Hedge Funds and Investment trusts FBLA

Investment Trust

a publicly listed company that invests in a diversified portfolio of assets on behalf of shareholders; trades on a stock exchange with a fixed number of shares.

Closed-End Fund

a fund with a fixed number of shares issued through an initial public offering; shares trade on the secondary market.

Open-Ended Fund

a contrast to investment trusts; shares or units are issued and redeemed continuously based on investor demand.

Premium to NAV

when the market price of a trust's shares is higher than the NAV per share.

Market Price

the price at which investment trust shares are bought or sold on the stock exchange.

Net Asset Value (NAV)

the total value of an investment trust's assets minus liabilities divided by the number of shares outstanding.

Discount to NAV

when the market price of a trust's shares is lower than the NAV per share.

Gearing (Leverage)

borrowing funds to invest in additional assets to amplify returns.

Equity Gearing

leverage applied specifically to purchase equities.

Portfolio Manager

the professional responsible for selecting and managing the trust's investments.

Board of Directors

the governing body of an investment trust overseeing fund management and governance.

Fixed Interest Gearing

borrowing applied to fixed-income investments.

Revenue Reserve

profits or income held back for reinvestment or to smooth dividends.

Dividend Yield

the annual dividends paid by the trust relative to its market price.

Total Return

the combined effect of capital gains, dividends, and interest on the trust's investments.

Closed-End Fund Trust Deed

the legal document setting out the trust's objectives, powers, and governance.

Discount Volatility

the degree to which the discount/premium of a trust fluctuates over time.

Liquidity Risk

the risk that shares cannot be easily sold without affecting price.

Hedge Fund

a private, pooled investment fund that uses a wide range of strategies to achieve high returns, often with higher risk and less regulation than mutual funds.

Accredited Investor

an individual or institution meeting certain wealth or income criteria, eligible to invest in hedge funds.

Fund of Hedge Funds

a hedge fund that invests in multiple other hedge funds to diversify risk.

Leverage

borrowing capital to increase potential investment returns.

Short Position

selling borrowed assets expecting the price to fall, profiting from price decline.

Long Position

buying an asset with the expectation that its value will increase.

Arbitrage

exploiting price differences between markets or instruments for profit.

Global Macro Strategy

investing based on macroeconomic trends such as interest rates, currency, or GDP.

Event-Driven Strategy

investing based on corporate events like mergers, acquisitions, or restructurings.

Market Neutral Strategy

attempting to reduce market risk by balancing long and short positions.

Managed Futures

investing in futures contracts to speculate on price movements of commodities, currencies, or indices.

High-Water Mark

the highest value a hedge fund has reached; performance fees are only charged on profits above this level.

Performance Fee

a fee paid to hedge fund managers based on profits earned above a benchmark.

Management Fee

an annual fee paid to hedge fund managers for managing assets, usually a percentage of assets under management (AUM).

Lock-Up Period

the period during which investors cannot withdraw funds from the hedge fund.

Redemption Notice

the advance notice required for investors to withdraw funds from a hedge fund.

Side Pocket

a separate account used by hedge funds to hold illiquid or hard-to-value assets.

Gate Provision

a limit placed on the amount investors can redeem during a given period to protect fund liquidity.

Short Selling

selling borrowed securities with the intention of buying them back at a lower price.

Derivative Instruments

financial instruments (options, futures, swaps) used by hedge funds for speculation, hedging, or leverage.

Prime Broker

a financial institution that provides hedge funds with services such as securities lending, leveraged trade execution, and custody.