Investor ABC

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A

  •   Acc. (Accumulation)

    Acc. is the abbreviation of the English term "Accumulation", which is a fund that pays no dividend, but adds this to the assets of the fund. This added value is then capitalised further in the fund. The opposite is 'Inc.' or 'Income', or distributing fund.

  •   Acquisition

    When a company buys most, if not all, of the target company’s shares in order to assume control of it.

  •   Alpha

    Alfa / α

    Alpha is the outperformance an investment fund has achieved on top of what could be expected according to a certain investment model. If alpha is calculated using the capital asset pricing model (CAPM), a positive alpha indicates that a fund has performed better than what could be expected from the beta. Similarly, a negative alpha indicates that the fund has underperformed, given the expectations associated with the beta of the fund.

  •   Analyst rating scale

    Gold: Best-of-breed fund in its category that distinguishes itself across the five pillars and has garnered the analysts' highest level of conviction.

    Silver: A fund with more positive than negative ratings across the five pillars and with sufficient level of analyst conviction to warrant a positive rating.

    Bronze: A fund with notable positive ratings across perhaps not all of the five pillars—strengths that give the analysts a high level of conviction.

    Neutral: A fund that is unlikely to deliver standout returns but also isn't likely to significantly underperform, according to the analysts.

    Negative: A fund that has at least one remark likely to significantly hamper future performance and that is considered by analysts an inferior alternative to its peers.

  •   Annual return

    Annual total returns are calculated on a calendar-year. Total return includes both capital appreciation of the fund as the possibly paid out dividends. This includes both income in the form of dividends or interest payments and capital gains or losses (the increase or decrease in the value of a security). Ideally the total return is calculated by taking the change in a fund's NAV, assuming the reinvestment of all income and capital gains distributions (on the actual reinvestment date used by the fund) during the period, and then dividing by the initial NAV. Total returns do account for management, administrative, and other costs automatically deducted from fund assets.

  •   Annualised return and year to date return

    In order to compare returns in an objective way they should be compared over the same period of time. Standard for this is one calendar year. Refers to the conversion of the return on an investment into a yearly rate. For example, if Fund A returned 5% over six months and Fund B returned 4% over four months, Fund A´s annualised return is 10,25% and Fund B´s is 12,49%.

  •   Asset allocation

    Deciding how to spread an investment between categories of financial assets (including shares, bonds, cash) and tangible assets (including real estate, commodities, precious metals and collectibles). Asset allocation is generally driven by the desire to optimise the risk-return trade-off according to an investor’s time frame and according to the investment objectives of the investor.

B

  •   Bankruptcy

    Legal status of a company that is unable to pay its creditors. Bankruptcy usually involves a formal court ruling.

  •   BEAMA

    Through the website of the Belgian Asset Managers Association (beama.be) you can check the most recent net inventory value of an investment fund or UCI.

  •   Benchmark index

    A benchmark is a measure by which the performance of an investment, investment fund or fund manager can be measured. It is a predetermined index which serves as a benchmark for the performance of an individual investment portfolio or mutual fund. A benchmark is typically an index over a broad market or a market segment for shares (e.g. BEL20.) or bonds that relate to the security or investment.

    If an investment fund is to be measured against a benchmark, it must be specified in the investment strategy.

  •   Bond

    An ‘I Owe You’ issued by a company or the government for a certain period of time. During the term of the bond the bondholder receives regular interest payments based on the coupon rate. Usually, the coupon rate is fixed for the term of the bond (hence the name 'fixed income securities'). Upon maturity the bond is repaid, unless the issuer cannot pay off and subsequently goes bankrupt. Bonds carry less risk than shares, because they must be repaid first before shareholders are paid, in case the issuer experiences payment problems.

  •   Bonus issue

    If a company announces a bonus issue, security holders will receive additional securities free of payment from the issuer in proportion to their holding. Usually bonus issues are undertaken to convert profits which the company has retained into share capital.

C

  •   Capital gains distribution

    Distribution of profits resulting from the sale of company assets.

  •   Capital gains tax

    Capital gain tax is applicable to the sale of funds that are comprised of more than 25% fixed income; a tax of 25% on the capital gain from the fixed income portion of the fund. Capital gains consist of interest income plus any booked gains minus any booked losses.

  •   Cash

    The proportion a fund invests in cash or other liquid assets such as deposit accounts or treasury notes which usually have a term that is less than 12 months.

  •   Cash dividend

    Distribution of cash to shareholders, in proportion to their equity holding. Ordinary dividends are recurring and regular.

  •   Commodities

    An investment you can get your hands on, commodities are raw goods that will be used to make something else. Examples include wheat and oil. You can buy and sell commodities using futures contracts. Commodities are often hard to trade and can be very risky investments.

  •   Corporate action

    A corporate action is an event announced by a corporate entity that usually results in material changes to the security issued by the company, or involve a cash consideration. In practice a corporate action refers to a broad spectrum of activities undertaken by companies and which have a significant influence on its security holders. A corporate action will usually be decided upon by the company's board of directors and require regulatory or investment holder approval. Corporate actions include name changes, dividend or coupon distributions, mergers and spin-offs, liquidations and many others. Some corporate actions such as takeovers, bonus issues, rights issues and stock splits affect the number of shares in issue: these actions will generally change the number or percentage of a company's shares you hold. Some corporate actions are mandatory, as they are applicable to all holders of a certain security, while others are voluntary, as they give security holders the option to take or not to take part to the corporate action.

  •   Cumulative total return

    The return or yield on an investment or portfolio over a given period of time, expressed in non-annualized terms. For example, if the stock price of company ABC goes up to 120 from 100 over a period of 9 months and the company paid out a return of 5 in that period, then the cumulative total return in that period is 25%.

  •   Currency hedging

    Currency hedging is a transaction that allows funds the opportunities to use different currencies to protect against currency fluctuations, as well as offering speculators the potential for capital gains. For funds the English term 'hedged' is often used.

D

  •   Distribution fee

    A distribution fee is the annual service fee paid by the fund company to the seller or distributor of the fund. This fee is paid to the distributor as long as you hold units in the fund. These fees generally range between 0.25% and 1%, and are paid from the ongoing costs of the fund. A distribution fee is a fee for services. This means that the seller or distributor must provide services to the purchaser of the fund, such as answering any questions he might have about the performance of his fund, the free provision of mandatory documents and most recent NAV.

  •   Distributor

    The distributor, also known as the fund underwriter of the fund, is the company that distributes the shares of the fund. This task usually includes offering the fund distributing fund literature, including KIID. This is what MedBank does.

  •   Dividend option

    Distribution of a dividend to shareholders with a choice to receive shares or cash. To be distinguished from dividend reinvestment, here the company creates new share capital in exchange for the dividend rather than investing the dividend in the market.

  •   Dividend reinvestment

    Dividend payment where holders can keep cash or have the cash reinvested in the market by the issuer into additional shares in the issuing company. To be distinguished from dividend option, the company invests the dividend in the market rather than creating new share capital in exchange for the dividend.

E

  •   Entry fee

    The fee payable to the financial advisor of an institution upon purchase of units of a UCI or fund. This party is also called the distributor.

  •   Equity

    A stock or any other security representing an ownership interest. Often paying dividends depending on decision and performance of company.

  •   ETF

    An ETF (Exchange Traded Fund), also known as index fund or index tracker, is an investment fund that is traded on the stock exchange. The investment objective of an ETF is tracking an underlying stock index as closely as possible.

  •   Exchange offer

    An offer by the company to give securities and/or cash in exchange for another security.

  •   Ex-dividend date

    This is the date when a share starts trading without a recently announced dividend. Before the ex-date, the buyer of the share is entitled to the recently announced dividend, while after the ex-date the seller will be entitled to the dividend.

  •   Exit fee

    A fee or sales charge imposed when investors sell units in certain investment funds or other investment vehicles. The amount tends to decrease the longer you hold the shares, often to zero after a set period of time, i.e. three or five years. This is typically designed to discourage investors from withdrawing their money too soon. These costs are rare.

F

  •   Forward stock split

    Increase in a company’s number of outstanding equities without any change in the shareholder's equity or the aggregate market value at the time of the split.

  •   Funds categories

    Equity funds

    Equity funds invest primarily in company stocks. These funds invest at least 75% of the total portfolio in shares.

    Bond funds

    Bonds funds invest primarily in bonds. These funds invest in different sorts of bonds. This can vary from government bonds to bonds with very low creditworthiness.

    Real estate funds

    Real estate funds invest primarily in shares of real estate companies. These funds do not directly invest significantly in building projects, but through real estate businesses. Some funds focus on a certain segment of the real estate sector, like companies or trusts that own office buildings and houses. These funds invest at least 75% of their portfolio in shares and at least 50% of these shares are real estate companies.

    Monetary funds

    Monetary funds invest in cash and different short term instruments. The portfolio of such a fund contains among others: Fixed term deposits, debt securities, short-term treasury bills with max 12 months maturity.

    Mixed funds

    Mixed funds invest in different investment products at the same time, like shares, bonds, cash, and sometimes real estate. Each unit represents a widely diversified portfolio. The distribution over different assets in the portfolio is regularly amended to the economic outlook, and is therefore subject to change.

I

  •   Inception date

    The Inception date is the date the fund or UCI is formed and units become available for sale.

  •   Interest rate risk bonds

    Bond prices move in the opposite direction of interest rates. When rates fall, bond prices rise. When rates rise, bond prices fall. To determine how dramatic a fund's ups and downs might be, check out its duration—a measure that considers a bond's maturity, the cash flows from coupons and principal, and current interest rates to produce a risk measure that investors can use for comparisons. The higher a bond's duration (measured in years), the more it responds to changes in interest rates. If a bond has a duration of five years, you can expect it to gain 5% if interest rates fall by one percentage point, and to lose 5% if interest rates rise by one percentage point. So a bond with a duration of four years should be twice as volatile as a bond with a duration of two years.

  •   Investment grade

    Having a rating of at least BBB by Standard & Poor’s or at least Baa3 by Moody’s Investor  services or at least BBB by Fitch ratings. These ratings are considered equivalent by the Investment manager of a UCI.

  •   Investment policy

    A UCI must first agree on a defined investment policy and must adhere to this when conducting investment decisions. In the "prospectus" the investment policy must be stated in such a way that it is sufficiently precise and narrowly defined so as to serve as a firm commitment. The investment policy must also be effectively executed as it is included in the prospectus. The investment policy includes an amount of crucial information for investors such as:

    • The asset classes in which the UCI is authorized to invest (e.g. shares, bonds, etc.). The UCI must also indicate in which asset classes they will mainly invest;

    • The type of actions that are allowed regarding derivative financial instruments (e.g. options, swaps, repurchase agreements, etc.).

    • If this is the case, any benchmark (which will serve as a reference for the performance) or index that will be used;

    • Besides some economically oriented informative elements, the investment policy also explains social, ethical and environmental aspects. After all, the UCI must indicate to which extent social, environmental and ethical considerations are taken into account in the implementation of the investment policy of the UCI.

J

  •   Junk bonds

    Bonds with a credit rating of BB or lower. Because the term has a negative connotation, issuers and holders prefer to call the securities "high-yield bonds." Junk bonds are issued by companies without long track records of earnings, nor strong credit history. They tend to finance high-risk activities and corporate restructuring and therefore appeal to risk-oriented investors.

L

  •   Legal documents

    Prospectus

    The prospectus must contain all information necessary to enable the investor to make an informed assessment of the proposed investment. As a legally required document, the prospectus is offered free of charge to the investor before the conclusion of an agreement. This document provides the investor on the one hand with a comprehensive description of all the undertakings in the UCI (such as administrator, custodian, etc.), and on the other hand with the specific product characteristics of the UCI, including:
    • Introduction of the UCI and sub-funds;
    • Bodies of the UCI;
    • Objective and policy (in which investment instruments will be invested and within the confines of the objective);
    • Costs (management fees, reimbursement for financial services, membership fees, etc.);
    • Risk attached to a UCI or a sub-fund.

    A UCI (or subfund) will only be registered as a public UCI if the regulator has approved the prospectus.

    Annual report (periodic report)

    In order to monitor the activities and results of the UCI (or sub-fund), the investor can view the annual and semi-annual reports that are made available free of charge. The annual report includes the financial statements, a report on the activities during the past year and a number of figures, including the number of units in circulation, the net asset value (total and per unit) and its evolution, the details of the securities portfolio, and the performance (return). The auditor verifies and certifies the accounts of the UCI. The half-yearly report includes a balance sheet, income statement and some of the data provided in the annual report.

    KIID

    The Key Investor Information Document, hereinafter also referred to as key investor information, is a document that informs the potential investor in a concise and structured way about the essential elements of a UCI. Sometimes this document is referred to in Dutch as EBI document, but Often the acronym 'KII' document will be used (key investor information). The document contains key investor information and is a pre-contractual document which is clearly recognisable by the title "Key Investor Information" on top of the first page. This title is immediately followed by a statement that the document is not marketing material. Pre-contractual means that the customer, prior to his possible purchase transaction, has been given the opportunity to study the document and ask for an explanation. The "issuer" of the UCI is responsible for the correct input of the key investor information. The document contains key investor information and is made freely available to the potential customer. This is normally done in one of two ways: the "distributor" of the UCI provides the potential customer with a paper version or the potential investors consults the document on the website of the "management company". The distributor of the UCI is responsible for notifying the prospective investor about the pre-contractual document.

M

  •   Market risk

    Market risk is the chance that an entire group of investments, like European stocks, will lose value (as opposed to one particular stock falling in price). Market risk is a danger because there is always the chance you’ll have to sell an investment when the market is down.

  •   Merger

    In a merger, two or more companies join to form a new company. Existing shareholders of merging companies typically receive shares of the new company in proportion to their current shareholding. A merger may give the option to receive cash instead or together with new shares.

  •   Morningstar analyst rating for funds

    The Morningstar analyst rating expresses the opinion of Morningstar's forward-looking analysis of a fund within the sector of equal funds.

    Morningstar analysts assign the ratings on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating. The Morningstar analyst rating is based on the analyst's conviction in the fund's ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over the long term. If a fund receives a positive rating of Gold, Silver, or Bronze, it means Morningstar analysts expect the fund to outperform over a full market cycle of at least five years.

    The Morningstar analyst rating is not a market call It is intended to supplement investors' and advisors' own work on funds.

    Research Methodology: The Five Pillars

    Morningstar evaluates funds based on five key pillars--Process, Performance, People, Parent, and Price--which its analysts believe lead to funds that are more likely to outperform over the long term on a risk-adjusted basis. Analysts assign a rating of Positive, Neutral, or Negative to each pillar.

    Process: What is the fund's strategy and does management have a competitive advantage enabling it to execute the process well and consistently over time?

    Performance: Is the fund's performance pattern logical given its process? Has the fund earned its keep with strong risk-adjusted returns over relevant time periods?

    People: What is Morningstar's assessment of the manager's talent, tenure, and available resources?

    Parent: What priorities prevail at the firm? Stewardship or salesmanship?

    Does the fund offer an attractive value proposition (price and costs) compared with similar funds that are sold through similar channels?

  •   Morningstar category for equity funds

    Funds are grouped into categories by Morningstar according to their actual investment style, not merely their stated investment objectives, nor their ability to generate a certain level of income. To ensure homogeneous groupings, Morningstar normally allocates funds to categories on the basis of their portfolio holdings. 

    1. Equity funds with focus on European countries

    Austria Equity
    Austria Equity funds invest primarily in the equities of companies based in Austria. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Austrian equities.
    Morningstar category index: MSCI Austria NDTR

    Belgium Equity
    Belgium Equity funds invest primarily in the equities of companies based in Belgium. 
    These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Belgian equities.
    Morningstar category index: MSCI Belgium NDTR

    Denmark Equity
    Denmark Equity funds invest primarily in Danish companies. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Danish equities.
    Morningstar category index: MSCI Denmark NDTR

    Equities from Eurozone countries
    Eurozone Single Country Equity funds invest primarily in the equities of companies based in Eurozone countries for which there are no distinct Morningstar categories (such countries have too few funds to support a distinct category). Currently, there are only two countries for which this is the case: Greece and Portugal. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Greek or Portuguese equities..
    Morningstar category index: MSCI EMU NDTR

    Finland Equity
    Finland Equity funds invest primarily in the equities of companies based in Finland. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Finish equities.
    Morningstar category index: MSCI Finland NDTR

    France Large-Cap Equity
    France Large-Cap Equity funds invest primarily in the equities of large-cap French companies. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. 
    These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in French equities.
    Morningstar category index: MSCI France NDTR

    France Small/Mid-Cap Equity
    France Small/Mid-Cap Equity funds invest primarily in the equities of small-cap and mid-cap French companies. Their holdings typically fall in the bottom 30% of the capitalisation of the European equity market (including the UK). These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in French equities.
    Morningstar category index: MSCI France Sm-Cap NDTR

    Germany Large-Cap Equity
    Germany Large-Cap Equity funds invest primarily in the equities of large-cap German companies. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. 
    These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in German equities.
    Morningstar category index: MSCI Germany NDTR

    Germany Small/Mid-Cap Equity
    Germany Small/Mid-Cap Equity funds invest primarily in the equities of small-cap and madcap German companies. Their holdings typically fall in the bottom 30% of the capitalization of the European equity market (including the UK). These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in German equities.
    Morningstar category index: MSCI Germany Sm-Cap NDTR

    Italy Equity
    Italy Equity funds invest primarily in the equities of companies based in Italy. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Italian equities.
    Morningstar category index: MSCI Italy NDTR

    Netherlands Equity
    Netherlands Equity funds invest primarily in the equities of companies based in the Netherlands. 
    These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Dutch equities.
    Morningstar category index: MSCI Netherlands NDTR

    Norway Equity
    Norway Equity funds invest primarily in Norwegian companies. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Norwegian equities.
    Morningstar category index: Mutual Fund Index Linked / TOTX

    Russia Equity
    Russia Equity funds invest primarily in the equities of companies based in Russia. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Russian equities.
    Morningstar category index: MSCI Russia NDTR

    Spain Equity
    Spain Equity funds invest primarily in the equities of companies based in Spain. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Spanish equities.
    Morningstar category index: MSCI Spain NDTR

    Sweden Large-Cap Equity
    Sweden Large-Cap Equity funds invest primarily in the equities of large-cap Swedish companies. Equities in the top 70% of the capitalisation of the European equity market (including the UK) are defined as large-cap. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Swedish equities.
    Morningstar category index: MSCI Sweden NDTR

    Sweden Small/Mid-Cap Equity
    Swedish Small/Mid-Cap Equity funds invest primarily in the equities of small-cap and madcap Swedish companies. Their holdings typically fall in the bottom 30% of the capitalization of the European equity market (including the UK). These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Swedish equities.
    Morningstar category index: MSCI Sweden Small Cap NDTR

    Sweden/Global Equity
    Sweden/Global Equity funds invest globally in equities but have a large position in Swedish equities. Typically funds in this category have between 30 and 75% of total assets invested in Swedish equities. These funds invest between 30% and 75% of their portfolio in Swedish equities.
    Morningstar category index: 50% MSCI The World Index Free NDTR, 50% MSCI Sweden NDTR

    Switzerland Large-Cap Equity
    Switzerland Large-Cap Equity funds invest primarily in the equities of large-cap Swiss companies. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Swiss equities.
    Morningstar category index: MSCI Switzerland NDTR

    Switzerland Small/Mid-Cap Equity
    Switzerland Small/Mid-Cap Equity funds invest primarily in the equities of small-cap and mid-cap Swiss companies. Their holdings typically fall in the bottom 30% of the capitalisation of the European equity market (including the UK). These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in Swiss equities.
    Morningstar category index: MSCI Switzerland Sm-Cap NDTR

    UK Large-Cap Blend Equity
    UK Large-Cap Blend Equity funds are fairly representative of the overall UK equity market in size, growth rates and price. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. The blend style is assigned to funds where neither growth nor value characteristics predominate. These funds tend to invest across the spectrum of UK industries. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in UK equities..
    Morningstar category index: FTSE 100

    UK Large-Cap Growth Equity
    UK Large-Cap Growth Equity funds invest primarily in the equities of large-cap UK companies that are more expensive or projected to grow faster than other large caps in Europe (including the UK). Equities in the top 70% of the capitalisation of the European equity market (including the UK) are defined as large-cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). Most of these funds focus on companies in rapidly expanding industries. These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in UK equities..
    Morningstar category index: MSCI United Kingdom Growth NDTR

    UK Large-Cap Value Equity
    UK Large-Cap Value Equity funds invest primarily in the equities of large-cap UK companies that are less expensive or growing more slowly than other large-caps in Europe (including the UK). Shares in the top 70% of the capitalisation of the European equity market (including the UK) are defined as large-cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in UK equities..
    Morningstar category index: MSCI United Kingdom Value NDTR

    UK Mid-Cap Equity
    Some UK Mid-Cap Equity funds invest in equities of all sizes, thus leading to a mid-cap profile, but others focus on mid-cap companies. The European mid-cap range represents the 20% of the European equity market (including the UK) that falls between small caps (the bottom 10% of capitalisation) and large caps (the top 70% of capitalisation). These funds invest at least 75% of their portfolio in equities and at least 75% of these are invested in UK equities..
    Morningstar category index: FTSE 250 Ex Inv

    UK Small-Cap Equity
    UK Small-Cap Equity funds invest primarily in the equities of small-cap UK companies. Equities in the bottom 10% of the European equity market (including the UK) are defined as small-cap. At least 75% of the portfolio is invested in equities and at least 75% of these are invested in UK equities..

    2. Equity funds with a focus on Europe as a region

    Emerging Europe Equity
    Emerging Europe Equity funds invest primarily in the equities of companies based in Emerging Europe. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Emerging Europe equities.
    Morningstar category index: MSCI EM Eastern Europe ND

    Emerging Europe ex-Russia Equity
    Emerging Europe ex-Russia Equity funds invest primarily in the equities of companies based in Emerging Europe, excluding Russia. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in non-Russian Emerging Europe equities.

    Europe Large-Cap Blend Equity
    Europe Large-Cap Blend Equity funds are fairly representative of the overall European equity market (including the UK) in size, growth rates and price. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. The blend style is assigned to funds where neither growth nor value characteristics predominate. These funds tend to invest across the spectrum of European industries. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in European equities.
    Morningstar category index: MSCI Europe NDTR

    Europe Large-Cap Growth Equity
    Europe Large-Cap Growth Equity funds invest primarily in the equities of large-cap European companies that are more expensive or projected to grow faster than other European large caps. Equities in the top 70% of the capitalisation of the European equity market (including the UK) are defined as large-cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). Most of these funds focus on companies in rapidly expanding industries. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in European equities.
    Morningstar category index: MSCI Europe Growth NDTR

    Europe Large-Cap Value Equity
    Europe Large-Cap Value Equity funds invest primarily in the equities of large-cap European companies that are less expensive or growing more slowly than other European large caps. Equities in the top 70% of the capitalization of the European equity market (including the UK) are defined as large-cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). These funds invest at least 75% of their portfolio in equities, and at least 75% of these in European equities.

    Europe Mid-Cap Equity
    Some Europe Mid-Cap Equity funds invest in equities of all sizes, thus leading to a madcap profile, but others focus on mid-cap companies. The European mid-cap range represents the 20% of the European equity market (including the UK) that falls between small caps (the bottom 10% of capitalisation) and large caps (the top 70% of capitalisation). These funds invest at least 75% of their portfolio in equities, and at least 75% of these European equities.
    Morningstar category index: MSCI Europe NDTR

    Europe Small-Cap Equity
    Europe Small-Cap Equity funds invest primarily in the equities of small-cap European companies. Equities in the bottom 10% of the European equity market (including the UK) are defined as small-cap. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in European equities.
    Morningstar category index: MSCI Europe Small Cap NDTR

    Europe ex-UK Equity Large Cap
    Europe ex-UK Large Cap funds invest primarily in the equities of large-cap companies in continental Europe. Equities in the top 70% of the capitalisation of the European equity market (including the UK) are defined as large-cap. These funds may also include smaller positions in the region's smaller markets, including the emerging markets of Eastern Europe. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in European equities, with less than 10% in the UK.
    Morningstar category index: MSCI Europe Ex UK NDTR

    Europe ex-UK Small/Mid Cap
    Europe ex-UK Small/Mid Cap funds invest primarily in the equities of small- and mid-cap companies in continental Europe. These funds primarily invest in equities that fall in the bottom 30% of the European equity market (including the UK). These funds may also include smaller positions in the region's smaller markets, including the emerging markets of Eastern Europe. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in European equities, with less than 10% in the UK.
    Morningstar category index: MSCI Europe Ex UK Small Cap NDTR

    Eurozone Large-Cap Equity
    Eurozone Large-Cap Equity funds invest primarily in the equities of large-cap companies from the 12 Eurozone countries. Funds in this category typically invest across multiple countries in the Eurozone. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Eurozone equities.

    Eurozone Mid-Cap Equity
    Some Eurozone Mid-Cap Equity funds invest in equities of all sizes, thus leading to a madcap profile, but others focus on mid-cap companies. Funds in this category typically invest across multiple countries in the Eurozone. The mid-cap range represents the 20% of the European equity market (including the UK) that falls between small caps (the bottom 10% of capitalisation) and large caps (the top 70% of capitalisation These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Eurozone equities.

    Eurozone Small-Cap Equity
    Eurozone Small-Cap Equity funds invest primarily in the equities of small-cap companies from the 12 Eurozone countries. Funds in this category typically invest across multiple countries in the Eurozone. Equities in the bottom 10% of the European equity market (including the UK) are defined as small-cap. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Eurozone equities.

    Nordic Equity
    Nordic Equity funds invest primarily in equities of companies from Scandinavian countries such as Sweden, Norway, Finland and Denmark. These funds invest at least 75% of their portfolio in equities, and at least 75% of these  in the Nordic countries.

    3. Equity funds with a focus on Asia as a region

    Asia-Pacific with Japan Equity
    Asia-Pacific with Japan Equity funds have a wider investment range than other Asia oriented funds. These funds can invest throughout the Pacific Rim, including Australia and New Zealand. As a result, country weightings for these funds vary tremendously, though most retain some exposure to Japan and Hong Kong.  These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Pacific countries, including at least 15% in Japan.
    Morningstar category index: MSCI AC Asia Pacific NDTR

    Asia-Pacific ex-Japan Equity
    Asia-Pacific ex-Japan Equity funds cover a wide geographic range. Most of these funds focus on export-oriented nations such as Hong Kong, Singapore, Taiwan and Korea. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Pacific countries, with less than 10% in Japan.
    Morningstar category index: MSCI AC Asia Pacific Ex Japan NDTR

    Australia & New Zealand Equity
    Australia & New Zealand Equity portfolios invest at least 75% of total assets in equities, and invest at least 75% of equity assets in Australia and/or New Zealand.
    Morningstar category index: MSCI Australia NDTR

    China Equity
    China Equity funds invest primarily in Chinese companies listed on the stock exchanges in China and Hong Kong, and companies that derive significant revenues from or have substantial business ties with the China market. These funds invest at least 75% of their portfolio in equities, and at least 75% of these  in Chinese or China-related companies defined as above. The funds usually invest less than 10% of their portfolio in Taiwanese equities.
    Morningstar category index: MSCI China Free NDTR

    Greater China Equity
    Greater China Equity funds invest in companies from the mainland of China, Hong Kong and Taiwan. To a lesser extent, these funds may also invest in companies that derive significant revenues from or have substantial business ties with the three markets. At least 50% of their portfolio is invested in Chinese equities, of which at least 10% is invested in Taiwanese equities. At least 75% of their portfolio invested in equities. Morningstar category index: MSCI Golden Dragon Emerging Asia Single Country Equity Emerging Asia Single Country Equity funds invest primarily in the equities of companies from a single Asian country (excluding Japan, Hong Kong, Taiwan, Singapore, China, India, Australia, New Zealand and Korea). Examples are funds that invest mainly in Indonesian or Thai companies. These funds invest at least 75% of their portfolio in equities, and at least 75% of these  in a single emerging Asian country.
    Morningstar category index: MSCI AC Asia Pacific Ex Japan NDTR

    Hong Kong Equity
    Hong Kong Equity funds invest primarily in the equities of Hong Kong companies. These funds invest at least 75% of their portfolio in equities, and at least 75% of these  in Hong Kong equities.
    Morningstar category index: MSCI Hong Kong NDTR

    India Equity
    India Equity funds invest at least 75% of their portfolio in equities, and at least 75% of these  in Indian equities.
    Morningstar category index: MSCI India NDTR

    Japan Large-Cap Equity
    Japan Large-Cap Equity funds invest primarily in the equities of large-cap Japanese companies. Equities in the top 70% of the capitalisation of the Japanese market are defined as large-cap. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in Japanese equities.
    Morningstar category index: MSCI Japan NDTR

    Japan Small/Mid-Cap Equity
    Japan Small/Mid-Cap Equity funds invest primarily in the equities of small-cap and madcap Japanese companies. Their holdings typically fall in the bottom 30% of the capitalisation of the Japanese equity market These funds invest at least 75% of their portfolio in equities, and at least 75% of thesein Japanese equities.
    Morningstar category index: MSCI Japan Small Cap NDTR

    Korea Equity
    Korea Equity funds invest primarily in the equities of South-Korean companies. These funds invest at least 75% of their portfolio in equities, and at least 75% of these  in Korean equities.
    Morningstar category index: MSCI Korea NDTR

    Singapore Equity
    Singapore Equity funds invest at least 75% of their portfolio in equities, and at least 75% of these  in Singapore equities.
    Morningstar category index: MSCI Singapore NDTR

    Taiwan Equity
    Taiwan Equity funds invest at least 75% of their portfolio in equities, and at least 75% of these in Taiwanese equities.
    Morningstar category index: MSCI Taiwan NDTR

    4. Global equity funds 

    Emerging Markets Equity
    Emerging Markets Equity funds tend to divide their assets among several emerging markets in Asia, Latin America, Europe, Middle East and/or Africa. These funds invest at least 75% of their portfolio in equities, and at least 75% of these in emerging markets equities.
    Morningstar category index: MSCI EM (Emerging Markets) NDTR

    Global Large-Cap Blend Equity
    Global Large-Cap Blend Equity funds invest primarily in the equities of large-cap companies from around the globe. Most of these funds divide their portfolio over many developed markets, of which they invest at least 20% in North America and 15% in Greater Europe. Equities in the top 70% of the capitalisation of each of the seven regional Morningstar style zones are defined as large-cap (the style zones are Europe, U.S., Canada, Latin America, Japan, Asia ex-Japan, and Australia/New Zealand--please see the Morningstar Style Box Methodology for further information). The blend style is assigned to funds where neither growth nor value characteristics predominate. At least 75% of the portfolio is invested in equities.
    Morningstar category index: MSCI The World Index Free NDTR

    Global Large-Cap Growth Equity
    Global Large-Cap Growth Equity funds invest primarily in the equities of large-cap growth companies from around the globe. Most of these funds divide their portfolio over many developed markets and invest at least 20% of equities in North America and 15% in Greater Europe. Equities in the top 70% of the capitalisation of each of the seven regional Morningstar style zones are defined as large-cap (the style zones are Europe, U.S., Canada, Latin America, Japan, Asia ex-Japan, and Australia/New Zealand--please see the Morningstar style box methodology for further information). Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high pric e ratios and low dividend yields). At least 75% of the portfolio is invested in equities.
    Morningstar category index: MSCI The World Index Free Growth NDTR

    Global Large-Cap Value Equity
    Global Large-Cap Value Equity funds invest primarily in the equities of large-cap value companies from around the globe. Most of these funds divide their portfolio over many developed markets and invest at least 20% of equities in North America and 15% in Greater Europe. Equities in the top 70% of the capitalisation of each of the seven regional Morningstar style zones are defined as large-cap (the style zones are Europe, U.S., Canada, Latin America, Japan, Asia ex-Japan, and Australia/New Zealand--please see the Morningstar style box methodology for further information). Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). At least 75% of the portfolio is  invested in equities.
    Morningstar category index: MSCI The World Index Free Value NDTR

    Global Equity Small/Mid Cap
    Global Equity Small/Mid Cap funds invest primarily in the equities of small- and mid-cap companies from around the globe. Most of these funds divide their portfolio over many developed markets and invest at least 20% of equities in North America and 15% in Greater Europe. Equities in the bottom 10% of the capitalisation of each of the seven regional Morningstar style zones are defined as small-cap, and equities in the next 20% of each market’s capitalisation are defined as mid-cap (the style zones are Europe, U.S., Canada, Latin America, Japan, Asia ex-Japan, and Australia/New Zealand--please see the Morningstar Style Box Methodology for further information). At least 75% of the portfolio is invested in equities.
    Morningstar category index: MSCI The World Index Small Cap NDTR

    5. Equity Funds per Sector

    Sector Equity Biotechnology
    Sector Equity Biotechnology funds invest primarily in the equities of companies that focus on biotechnology. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in the biotechnology industry.
    Morningstar category index: MSCI Wrld/Biotechnology NDTR

    Sector Equity Communications
    Sector Equity Communications funds invest primarily in the equities of telecommunications and media companies of various kinds. Most buy some combination of cable television, wireless-communications, and communications-equipment firms as well as traditional phone companies. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these media sectors.
    Morningstar category index: MSCI Wrld/Comml Svc & Suppl NDTR

    Sector Equity Consumer Goods and Services
    Sector Equity Consumer Goods and Services funds invest primarily in the equities of companies that manufacture or provide consumer goods or services. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in the consumer goods and/or consumer services sectors.
    Morningstar category index: 50% MSCI Wrld/Consumer Discretionary NDTR, 50% MSCI Wrld/ Consumer Staples NDTR

    Sector Equity Energy
    Sector Equity Energy funds invest primarily in the equities of companies that produce or refine oil and gas, oilfield services and equipment companies, and pipeline operators. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in energy equities.
    Morningstar category index: MSCI Wrld/Energy NDTR

    Sector Equity Financial Services
    Sector Equity Financial Services funds invest primarily in the equities of companies in the financial services sector, including banks, brokerage firms, insurance companies and consumer credit providers. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in financial services companies.
    Morningstar category index: MSCI Wrld/Financials NDTR

    Sector Equity Health Care
    Sector Equity Health Care funds invest primarily in the equities of companies in the medical and health-care industries. Most invest in a range of companies, buying everything from pharmaceutical and medical device makers to hospitals and nursing homes. A few funds concentrate on just one industry segment, such as medical devices. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in health care companies.
    Morningstar category index: MSCI Wrld/Health Care NDTR

    Sector Equity Industrial Materials
    Sector Equity Industrial Materials funds invest primarily in the equities of industrialmaterials companies. These include companies that provide or manufacture chemicals, machinery, building materials, and commodities, as well as aerospace and defence firms. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in industrial materials companies.
    Morningstar category index: MSCI Wrld/Materials NDTR

    Sector Equity Precious Metals
    Sector Equity Precious Metals portfolios invest primarily in the equities of mining companies, though some may own gold or other metals outright. Most portfolios concentrate on gold-mining equities, but some have significant exposure to silver-, platinum-, and base-metal-mining equities as well. Many precious-metals companies are based in North America, Australia, and South Africa.

    Sector Equity Technology
    Sector Equity Technology funds invest primarily in the equities of companies in the hardware and software sectors. Most concentrate on computer, semiconductor, software, networking and internet-related equities. Some concentrate on a single technology industry. These funds invest at least 75% of their portfolio in equities and invest at least 50% of these in the hardware and software sectors.
    Morningstar category index: MSCI Wrld/Information Tech NDTR

    Sector Equity Utilities
    Sector Equity Utilities funds invest primarily in the equities of companies in the utilities sector. The sector includes electric, gas, and water companies, but not telecommunications or cable companies. These funds invest at least 75% of their portfolio in equities and invest at least 50% of theseutility companies.
    Morningstar category index: MSCI Wrld/Utilities NDTR

  •   Morningstar category for fixed income funds

    Funds are grouped into categories by Morningstar according to their actual investment style, not merely their stated investment objectives, nor their ability to generate a certain level of income. To ensure homogeneous groupings, Morningstar normally allocates funds to categories on the basis of their portfolio holdings.

    Asia/Japan Convertible Bond
    Asia/Japan Convertible Funds invest principally in convertible securities denominated or hedged into the Yen or other Asian currencies.

    Dollar/Global Convertible Bond

    These funds invest principally in convertible securities denominated in or hedged into the U.S. dollar or have global currency exposure.
    Morningstar category index: Merrill Lynch All Conv, All Qualities

    Emerging Europe Bond
    Emerging Europe Bond funds invest principally in bonds of issuers in emerging markets countries in Europe. Most funds will invest in several countries or currencies, though same may specialise in a single country or currency.
    Morningstar category index: ML EUR EM Sovr EUR/ME/Afr

    Euro Convertible Bond
    Euro Convertible Bond funds invest principally in convertible securities denominated in or hedged into the Euro.

    Euro Short Bond
    Euro Short Bond funds invest in short-dated bonds denominated or hedged into euros. The aggregate maturity for each fund does not tend to exceed three years.
    Morningstar category index: Citigroup Eurozone GBI 1-3Y

    Euro Government Bond
    Euro Government Bond funds invest primarily in government or government-backed agency securities denominated or hedged into the relevant currency.
    Morningstar category index: Citigroup Eurozone GBI

    Euro Global Bond
    Euro Global Bond funds invest in fixed income securities and take material currency exposures as part of their investment strategies. These funds are optimised in euros and a moderate credit exposure is possible.
    Morningstar category index: Citigroup WGBI In Euros

    Euro Global Bond - Hedged
    Euro Global Bond – Hedged funds invest in bonds on a global basis, and normally hedge all of their currency exposure back into the Euro.
    Morningstar category index: Citi Ccy-Hdg WGBI Euros

    Euro High Yield Bond
    Euro High Yield Bond funds invest in higher yielding securities denominated or hedged into the relevant currency. These funds invest 40% or more of their assets in securities with a credit quality equivalent to BB, or lower.
    Morningstar category index: Lehman Pan-European High Yield (Euro)

    Euro Inflation Linked Bond
    Euro Inflation Linked Bond funds invest principally in inflation-linked bonds denominated in or hedged into the Euro.
    Morningstar category index: EuroMTS Inflation Linked Aggregate

    Non-Euro Inflation Linked Bond
    Non-Euro Inflation Linked Bond funds invest primarily in inflation-linked bonds denominated in or hedged into currencies other than the Euro.
    Morningstar category index: ML Glb Gov Inflation-Linked

    Euro Long Bond
    Euro Long Bond funds invest principally in bonds denominated in or hedged into the Euro. The average maturity for each fund is generally greater than 10 years.
    Morningstar category index: Citi Eurozone GBI 10+Y

    Euro Diversified Bond
    Euro Diversified Bond funds have a generalist mandate and do not exhibit significant risk concentrations. This category contains funds that are not eligible for other Eurodenominated/ hedged bond fund categories.
    Morningstar category index: Lehman Euro-Aggregate Index

    European Bond
    European Bond funds invest in European fixed income securities. This category is similar to the Euro Global Bond category, except that the foreign currency exposure is limited to European currencies.
    Morningstar category index: Lehman Pan-European Aggregate

    Sterling Money Market
    Sterling Money Market funds invest in Sterling-denominated money market instruments. The residual aggregate maturity of those instruments does not exceed 12 months.
    Morningstar category index: Citigroup 3M Sterling Deposit

    Sterling Government Bond
    Sterling Government Bond funds invest primarily in government or government-backed agency securities denominated or hedged into the relevant currency.
    Morningstar category index: Citigroup UK GBI, All Maturities, USD

    Sterling High Yield Bond
    Sterling High Yield Bond funds invest in higher yielding securities denominated or hedged into Sterling. These funds will invest 40% or more of their assets in securities with a credit quality equivalent to BB, or lower.
    Morningstar category index: Lehman Pan-European High Yield (Non-Euro)

    Sterling Global Bond
    Sterling Global Bond funds invest in fixed income securities and take material currency exposures as part of their investment strategies, but are optimised in Sterling. A moderate credit exposure is possible.
    Morningstar category index: Citigroup WGBI, All Maturities, In Sterling

    Sterling Diversified Bond
    Sterling Diversified Bond funds have a generalist mandate and do not exhibit significant risk concentrations. This category contains funds that are not eligible for other bond fund categories.
    Morningstar category index: Lehman Sterling Aggregate

    Dollar Short Bond
    Dollar Short Bond funds invest in short-dated bonds denominated in or hedged into U.S. dollars. The aggregate maturity for each fund does not tend to exceed three years.
    Morningstar category index: Citigroup U.S. GBI 1-3 Year Sector

    Dollar Government Bond
    Dollar Government Bond funds invest primarily in government or government-backed agency securities denominated in or hedged into the relevant currency.
    Morningstar category index: Citigroup U.S. GBI, All Maturities, In Euros

    Dollar Global Bond
    Dollar Global Bond funds invest in fixed income securities and take material currency exposures as part of their investment strategies. These funds are optimised in U.S. dollars and a moderate credit exposure is possible.
    Morningstar category index: Citigroup World GBI

    Dollar High Yield Bond
    Dollar High Yield Bond funds invest in higher yielding securities denominated or hedged into the relevant currency. These funds invest 40% or more of their assets in securities with a credit quality equivalent to BB, or lower.
    Morningstar category index: Lehman High Yield Corporate Bond Index

    Dollar Diversified Bond
    Dollar Diversified Bond funds have a generalist mandate and do not exhibit significant risk concentrations. This category contains funds that are not eligible for other dollar-denominated/ hedged bond fund categories.
    Morningstar category index: Lehman Aggregate Bond Index

    SEK Bond
    SEK Bond funds invest in bonds denominated or hedged into Swedish Krona. The aggregate maturity of these funds exceeds three years.
    Morningstar category index: Citigroup Sweden GBI

    SEK Money Market
    SEK Money Market funds invest in Swedish Krona-denominated money market instruments. The residual aggregate maturity does not exceed 12 months.
    Morningstar category index : Statsobligasjonsind. 0.25

    SEK Short Bond
    SEK Short Bond invests in short-dated bonds denominated or hedged into Swedish Krona. The aggregate maturity does not exceed three years. Morningstar category index: Citigroup Sweden GBI 1-3Y NOK Bond NOK Bond funds invest in bonds denominated or hedged into Norwegian Krone, where the aggregate maturity exceeds three years.
    Morningstar category index: Statsobligasjonsind. 3.00

    NOK Money Market
    NOK Money Market funds invest in Norwegian Krone-denominated money market instruments. The residual aggregate maturity does not exceed 12 months.
    Morningstar category index: Statsobligasjonsind. 0.25

    NOK Short Bond
    NOK Short Bond Funds invest in short-dated bonds denominated or hedged into Norwegian Krone. The aggregate maturity does not exceed three years.
    Morningstar category index: Statsobligasjonsind. 1.00

    DKK Money Market
    DKK Money Market funds invest in Danish Krone-denominated money market instruments. The residual aggregate maturity does not exceed 12 months.

    DKK Bond
    DKK Bond invests in bonds denominated or hedged into Danish Krone, where the aggregate maturity exceeds three years.
    Morningstar category index: Citigroup Danish GBI, All Maturities, In Euros

    DKK Short Bond
    DKK Short Bond funds invest in short-dated bonds denominated or hedged into Danish Krone. The aggregate maturity does not exceed three years.
    Morningstar category index: Citigroup Danish GBI, 1-3 Year Sector, USD

    CHF Money Market
    CHF Money Market funds invest in Swiss Francs-denominated money market instruments. The residual aggregate maturity does not exceed 12 months.
    Morningstar category index: Citigroup Swiss Franc 1-Month Euro Deposit, USD

    CHF Bond
    CHF Bond funds invest in bonds denominated or hedged into Swiss Franc , where the aggregate maturity exceeds three years.
    Morningstar category index: Citigroup Swiss GBI, all maturities

    CHF Global Bond
    CHF Global Bond funds invest in fixed income securities and are taking material currency exposures as part of their investment strategies. These funds optimise their returns in Swiss Francs and a moderate credit exposure is possible.
    Morningstar category index: Citigroup WGBI CHF

    CAD Bond and Cash

    CAD Bond and Cash funds invest in Canadian Dollar-denominated bonds and/or money market securities.
    Morningstar category index: Citigroup Canadian GBI, all maturities

    AUD Bond and Cash
    AUD Bond and Cash funds invest in Australian Dollar-denominated bonds and/or money market securities.
    Morningstar category index: Citigroup Australian GBI, all maturities

    JPY Bond
    JPY Bond funds invest in Japanese Yen-denominated bonds and money market securities.
    Morningstar category index: Citigroup Japanese GBI, All Maturities, USD

    Taiwan Bond
    Taiwan Bond funds invest in Taiwan Dollar-denominated Bonds and/or money market securities.
    Morningstar category index: JPM Taiwan Local Markets Index Plus (USD)

    Asia Bond
    The Asia Bond funds category consists of all funds investing in Asian Bonds and money market securities (excl. funds that exclusively invest in Australia, Japan or Taiwan).
    Morningstar category index: JPM Asia Local Markets Index Plus (USD)

    Emerging Markets Bond
    Emerging Market Bond funds are dedicated to fixed income securities of issuers in emerging market countries. Most funds will invest in several currencies or countries. Some might have a more specialized approach.
    Morningstar category index: JPM EMBI+

  •   Morningstar category for mixed funds

    Funds are grouped into categories by Morningstar according to their actual investment style, not merely their stated investment objectives, nor their ability to generate a certain level of income. To ensure homogeneous groupings, Morningstar normally allocates funds to categories on the basis of their portfolio holdings.

    CHF Aggressive Balanced
    CHF Aggressive Balanced funds have a mandate to balance equity and bond investments for a Swiss Franc -based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: 40% Citi Switzerland GBI, 60% FTSE World

    CHF Cautious Balanced
    CHF Cautious Balanced funds have a mandate to balance equity and bond investments for a Swiss Franc -based investor. The equity component does not exceed 40% in the normal running of the fund.
    Morningstar category index: 75% Citi Switzerland GBI, 60% FTSE World

    DKK Balanced
    DKK Balanced funds have a mandate to balance equity and bond investments for a Danish Krone-based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: 50% Citi Danish GBI, 50% FTSE World

    Dollar Balanced
    Dollar Balanced funds have a mandate to balance equity and bond investments for a U.S. Dollar-based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: LB $ Aggregate 50% / FTSE World 50%

    Euro Cautious Balanced
    Euro Cautious Balanced funds have a mandate to balance equity and bond investments for a Euro-based investor. The equity component does not exceed 35% in the normal running of the fund.
    Morningstar category index: LB Euro-Agg. 75% / FTSE World 25%

    Euro Moderate Balanced
    Euro Moderate Balanced funds have a mandate to balance equity and bond investments for a Euro-based investor. The equity component does not exceed 60% in the normal running of the fund.
    Morningstar category index: LB Euro-Agg. 50% / FTSE World 50%

    Euro Aggressive Balanced
    Euro Aggressive Balanced funds have a mandate to balance equity and bond investments for a Euro-based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: LB Euro-Agg. 25% / FTSE World 75%

    NOK Balanced
    NOK Balanced funds have a mandate to balance equity and bond investments for a Norwegian-Krone based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: 50% Citi Norway GBI, 50% FTSE World

    SEK Aggressive Balanced
    SEK Aggressive Balanced funds have a mandate to balance equity and bond investments for a Swedish-Krona based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar Category Index: 40% Citi Sweden GBI, 30% MSCI Sweden NDTR, 30% FTSE World

    SEK Cautious Balanced
    SEK Cautious Balanced funds have a mandate to balance equity and bond investments for a Swedish-Krona based investor. The equity component does not exceed 40% in the normal running of the fund.
    Morningstar category index: 75% Citi Sweden GBI, 12.5% MSCI Sweden NDTR, 12.5% FTSE World

    Sterling Aggressive Balanced
    Sterling Aggressive Balanced funds have a mandate to balance equity and bond investments for a sterling-based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: 40% Lehman Brothers Sterling Aggregate, 60% FTSE World

    Sterling Cautious Balanced
    Sterling Cautious Balanced funds have a mandate to balance equity and bond investments for a Sterling-based investor. The equity component does not exceed 40% in the normal running of the fund.
    Morningstar category index: 75% Lehman Brothers Sterling Aggregate, 25% FTSE World

    Asia Balanced
    Asia Balanced funds have a mandate to balance equity and bond investments for an Asia based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: 50% JPM Asia Local Markets Index Plus (USD) / 50% MSCI AC Asia Pacific NDTR

    Taiwan Balanced
    Taiwan Balanced funds have a mandate to balance equity and bond investments for a Taiwan-based investor. The equity component does not exceed 75% in the normal running of the fund.
    Morningstar category index: 50% JPM Taiwan Local Markets Index Plus (USD) / 50% MSCI Taiwan NDTR

    Euro Absolute Return
    Euro Absolute Return funds have an investment objective of pursuing positive returns in all market environments, and risk controls and investment capabilities sufficient to give the fund a reasonable chance of meeting that objective. They should not display a negative return over an 18 month period. Such funds will typically have a stated benchmark reflecting that goal (e.g., Euribor + 2%, etc.), and should have the ability to invest across asset classes and/or use derivatives. The funds in this category will invest primarily in instruments denominated in or hedged into the Euro.
    Morningstar category index: ML Euro LIBOR 1-Mth Const Mat (LOC)

    Non-Euro Absolute Return
    Non Euro Absolute Return funds have an investment objective of pursuing positive returns in all market environments, and risk controls and investment capabilities sufficient to give the fund a reasonable chance of meeting that objective. They should not display a negative return over an 18 month period. Such funds will typically have a stated benchmark reflecting that goal (e.g., Libor + 2%, etc.), and should have the ability to invest across asset classes and/or use derivatives. The funds in this category will invest primarily in instruments denominated in or hedged into currencies other than the Euro.
    Morningstar category index: ML GBP LIBOR 1-Mth Const Mat (LOC)

  •   Morningstar style box

    The Morningstar style box is a nine square grid that provides a graphical representation of the various investment styles. Morningstar offers a style box for both stocks and bonds.

    For stocks and stock funds, it classifies securities according to their size or market capitalization (the vertical axis of the style box) and the investment style of the stock (growth equity or value equity) (the horizontal axis of the style box).

    Morningstar style box for stocks

    morningstar_stylebox_stocks_en

    Style box assignments begin at the individual stock level. Morningstar determines the investment style of each individual stock in their database. The style attributes of individual stocks are then used to determine the style classification of stock mutual funds.

    A stock fund is an aggregation of individual stocks and its style is determined by the style assignments of the stocks in which it invests. By plotting all of a fund's stocks on the stock style grid, the range of stock styles included in the fund immediately becomes apparent. An asset-weighted average of the underlying stocks' style and size scores determines a fund's placement in the style box. Style box assignments for stocks are updated each month. Assignments for funds are recalculated whenever Morningstar receives updated portfolio holdings for the fund.

    Morningstar style box for bonds

    morningstar_stylebox_bonds_en

    Bonds and bonds funds are classified with regards to their solvency (the vertical axis of the style box) and sensitivity to changes in rates (the horizontal axis of the style box).

    As depicted in the style box image, the three interest sensitivity groups are limited, moderate and extensive and the three credit quality groups are high, medium and low. These groupings display a portfolio's effective duration and bond credit ratings.

    Horizontal Axis: Interest Rate Sensitivity

    The horizontal axis focuses on interest-rate sensitivity as measured by the bond's portfolio effective duration.

    American bond funds with duration of 4.5 years or less qualify as low; more than 4.5 years but less than 7 years, medium; and more than 7 years, high.

    Non-US domiciled funds use other static duration breakpoints. These thresholds are:

        Limited: <= 3.5 years

        Moderate: > 3.5 and <= 6 years

        Extensive: > 6 years

    Vertical Axis: Credit Quality

        "Low" credit quality – where asset weighted average credit rating is less than "BBB-"

        "Medium" credit quality – where asset weighted average credit rating is less than "AA-" but greater or equal to “BBB-”

        "High" credit quality – where asset weighted average credit rating is "AA-" and higher

  •   Mutual fund or UCI

    When you invest in a mutual fund, your money is pooled with that of other investors, and then it is managed by a group of professionals who try to earn a return by selecting stocks for the portfolio. This Undertaking for Collective Investment or UCI is often called a fund in the vernacular. One key advantage of funds is that they can be less volatile. Simple statistics say that a portfolio will experience less volatility than the individual components of the portfolio. After all, individual stocks can and sometimes do go to zero, but if a mutual fund held 50 stocks, it would be very unlikely that all 50 of those stocks become worthless. The flipside of this reduced volatility is that fund returns can be muted relative to individual stocks. In investing, risk and return are intimately correlated—reduce one, and odds are you will reduce the other. Mutual fund investors must also consider expenses. The professionals running mutual funds do not do so for free. They charge fees, and fees eat into returns.

N

  •   NAV

    A fund's net asset value (NAV) represents the value of the fund per unit. NAV is calculated by dividing a fund's total net assets by its number of outstanding units. Units in regular open-end mutual funds are bought and sold at NAV, but units in ETF’s are bought and sold at the market price, which can differ from NAV.

O

  •   Ongoing charge

    All charges taken from the fund over a year, expressed as a percentage of net assets. The ongoing charges include the management fee of the fund manager, administrative costs and costs related to legislation, auditing and registration. Entry and exit fees or performance fees are not included. Ongoing charges are processed on a daily basis in the course of a fund, thus, you are not charged separately.

P

  •   Payment date

    The date on which a declared event is scheduled to be paid.

  •   Priority issue

    Form of open or public offer where, due to a limited amount of securities available, priority is given to existing shareholders.

Q

R

  •   Record date

    The cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend. 

  •   Repurchase offer

    Offer to existing shareholders by the issuing company to repurchase securities. The objective of a repurchase offer is to reduce the number of outstanding shares.

  •   Return of capital

    A return of capital occurs when a company makes a cash payment to all shareholders of a proportion of the value of their shares. It may be that the company has excess cash which it is not intending to use and so shareholders are paid this cash. Upon payment of this cash, the value of the share is reduced by the rate per share paid.

  •   Reverse stock split

    Decrease in a company's number of outstanding shares without any change in the value of shareholder's equity or the aggregate market value at the time of the split.

  •   Rights issue

    Distribution of a security or privilege that gives the holder an entitlement or right to take part in a future event. A company may offer its current shareholders the right to buy new shares in the company at a discount to the market price.

S

  •   Share premium dividend

    An amount in cash paid to shareholders from the shares premium reserve. It is similar to a dividend but with different tax implications. Upon payment of a share premium dividend, the value of the share is decreased by the rate per share paid.

  •   Sharpe ratio

    The Sharpe ratio measures the risk per unit by using the return and the standard deviation. The higher the Sharpe ratio, the higher the fund's historical risk-adjusted returns.

    The Sharpe ratio is calculated for the past 36-month period by dividing a fund's annualized returns over the risk-free return (for example the return on government bonds) by its standard deviation. Since this ratio uses standard deviation as its risk measure, the Sharpe ratio is applied when analysing a fund or instrument that is an investor's sole holding.

    Like this, a mid-cap growth equity fund may have a Sharpe ratio of 0.40. Meanwhile, the average Sharpe ratio for all mid-cap growth equity funds is 0.29. This means that this individual fund currently has had performance higher return than the average mid-cap growth fund, taking the risk and volatility into consideration.

  •   Sortino ratio

    The Sortino ratio, a variation of the Sharpe ratio, differentiates downwards volatility from (downwards and upwards) volatility in general.

    The Sortino ratio is the excess return of a fund or another investment on top of the ‘risk-free rate’ divided by the past downside semi-variance. Therefore, it measures the return to "bad" volatility. (Volatility caused by negative returns is considered bad or undesirable by an investor, while volatility caused by positive returns is desirable.)

  •   Spin-off

    A spin-off involves taking a part of a company, usually a contained business unit with its own management structure, and creating a new company that contains only that part. Shareholders of the parent company receive shares of the new subsidiary without having to surrender their shares in the parent company.

  •   Standard deviation

    This statistical measurement is a benchmark for the dispersion of historical returns of the historical average. Therefore, it depicts how widely a mutual fund's returns varied over a certain period of time. When a fund has a high standard deviation, the predicted range of performance is wide, implying greater volatility. Standard deviation is most appropriate for measuring the risk a fund that is an investor's only holding. The standard deviation for a portfolio of multiple funds or instruments is a function of not only the individual standard deviations, but also of the degree of correlation among the funds' returns.

    If a fund's investment returns follow a normal distribution, then approximately 68% of the time they will fall within one standard deviation of the mean return for the fund, and 95% of the time within two standard deviations.

    For example, for a fund with a mean annual return of 10% and a standard deviation of 2%, you would expect the return to be between 8% and 12% about 68%of the time, and between 6% and 14% about 95% of the time.

    Standard deviation is also a component in the Sharpe Ratio, which assesses risk-adjusted performance.

  •   Stock

    When you buy a stock, you become part-owner of a business, and the value of your share will rise and fall according to the success of the company. Stockholders are entitled to the profits, if any, generated by the company, and after everyone else, employees, vendors, lenders, is paid. Because only receive the profits that are left over, they shoulder more risk than bondholders, who get paid a fixed amount regardless of how well a company does (unless it goes bankrupt). However, if a company generates lots of profit, shareholders enjoy the highest (theoretically unlimited) returns. Companies usually pay out their profits to investors in the form of dividends, or they reinvest the money into the company. Theoretically this should result in shares that have a higher value.

    Growth Stock

    Shares of companies of which investors believe that will make faster gains than the rest of the market.

    Value Stock

    Shares of which investors think that they are currently undervalued in price and that their value will eventually be recognised by the market.

  •   Stock dividend

    Dividend paid to shareholders in the form of equities of the issuing company.

  •   Synthetic Risk and Reward Indicator (SRRI)

    The Synthetic Risk and Reward Indicator (SRRI) was defined in 2009 by the Committee of European Securities Regulators (CESR) with the aim of providing funds investors with a method of assessing the volatility of a fund (the risk) in a uniform manner.

    A higher SRRI means greater fluctuations (upwards and downwards) in a fund's value in the past. A lower SRRI means that a fund's value was more stable in the past. The table below shows the mapping between the volatility (upwards and downwards fluctuations in price) and the SRRI value.

    SRRI Annualised Volatility
    1 0 - 0.49% 
    0.5 - 1.99%
    3 2 - 4.99%
    4 5 - 9.99%
    5
    10 - 14.99%
    6 15 -24.99%
    7 25% +

    The SRRI is calculated based on the fund returns over the last 5 years. In the case that a fund is less than 5 years old, the returns of a comparable fund (a benchmark) is used for the period before the fund was launched.

T

  •   Tender offer

    An offer made to shareholders, normally by a third party, to sell (tender) or exchange their shares. The term also refers to the process whereby shareholders submit their shares or securities to a takeover offer.

  •   Total return

    The calculation of total return, expressed in percentage terms, is determined by taking the change in price, if applicable, reinvestment of all dividends and capital gains of the period, and dividing these by the starting price. Unless otherwise noted, total returns are not adjusted for sales charges (such as stock exchange fees, withholding tax and possible in and exit costs), because Morningstar prefers to give a clearer picture of performance.

    Total returns account for ongoing costs, (such as management, administrative and other costs that are taken out of the UCI and are settled daily according to the fund's NAV.

U

  •   UCITS

    UCITS stands for Undertakings for Collective Investment in Transferable Securities. The term refers to a UCITS IV Directive 2009/65 / EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS). The Directive defines the criteria an investment fund or UCI based in the EU must satisfy in order to be sold in all EU countries. The UCITS Directive aims to simplify investment guidelines in Europe and to provide investors with more protection. In the Netherlands this document is also known as ICBE.

W

  •   Warrant exercise

    Option offered to shareholders where they are given the right to buy ordinary shares in the company at a set price and at a future date. Warrants will have an exercise price. This is the price which you must pay in order to convert a warrant into an ordinary share.