Investor’s Glossary

Acquisition means the takeover of an existing company or part of it by another company.
Mergers and acquisitions (M&A) are a collective term for transactions related to the targeted purchase, sale, and merger of originally separate businesses, as well as the name of the relevant field and aspect of corporate finance, management, and corporate strategy.

Allocation of investments according to various criteria to reduce risk – for example, allocation by fund currency, sector, fund type, etc.

Asset allocation is the division of a portfolio among different asset classes, such as stocks, bonds, cash, commodities, and real estate. Each class differs in expected return, risk, liquidity, and correlation. Appropriate allocation helps to set the risk-reward ratio according to the investor’s goals and investment horizon but does not guarantee optimal results.

There are various types of assets (bonds, stocks, time deposits, commodities, real estate, etc.).

An auditor is an independent person or company that is authorized to audit the accounting of the management company and mutual funds. The auditor verifies the financial statements and annual reports of the management company and of each mutual fund for which the management company keeps separate accounting records.

It represents the proportion of the leased premises in a building compared to the total rentable area.

A designation indicating that a debtor is in bankruptcy or is subject to legal proceedings addressing its inability to meet its obligations. The specific conditions and consequences of bankruptcy are governed by insolvency law.

Key central bank interest rates are the rates through which a central bank implements monetary policy. In the euro area, they are set by the European Central Bank. Key interest rates typically influence market interest rates and financing conditions.

50 basis points are 0.5 of a percentage point. It is a unit of measurement used in finance and economics to express percentage changes, particularly in interest rates, bond yields, and financial indices.

A benchmark or combination of benchmarks against which a fund’s performance, risk, or investment strategy is assessed. Overperformance or underperformance against a benchmark alone may not be sufficient to assess the quality of a fund’s management without other factors such as risk, costs, investment horizon, etc.

A bond is a security that gives the holder the right to demand repayment of the amount owed and payment of income (coupons) on a certain date and the issuer the obligation to meet these obligations. By purchasing a bond, the investor lends money to the issuer. The yield on the bond (the so-called coupon) can be fixed (e.g. 10%) or variable (e.g. EURIBOR + 0.5%). The price of a bond with a fixed coupon (as well as the rate of a fund investing in such bonds) decreases if interest rates rise. If interest rates fall, the price of such a bond or the rate of the fund increases.

The capital market is a subset of the financial market – it is a market for medium- and long-term capital. It trades in financial instruments with a maturity period of more than one year, or those that have no maturity date (shares).

The difference between the purchase and sale price of a financial instrument.

Capitalization shares generally do not pay distributed income to investors; the income attributable to this class remains in the fund and is reflected in the value of the share. The exact mechanism is determined by the fund documentation.

Cash flow refers to cash flows, i.e. cash receipts and cash disbursements over a certain period. Net cash flow is the difference between cash receipts and cash disbursements; a distinction is made between operating, investing and financing cash flows.

A financial institution that regulates the circulation of money in a country. It issues money, sets credit conditions, and regulates the activities of commercial banks. In the Eurozone (including Slovakia), it is the European Central Bank (ECB).

A closed-end mutual fund is a fund established for a fixed period, in which the issuance of units (shares) is limited in a manner determined by law and the statute. During its duration, the management company generally does not ensure the ongoing payment of units (shares) at the request of the shareholder; the possibilities of transfer or exit depend on the legal form, the fund documentation and the existence of a secondary market. The income may be paid to the investor on an ongoing basis or upon termination of the fund according to its documentation.

The collection of funds from investors with the aim of investing them in accordance with a specified investment policy for the benefit of the persons – investors whose funds have been collected. If funds are collected from the public, collective investment can only be carried out based on the principle of risk spreading.

Confirmation is a confirmation of a completed trade, such as the purchase or sale of a security. It typically lists the instrument identification, quantity, price, trade date, settlement date, fees, and other terms of the transaction.

It expresses the maximum amount of decline in the value of an investment that an investment strategy could achieve in 95% of measured cases during the recommended investment horizon.

The current price of a stock is the last available market price or the current bid or ask quote, depending on the data source used. The price at which a stock can be bought or sold at a given time may vary due to the spread between the bid and ask prices, liquidity, and the time at which the data is updated.

It is a decline in consumer prices, the opposite of inflation.

The denomination currency is the currency in which the securities are issued. The performance of the fund expressed in the denomination currency may differ significantly from that expressed in the reference currency. This may be due to the change in the exchange rate of one currency against another. If the manager does not hedge the investment in the fund in another currency, the unitholder incurs exchange rate risk in addition to the investment risk.

A derivative is a financial instrument whose value is derived (“derived”) from an underlying asset, security, rate, index or other reference value. Examples of derivatives are forwards, futures, options, swaps, etc. They are used to manage risks, speculate or gain exposure to the underlying asset.

A distribution share may pay investors a return in accordance with the rules set out in the fund’s documentation. The payout, its amount or periodicity may not be guaranteed.

It is the spreading of an investment across multiple securities or other assets. It is a tool that helps reduce the risk of a portfolio. However, not all types of risks associated with investing can be “eliminated”, but some risks can be significantly reduced through diversification.

A dividend is a share of a company’s profits or other own resources paid to shareholders based on a decision by a competent authority and subject to compliance with legal requirements. Its amount may depend on the specific decision, the type of share, and the company’s performance.

Dividend yield is the ratio of the dividend per share for a specified period to the current market price of the share, usually expressed as a percentage. It represents only the dividend component of the yield and does not include the change in the market price of the share.

The fee that an investor pays when purchasing a unit certificate is a fee that the management company requires or may require from the investor when issuing a unit certificate. The amount of the entry fee for issuing a unit certificate of a mutual fund is published in the sales prospectus of the mutual fund. The entry fee is the income of the management company.

A framework for assessing the sustainability and ethical behavior of businesses based on three key areas, environmental, social and corporate governance.

An investment fund (Exchange Traded Fund) whose units or shares are traded on a regulated market or other trading venue. ETFs may track an index or be actively managed. ETFs are generally cost-effective and tax efficient, but the efficiency depends on the specific fund, jurisdiction and tax status of the investor.

A place where supply and demand for certain financial instruments are concentrated and their prices are determined at a specific time. We distinguish, for example, securities exchanges, stock exchanges, commodity exchanges or derivatives exchanges.

The fee that the management company requires or may require from the investor when redeeming a unit certificate. The amount of the exit fee for redeeming a unit certificate of a mutual fund is published in the sales prospectus of the mutual fund. The exit fee is the income of the management company.

Nominal or face value is the value stated on a security or determined at its issue according to the relevant legal regulation. In the case of a share, it expresses a share in the registered capital of a company.

A person whose activity consists of offering financial products and intermediating financial products for the benefit of one or more financial institutions. A financial agent must be registered in the register maintained by the National Bank of Slovakia.

A system in which supply and demand for capital meet and financial instruments and financial risks are traded. It mainly includes the money and capital markets, but also other segments, such as the foreign exchange and derivatives markets. It allows the transfer of funds between entities with excess capital and entities in need of capital.

Currency risk of a fund is the risk of a change in the value of a fund in its reference or denomination currency due to movements in the exchange rates of the currencies in which the fund’s assets, liabilities or currency positions are denominated. The impact of currency movements depends on the direction of the exposure and whether the currency risk is fully or partially hedged.

The fund’s depositary is an authorized credit institution (bank or branch of a foreign bank) or other authorized entity within the meaning of the relevant legislation. The depositary ensures the safekeeping and/or recording of the assets in the fund, supervises selected activities of the fund administrator or manager, checks whether the management company disposes of the fund’s assets in accordance with the law and fulfills other supervisory obligations.

The management company’s remuneration for managing a mutual fund is based on the average annual value of the mutual fund’s assets. It covers the management company’s costs for managing the mutual fund and is remuneration for the professional management of the investor’s assets. It is an indirect cost to the investor.

It is usually expressed as a percentage and expresses the appreciation of the fund’s assets over a given period. However, past performance does not guarantee the same performance in the future.

A designation for an investment fund that may employ a wide range of strategies and instruments, such as short positions, derivatives, leverage, arbitrage, or relative value. The specific strategy and risk level of hedge funds can vary significantly.

The variability of the price of an underlying asset over a period in the past. Used in the valuation of derivatives.

We can characterize it as the depreciation of a monetary unit, which is manifested by an increase in the price level, or a permanent decrease in the purchasing power of money. It is expressed in percentages. Inflation devalues income.

The rate of increase or decrease in the price level each year compared to the previous year.

A person who has inside information within the meaning of market abuse legislation, for example by virtue of membership in the issuer’s bodies, employment, ownership interest or other access to information. Using this advantage to one’s advantage through financial market transactions is prohibited.

Trading or otherwise dealing with a financial instrument based on non-public information or under the conditions set out in market abuse legislation, recommending a trade using non-public information or unauthorized disclosure of confidential information. Using this information to your advantage to make a profit is among the prohibited practices in the financial market.

An activity aimed at distributing (placing) free capital with the aim of its appreciation. Most often it involves the purchase of securities such as stocks, bonds, units and real estate, to achieve a profit after a certain period. Investing involves the risk of loss; therefore, it is necessary to analyze and distribute the risk (minimize it), evaluate the amount of possible return (investment strategy) and determine the duration of the investment (investment horizon).

Investment advice is the provision of a personal recommendation to a client at their request or on the initiative of a securities dealer in connection with one or more transactions in financial instruments.

An investment fund is a collective investment entity that raises capital from multiple investors with the aim of investing it for their benefit according to a defined investment policy. Its legal form, method of raising capital, eligible assets and management method depend on the relevant legislation and fund documentation.

The rules for investing assets collected in a mutual fund, set out in the mutual fund’s statute, which must be in accordance with the rules for limiting and spreading risk specified by law.

Investment risk is the uncertainty regarding the future value or return of an investment, including the possibility of partial or complete loss of capital. Its level depends on the specific instrument, strategy, investment horizon and other risk factors.

A set of rules and decisions determining how capital is invested with respect to objective, risk profile, investment horizon, asset classes, geographic or sector focus, and portfolio management method.

A person who has used or is interested in using their funds to acquire units or securities or equity interests in foreign collective investment undertakings or has been approached for this purpose.

The process by which a company publicly offers its shares in the capital market for the first time.

Means International Securities Identification Number (International Securities Identification Number).
This is a unique 12-character code that identifies a specific security on a global level.

It is a legal entity, a type of corporation, established in accordance with articles of incorporation drafted by the founders and subsequent registration, i.e., entry in the commercial register. A joint-stock company raises its capital, that is, its share capital—by issuing shares (either through the founders’ subscription to the share capital or through the sale of shares to third parties, who thereby become co-owners of the share capital—shareholders).

The Key Information Document (KIID) provides the retail investor with the essential information needed to make an informed investment decision before concluding a contract. It contains a product description, risks, possible performance scenarios, costs, recommended investment horizon and practical information. The specific information obligation depends on the type of product and the relevant legislation.

Leverage is created using debt, derivatives, or other techniques that increase the economic exposure of an investment relative to equity. It can increase the return on equity if the return on the financed asset exceeds the cost of financing, but it also magnifies losses and the risk of default. In real estate financing, the level of leverage is often expressed in terms of ratios such as LTV.

The property of an asset that allows it to be sold quickly without significant price movements and without loss of value. The most liquid assets include cash or non-cash money.

The ratio of the outstanding principal of a loan or loans secured by a given asset to the value of that asset. The LTV value is typically determined by market valuation or other value according to the loan documentation.

A directive that guides the behavior of financial institutions towards investors and aims to increase investor protection and awareness.

It consists of various types of securities (stocks, bonds, treasury bills, etc.) as well as cash in accounts, depending on the type and focus of the mutual fund’s investment policy.

Net asset value of the fund (NAV – Net Asset Value) = Total value of the fund’s assets (value of securities, pre-emptive rights arising from these securities, cash in current and deposit accounts, receivables, other rights) reduced by the fund’s liabilities.

The difference between the market value of a company’s assets and liabilities.

The total value of newly issued shares that managers sold to shareholders, i.e. new client investments, was reduced by the total value of returned shares that managers bought from shareholders and investors thereby terminated their investment.

The amount for which security is issued and which is indicated on the security.

Ongoing costs represent the regular costs paid by the fund’s assets over the relevant period, such as management company fees, administrative costs and depositary fees. They generally do not include transaction costs or performance fees. The indicator is stated in % in the “Key Investor Information” document.

An open-ended mutual fund issues units (shares) on an ongoing basis and the unitholder (shareholder) has the right to request their redemption under the conditions specified by law and the statute. Upon redemption, the unitholder (shareholder) is paid the value of the units (shares) from the fund’s assets; this right may be suspended under certain conditions.

Per annum means “annually.” For example, the return on a fund calculated on an annual basis.

Performance fee is charged only when the conditions specified in the fund’s statute or other relevant document are met. Its occurrence may depend, for example, on exceeding a reference value, a defined rate of appreciation (the so-called ” hurdle rate”) or a previous maximum in the fund’s value.

A person who uses information provided by financial analysts to construct and manage a portfolio of financial assets.

A person authorized to handle share certificates on the account of the owner of book-entry share certificates.

Part of the securities market where so-called publicly traded securities are traded, i.e. securities that are allowed access to this market according to special rules.

The annual return on investment expressed as a percentage of the amount invested; also known as yield.

It is a request for redemption of fund units or shares. The unitholder has the right to request resale under the conditions determined by law and the fund statute for its current price. The right to payment may be temporarily suspended in cases provided for by law or statute.

The currency in which an investor measures the return on their investment. The reference currency is usually determined by the investor based on the currency in which they plan to spend their investment. For most Slovak investors, the reference currency is the euro.

In the case of some funds, fund investors have the option of receiving returns in the form of paid-out funds or reinvesting them by acquiring additional fund units. Most investors prefer to reinvest the returns when purchasing fund units.

The income that flows from an investment from the moment we invest in it until the last possible income from this investment. It is therefore the investor’s reward for the risk taken and for sacrificing liquidity.

An international professional organization based in London (United Kingdom), bringing together professionals in the fields of real estate, land, construction, infrastructure and property valuation. Among other things, it issues internationally recognized standards for the valuation of real estate and other assets, known as RICS Valuation – Global Standards (Red Book).

The degree of probability of loss or uncertainty of return on an investment.

The risk of investing in the real estate sector includes the possibility of a decline in the value or yield of real estate assets due to changes in market rates of return, rents, occupancy, tenant quality, financing and operating costs, the physical condition of the properties, regulation, liquidity and other market or operational factors.

One of three statutory documents that every mutual fund must have (the others are the statute and key investor information). The sales prospectus must contain information that is necessary for investors to form a correct judgment about the investment opportunity offered its content is stipulated by law.

When stocks or bonds are traded or resold, they are said to be sold in the secondary market. This is where most securities transactions take place.

It is a document of monetary value in the form and format prescribed by law, to which rights are attached under the Securities Act and under special laws, in particular the right to demand certain financial performance or to exercise certain rights against persons specified by law. Examples of securities include stocks, partnership interests, bonds, promissory notes, and investment certificates.

Financial and property settlement of a securities transaction, where the person selling the securities receives an adequate amount of money for them on the financial settlement date, and the person buying the securities receives the corresponding number of securities on the property settlement date.

European Union Regulation 2019/2088 on sustainability-related disclosures in the financial services sector. It imposes obligations on financial market participants and financial advisors, in transparency of sustainability risks, adverse impacts and characteristics of financial products.

A share is a security that represents an ownership interest in a company. A shareholder (owner of a share) has the right to participate in the management of the company, in the company’s profits (dividends), and in the company’s liquidation proceeds. Over the long term, the average return on stocks is higher than that on bonds or money market instruments (however, past performance is no guarantee of future returns).

Fixed-capital investment fund (société d’investissement à capital fixe).

Investment fund with variable capital (société d’investissement à capital variable).

A mutual fund or investment fund with variable share capital is not a standard fund and in which funds are collected through a public offering or private offering with the aim of investing the funds collected in assets defined by the law on collective investment or the statute of the special fund.

The basic document of a mutual fund, which, in accordance with the law, describes the rules of operation of the mutual fund.

A trading venue where securities or other financial instruments are traded regularly and at specified times according to applicable rules and stock exchange regulations.

Harmonized European regulatory framework for undertakings for collective investment in transferable securities. A fund that complies with UCITS requirements and uses the relevant notification procedure can be distributed to retail investors in other Member States of the European Union. Funds outside the UCITS regime include, for example, alternative investment funds under the relevant legislation.
UCITS (Undertakings for collective investments in transferable securities) directive regulates the conditions for collective investment within the EU. Mutual funds that meet the requirements of the UCITS directive can be freely sold throughout the EU. These are the so-called UCITS (or standard) funds. Funds that do not meet the requirements of the UCITS directive are the so-called non-UCITS (alternative) funds.

Their portfolio covers several funds (sub-funds) with different investment strategies. Their advantage is, for example, easier and free transfer of funds within sub-funds.

The account of the owner of the registered share certificates in a separate register, in which the management company keeps data on the owner of the share certificates and data on the share certificates in the account of the owner of the share certificates.

Within the financial instruments in which the management company invests the assets in the mutual fund, there may be instruments with low liquidity for which there is no market price at the time of valuation of the assets in the mutual fund.

It represents the price volatility of, for example, a financial instrument. The higher it is, the larger the price range in which the price of the financial instrument moves. Higher volatility also causes greater investment risk.

A graphical representation of the relationship between the maturity and yield of a particular instrument (for example, bonds with a particular rating, swaps, or money market deposits).

It represents the expected return on a bond, assuming it is held until maturity, and the coupons are reinvested at an unchanged interest rate.

The time from the beginning of the (typically calendar) year to the current date.

Yield to maturity of a debt security.