative bonds with a Standard & Poor's rating lower than BBB-, or Baa3 for Moody's.

OPCVM – MUTUAL FUND

Also known as a UCITS (Undertaking for Collective Investments in Transferable Securities). The aim of a mutual fund is to allow the investment of savings in securities (equities, bonds, etc.) in the expectation of a pre-defined profit.

OPCVM INDICIELS – INDEX-LINKED MUTUAL FUNDS

A mutual fund whose management target is in line with an established stock market index. It replicates the composition of the index as closely as possible through purchases and sales of securities.

OPCVM MAITRES / NOURRICIERS – MASTER/FEEDER MUTUAL FUNDS

A so-called 'feeder' mutual fund is one whose assets are entirely and permanently invested in units or shares in a single other mutual fund, the so-called '˜Master'. The offering of such products allows promoters to offer a similar management style (management harmonisation) under commercial conditions appropriate to the needs of different client segments.

OPC DE DROIT LUXEMBOURGEOIS – CIF GOVERNED BY LUXEMBOURG LAW

Collective Investment Fund (CIF) governed by Luxembourg law and approved by the Financial Sector Supervisory Authority (CSSF).

ORDER

A market order allows the transmission of a sale or buys instruction of a financial product. It is transmitted to a financial intermediary (online broker or bank) who will present it to be run on the stock market.

OST OU OPÉRATIONS SUR TITRES – SECURITY TRANSACTIONS

'Security transactions' refer to all the events that may occur during the life of a security:

Capital increase, free shares, stock split, distribution of dividends, removal or allocation of subscription rights.

Top of the page


PEA OU PLAN D'EPARGNE EN ACTIONS – PEA OR SHARE SAVINGS PLAN

A PEA is a tax-friendly investment format granting its holder(s) tax exemption, social security deductions excluded (social security levies, general welfare contributions, supplementary contributions) for capital gains earned through disposals and income from shares (or OEICs or equity mutual investment funds), on condition that you hold the investment for at least 5 years, after the initial payment. The PEA is a tax envelope in the form of a contract with a named person, giving any tax resident in France the opportunity to invest in French and European equities under favourable tax conditions, subject to terms and conditions.
The maximum amount of authorised payments into a mutual investment fund is €132,000 per year for a single person and €264,000 for a couple. Not all mutual funds are PEA-eligible. Regardless of the legal structure of the mutual fund (mutual investment fund or OEIC), a minimum of 75% European equities must be held.

PRÉLÈVEMENT LIBÉRATOIRE – FLAT RATE WITHHOLDING TAX

Flat rate withholding tax is an option allowing the taxpayer to pay the tax earned on financial investments at an optional fixed rate instead of at the rate of income tax, which is calculated on a sliding scale. If the taxpayer opts for the flat rate withholding tax, the institution that holds their securities account will deduct it directly, so that the taxpayer need not add earnings from securities to their taxable income. The flat rate withholding tax varies according to the investment and its duration. Social security charges are added to the fixed rate of withholding tax (social security levies, general welfare contributions and a supplementary contribution of 11% in 2007).

PRIX DE RACHAT – REPURCHASE PRICE

The price the client must pay to resell a unit in the fund. This price is equal to the most recent NAV of the fund, minus exit fees.

PRIX DE SOUSCRIPTION – SUBSCRIPTION PRICE

The price the client must pay to buy a unit in the fund. This price is equal to the most recent NAV of the fund, plus subscription fees.

PROFILÉS (FONDS) – ALLOCATION FUNDS

Allocation funds are diversified funds made up of equities, bonds and money market assets. These funds are referred to as allocated as a risk profile is identified on which the asset allocation is then based. The different allocation funds are characterised by the size of their "equity" component. Profiles are generally classed into three broad categories:

  • cautious profile: investments are mostly made up of interest rate products, more specifically on the money market;
  • balanced profile: accommodates a limited quantity of equities;
  • dynamic profile: dominated by equities.

The more shares there are, the greater the risk and therefore the longer the recommended holding period. These funds are distinctive in that they are managed according to a pre-determined risk level, which is different for every product.

PROMOTEUR -PROMOTER

The financial institution involved in the creation and selling of the mutual fund.

Top of the page


RATIO D'INFORMATION – INFORMATION RATIO

The information ratio indicates the regularity with which the fund outperforms its index: it measures the extent to which the fund outperforms its benchmark index and its tracking error.

Fund performance – Performance of benchmark index

Tracking error

As a guide: the higher the IR is, the more robust the fund is. The more the fund outperforms its benchmark, the higher the IR is. The more regularly it outperforms it, the weaker the tracking error, and the higher the IR are.

RATIO DE SHARPE – SHARPE RATIO

The Sharpe ratio measures the fund's performance in relation to the associated risks.

Top of the page


SECURE INVESTMENT

Investment with low return on capital in return for a capital protection (Livret A, Plan Epargne Logement(PEL), euro fonds in life insurance contracts).

SENSIBILITÉ - SENSITIVITY

Sensitivity indicates the impact of interest rates on the net asset value of the fund. For example, with a sensitivity of +3, a fund would increase by 3% if interest rates fell by 1%. Conversely, a 1% rise in rates would trigger a 3% fall in the fund's value.

SEUIL DE CESSIONS – DISPOSAL THRESHOLD

Capital gains on the disposal of securities and company shares are only taxed if the annual sum of the disposals exceeds €25,000 (threshold in force in 2008). In order to assess your tax threshold, you must take into account all transactions carried out, directly or through intermediaries, by all members of your tax household.

SICAV - OEIC

Open Ended Investment Company. These issue shares in line with subscriptions. When investors subscribe, they become shareholders and therefore have a say in the management of the company. The security portfolio is often under outside management.

SRD (DEFERRED SETTLEMENT SERVICE)

The Deferred Settlement Service allows, under certain conditions, to execute an order in cash but to postpone the cash settlement or the delivery of securities at the end of the trading month, creating a leverage effect on the rise as the drop.

SUPPORT FISCAL – TAX INCENTIVES

For several years, various tax incentives have been devised in order to encourage longer term investment.

Top of the page


TRACKING-ERROR – TRACKING ERROR

The tracking error is closely related to volatility; however, whereas volatility is calculated based on absolute performance, the tracking error is a relative marker, making a comparison with the market/benchmark index. The tracking error between a portfolio and its benchmark index is calculated by monitoring the variations in profitability between the portfolio and the index.

This indicator gauges the risk that the portfolio performance will deviate from its benchmark indicator. By imposing tracking error limits on a portfolio you can guarantee that it will adhere to the constraints and objectives mutually defined between the investor and the management company.

As a guide:
A tracking error of 2% means that in over 2/3rd of cases, the fund's performance is between –2% and +2% in relation to its benchmark index.
An index-linked equity fund will have a tracking error of under 1%, for example. An actively managed equity fund will have a tracking error above 5%.

TYPE - TYPE

Indicates whether the mutual fund is an OEIC or a mutual investment fund.

Top of the page


VALEUR LIQUIDATIVE – NET ASSET VALUE PER SHARE

Net asset value per share is the unit value of a share in a mutual investment fund or an OEIC, without taking into account the subscription or exit fees. This is obtained by dividing the net assets by the number of units in the fund.

VALEURS FRANCAISES – FRENCH SECURITIES

This is the percentage of French securities held in a mutual fund portfolio.

VOLATILITÉ 1 AN – 1-YEAR VOLATILITY

The volatility gauges the frequency of variations in a mutual fund's performance over the course of a year. As with equities, this indicator shows the relationship between profitability and risk-taking.

Top of the page


This glossary is for information purposes only and is solely provided as an aid to understanding the financial terms that may be found in information given on this website. Under no circumstances should it be considered as legally binding upon HSBC France, which reserves the right to modify content at any time. Under no circumstances may HSBC France be held liable for any direct or indirect losses that may result from use of this information.

* Dial +33 810 246 810 from abroad.
All rights reserved. Any reproduction or distribution of this document is strictly forbidden without the prior written authorisation of HSBC France.