A bond that has been downgraded from investment grade to junk bond status.

A privately held company that manages the financial assets of one or a small number of ultra-high-net-worth families.

The target rate reflects the upper bound of the Federal Open Markets Committee’s (FOMC) target range for overnight lending among US banks.

A fund that pools investors' money which is then fed into a master fund.

Refers to using borrowed capital in investments to increase a company's asset base and amplify potential returns.

Refers to efforts to make financial products and services accessible and affordable to all individuals and businesses.

A debt instrument issued by a government, corporate or other entity.

A non-profit organisation or charitable trust that provides funding and support to other charitable organisations via grants.

A ratio that indicates how much cash is available to a company after covering its operating and capital expenses, reflecting its capital intensity. It is calculated by dividing free cash flow by cash flow from operations.

A ratio that indicates how much cash is available to a company after covering its operating and capital expenses, an indication of its capital intensity. Defined here as free cash flow divided by cash flow from operations.

Countries with investable stock markets that are less established than those in the emerging markets.

A financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks and bonds.

A measure of a fund’s results, it is calculated by dividing total earned income (after taxes and before management fees and expenses) by average net assets over the past 12 months.

An investment vehicle that invests in other funds, rather than investing directly in stocks, bonds or other securities. The FOF strategy aims to achieve broad diversification and minimal risk.

An investment professional responsible for evaluating/setting portfolio strategies for firms’ fund platforms.

A method of evaluating a security in an attempt to measure its intrinsic value, by examining related economic, financial and other qualitative and quantitative factors.

A third party that sells or distributes mutual funds to investors on behalf of fund management companies. They generally have no direct relationship to the funds and may come with additional charges.

Financial contracts under which an agreed price for an asset must be transacted at a certain time regardless of the asset’s current market value.

A portfolio that invests across both global equity and global fixed income assets. In general, it maintains a 60% allocation to equities and a 40% allocation to fixed income.

When one company purchases another, the intangible (non-physical) assets associated with that transaction are considered goodwill.

The system of rules, practices and processes by which a company is directed and controlled.

The worst economic downturn in the history of the industrialised world to date, the Great Depression lasted from 1929 to 1939.

A type of bond that helps companies and governments raise funds for environmentally-friendly projects.

Measures the monetary value of final goods and services – that is, those that are bought by the final user – produced in a country in a given period of time (for example over a quarter or a year). Real GDP takes into account inflation.

The amount of money a company makes after the cost of producing the goods or services, expressed as a percentage.

The return on an investment before/after the deduction of taxes and expenses, expressed in percentage terms. This differs from the yield of each share class.

The amount of money a company makes after deducting the costs from making and selling its products and services.

Equity funds focused on long-term capital appreciation.

Equity funds focused on generating long-term returns from a combination of capital appreciation and dividend income.

Typically companies that aim to increase their revenue and earnings at a faster rate than the market average.

A strategy focused on increasing an investor's capital by investing in companies or sectors that are currently in a growth phase and expected to continue growing.

Generally natural resources mined or extracted from the earth, including ore, petroleum products and metals.

Refers to money issued by a nation that is seen as politically and economically stable. Hard currencies are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic (local) currency.

Hawkish economic policy is generally when a central bank uses interest rate rises in an attempt to curb inflation.

A method of reducing unnecessary or unintended risk, usually regarding currency transactions.

A high-yield bond is one with a lower credit rating than an investment grade bond. High-yield bonds typically offer a higher rate of interest because of a greater risk of default.

Companies with outstanding quality characteristics, which may include low debt, more stable earnings, stronger balance sheets and higher margins to outperform over a long time horizon.

Refers to the economic problems Japan has faced since the 1990s, characterised by chronically low economic growth and weak inflation.

Generally, laddering is used to describe different investing strategies that aim to produce steady cash flow by deliberately planning investments, creating an influx of liquidity at a predetermined time, and/or matching a desired risk profile.

A publicly traded company with a market value between US$10 billion and US$200 billion.

Best-in-class companies in sustainable sectors with high ESG ratings.

Leverage is the amount of debt a company has in its mix of debt and equity (its capital structure). A company with more debt than is average for its industry is considered highly leveraged.

Describes the degree to which an asset or security can be quickly converted into cash without a significant concession in price.

A currency that can be spent in a particular geographical locality at participating organisations.

Stocks offering low earnings in the near-term but which are expected to generate most of their cashflows in the distant future, typically interest rate sensitive as the value of future cashflows is determined by the interest rate. 

The world’s stocks of natural resources, which include geology, soil, air, water and all living things.

Moving production and other outsourced operations closer to a company’s registered country or region.

Measures the value of a fund’s assets minus its liabilities. Usually, NAV is determined for each individual share.

Describes an index which reinvests dividends from its constituent corporate securities after the deduction of withholding taxes.

Typically measure the amount of money that a bank is earning in interest on loans versus what it is paying in interest on deposits.

Refers to achieving a balance between the amount of greenhouse gas emissions produced and those removed from the atmosphere in order to reduce global warming.

Refers to the actual dollar amount of money that a company expects to take in and pay out, without any adjustment for inflation.

A process used in investing to remove from consideration certain types of companies, sectors or practices based on specific criteria, such as ethical or social reasons.

Countries that are less developed than the semi-periphery and core countries.

A representation of the economic relationship between the rate of change in unemployment, which affects the rate of change in wages as a result of inflation.

An approach where companies are included in a portfolio according to defined criteria.

In investing, a premium on shares or stock occurs when a stock or share is issued above its par value (the face value of a bond or the value of a stock certificate). The difference between the par value and the issuing value is considered the stock premium.

Measures the sensitivity of demand for a good relative to a change in its price. A good is elastic when a change in price leads to substantial change in demand. A good is inelastic when the demand remains constant or has little change when price changes.

The ratio for valuing a company that measures its current share price relative to its earnings per share (EPS).

Packaged retail investment and insurance-based products make up a broad category of financial assets provided to consumers in the European Union.

The capital market where investors buy new securities directly from the issuer or an intermediary.

In investment terms, this is the original sum of money used to buy an asset.

A portfolio manager accountable for ensuring the overall portfolio is achieving its objective.

Investments in private, non-publicly traded debt instruments.

A fund that normally invests in private, non-publicly traded companies and businesses.

A profitability ratio that measures the degree to which a company makes money by calculating the percentage of sales that has turned into profits.

Refers to government policies that protect domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors. They can also be implemented for safety or quality concerns.

A company owning and typically operating real estate that generates income.

Income after factoring in inflation.

A return to inflation (an overall increase in prices), from a state of deflation (an overall decrease in prices).

An individual financial advisor or a company that provides its clients with financial advice.

The possibility that cash flows received from an investment will earn less when reinvested in new or existing security.

A measure of the outperformance (or underperformance) of a portfolio relative to the associated benchmark.

Research analysts conduct in depth, proprietary research on companies, they then make recommendations to portfolio managers and are also allocated part of the fund assets to manage.

Involves making well-reasoned decisions about the products we buy, by taking into account environmental impacts at all stages of the product life cycle.

An investment approach that explicitly acknowledges the relevance to the investor of environmental, social and governance factors.

A ratio that measures how well a company uses its capital to generate profits.

A central bank policy tool to help regulate monetary supply.

Bonds rated as a junk bond but which could become investment grade because of improvements in the issuing company's credit quality.

The degree of uncertainty and/or potential financial loss inherent in an investment decision. In general, as investment risks rise, investors seek higher returns to compensate themselves for taking such risks.

Any asset that carries a degree of risk. Risk asset generally refers to assets that have a significant degree of price volatility, such as equities, commodities, high-yield bonds, real estate, and currencies.

The risk indicator is a guide to the level of risk of this product compared to other products.

Generally refers to markets with the potential for significant price volatility, such as equities, high-yield bonds, commodities, options, derivatives, and currencies.

A concept in investment management that potential return rises with increased risk, and vice versa.

Money movement from one type of investment to another as investors anticipate the movement of the economic cycle.

Scope 1 are those direct emissions that are owned or controlled by a company.

The capital market where previously issued securities, such as stocks and bonds, are traded among investors.

Occurs when there is a long-lasting and essential shift in an industry or sector leading to substantial growth.

A secular tailwind refers to economic trends that unfold over long time horizons that help encourage market growth, in contrast to cyclical factors that limit growth.

Financial securities that are created by securitising individual loans (debt).

A mutually interchangeable, negotiable financial instrument that holds some type of monetary value. It represents an ownership in a publicly-traded corporation — via stock; a creditor relationship with a governmental body or a corporation — via bond; or rights to ownership via an option.

Segregated bank accounts are accounts that hold the funds of a customer separated from the funds of a FX or brokerage company in the interests of the customer's security. They are designed to achieve specific client investment objectives in an effective and transparent manner.

A measure of risk-adjusted return that represents the excess return of an investment portfolio for holding a riskier asset instead of the risk-free asset.

A Société d'investissement à Capital Variable, or SICAV, is a publicly-traded open-end investment fund structure offered in Europe. SICAV funds are similar to open-end mutual funds in the US. Shares in the fund are bought and sold based on the fund's current net asset value.

A publicly traded company with a market value between US$250 million and US$2 billion.

Any type of bond instrument where the proceeds are to be exclusively used to finance or re-finance, in part or in full, a new and/or existing eligible social project.

A software delivering and licensing model where users subscribe to and access the software online, rather than installing it on individual computers.

Refers to investors that are either sovereign States themselves or are intrinsically linked to a sovereign State, the most common types of which are State-owned enterprises (SOEs) and sovereign wealth funds (SWFs).

The price quoted for immediate settlement on a commodity, a security or a currency. The spot rate, also called 'spot price', is based on the value of an asset at the moment of the quote.

Measures how much the returns from an investment can vary from its average return and is calculated after fees.

An individual portfolio manager running a portfolio by themselves.

Companies with high return on invested capital, a high quality franchise and recurring revenues built on intangible assets, and which possess pricing power and low capital intensity.

A seven-character code used to identify unit trusts, investment trusts, insurance-linked securities, and domestic and foreign stocks, trading on the London Stock Exchange and various smaller UK- based exchanges.

The act of loaning a stock, derivative or other security to an investor or firm.

A strategy of investing across the fixed income spectrum, from corporate bonds to high-yield bonds. With a strategic bond strategy, exposure to different bond types can be increased or decreased, depending on factors including the economic environment.  

In investing, structural themes occur as one-off shifts that change an existing economic paradigm. These are typically long-term structural changes driven by powerful forces such as disruptive technologies or changing demographics and consumer behaviour.

In investing, style refers to the investment approach or objective that an asset manager uses with the ultimate goal of generating returns.

A strategy for passing each key roles within a company to someone else in a way that the company continues to operate after the incumbent leader is no longer in control. Succession planning helps ensure that businesses continue to run smoothly after the business’ more senior people move on.

Bonds where the proceeds will be exclusively applied to finance or refinance a combination of both green and social projects.

A proposed set of rules that will govern sustainability disclosure requirements for financial market participants in the U.K.

A collection of 17 interlinked objectives adopted by the United Nations in 2015 designed as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.

A European regulation that lays down harmonized rules for financial market participants on transparency with regard to the integration of sustainability risks and the provision of sustainability-related information for financial products.

Covers funds that do not integrate the EU criteria for environmentally sustainable economic activities into the investment process and could include stocks currently ineligible for inclusion in ESG funds.

A derivative contract traded primarily between businesses or financial institutions outside of exchanges, through which they exchange one financial instruments for another. It usually involves cash flows but the instrument can be almost anything. The swaps are customised to the needs of both parties, and retail investors do not generally engage in swaps.

A classification system that enables businesses to identify whether or not a given economic activity should be considered “environmentally sustainable”.

In finance, refers to a certain situation or condition that may lead to higher profits, revenue, or growth.

Terming out debt means refinancing short-term debt into long-term debt, which may make sense when interest rates are very low.

Since 1931, our firm, Capital Group, has been singularly focused on delivering superior, consistent results for long-term investors using high-conviction portfolios, rigorous research and individual accountability.

Our distinctive investment approach, harnesses high conviction investing from multiple investment professionals working independently alongside each other with the overall aim of producing smoother returns that align with our investors’ long-term objectives.

An investment approach which focuses on where a company derives its revenues rather than just where it is based.

A form of investment that aims to identify macro-level trends, such as clean energy or technology, and the underlying investments that stand to benefit from those trends materialising.

A measure of the total costs associated with running the fund, including marketing and distribution costs.

A measure of how closely a portfolio follows its reference index by assessing the volatility of the difference in returns between the portfolio and the index.

Companies looking to transition their business models to a sustainable future.

A type of debt issued by the US Treasury.

Turnover is calculated over the last 12 months as the lesser of monthly purchases and sales divided by the average net assets.

Undertakings for Collective Investment in Transferable Securities (UCITS) is a regulatory framework that allows for the sale of cross-Europe mutual funds.

Conceived by the United Nations, a call to companies to align standards and operations with universal principles on human rights, labour, environment and anti-corruption.

An investment strategy that does not require a fund or portfolio manager to adhere to a specific benchmark.

The period of time after a market bottom during which a security’s price trends upwards.

Refers to the potential for an investment to increase in value, as measured in terms of money or percentage.

Measures the outperformance of an investment compared to an index during up markets.

An estimated value of an asset or a business.

An investment strategy that involves picking stocks that appear to be trade at a significant discount to their intrinsic value.

A stock that appears to trade at a lower price compared to the worth of its fundamentals (such as cashflows, dividends, earnings, or sales), making it attractive to value investors as they anticipate its price to rise and eventually reflect the true potential of the company.

A statistical measure of the pace, frequency and magnitude of a security’s price movement over a period of time, expressed in standard deviation.