Funds & wrappers

• Active managementChoosing holdings deliberately in an attempt to beat a benchmark.
• Active shareHow much a fund’s holdings differ from its benchmark, as a percentage.
• Cash dragThe return lost by holding cash in a fund or portfolio rather than being fully invested.
• DistributionIncome a fund pays out to holders, as opposed to reinvesting it inside the fund.
• ETFA fund whose shares trade on an exchange throughout the day like an ordinary share.
• Expense ratioThe annual percentage of your money a fund takes to cover its running costs.
• Factor investingBuilding portfolios around characteristics that have historically explained returns.
• FundA pooled vehicle where many investors’ money is managed together under one strategy.
• Fund domicileThe country a fund is legally based in, which determines its tax treatment for you.
• GatingA fund limiting or suspending withdrawals because it cannot sell holdings fast enough.
• Hedge fundA lightly regulated private fund able to use leverage, shorting and derivatives freely.
• High-water markThe highest value a fund has reached, above which performance fees can be charged again.
• IndexA rules-based list of securities used to represent a market or segment of one.
• Index fundA fund that aims to match an index rather than beat it, at very low cost.
• Investment trustA listed company whose business is holding investments, with a fixed number of shares.
• Leveraged ETFA fund designed to deliver a multiple of an index’s return, reset every single day.
• Mutual fundA fund that creates and cancels units on demand, priced once a day at net asset value.
• Net asset valueThe value of everything a fund owns, minus what it owes, divided by the number of units.
• Performance feeAn additional charge taken as a share of returns above an agreed threshold.
• Portfolio turnoverHow much of a fund’s portfolio is bought and sold in a year.
• Premium and discountThe gap between a listed fund’s share price and the value of the assets it holds.
• Private equityFunds that buy whole companies not listed on a public market, usually using substantial debt.
• Synthetic ETFAn ETF that uses a swap to deliver an index return rather than holding the constituents.
• Target-date fundA single fund that automatically shifts from growth assets to defensive ones as a set year approaches.
• Transaction costsThe trading costs a fund incurs inside the portfolio, on top of its stated expense ratio.

Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.