Investment funds are very popular, but the jargon surrounding them can be obstructive. These articles will show you how to evaluate the riskiness of a fund.
LDI funds leverage themselves by getting into derivatives contracts. The goal is to cover the interest rate risk of the liabilities of their investors (defined-benefit pension funds). Even though pension funds invest only a small portion of their assets, the…
A repo usually involves the sale of bonds in exchange for cash. The borrower is obliged to repurchase the bonds later. The bonds work as collateral for the lender. Securities lending is very similar, but usually involves the transfer of stocks…
A clearing house stands between two clearing firms, typically big banks, in a trade. Clearing firms must follow a strict set of rules and regulations in order to engage in transactions and have the clearing house as the intermediary. The…
In Europe, investment funds are typically structured under the UCITS directive (Undertakings for Collective Investment in Transferable Securities) or as an Alternative Investment Fund (AIF) under the Alternative Investment Fund Manager Directive (AIFMD). Funds that follow the UCITS directive can…
AuM is the total market value of the assets an asset manager oversees on behalf of its investors. It includes stocks, bonds, and cash within the funds the asset manager manages. AuM doesn’t subtract unpaid expenses. NAV on the other…
A SICAV is an investment company, while an FCP is a fund. Both are common legal fund structures offered in Europe. A SICAV has its own legal identity and is usually an umbrella structure, meaning it has many sub-funds under…
To calculate the exposure of a UCITS fund, the commitment approach estimates the leverage caused by all the derivatives in the portfolio. In contrast, the VaR approach measures the maximum potential loss within a specified time period due to market…