We’ve put together a list of Asset Management Terminologies to guide you. It doesn’t matter if you’re a beginner or expert, this will act as a cheat sheet to have all the information you require. Take a look.
Fund Factsheets: The fund factsheet is a document or reports published by fund houses like Mutual Funds which gives a brief about all functional and technical characteristics of individual funds. It includes the details of funds like strategy, performance details, and information about fund manager, Key ratios like beta, returns, Sharpe ratio, and others, fee structures.
12b-1 fees: These are the fees charged to investors for marketing and selling fund shares.
Net Asset Value (NAV) unit: it is equal to the total market value of the fund (e.g. Mutual Fund Scheme) divided by the total number of units of that Mutual Fund Scheme. For example, Total Market Value of MF Scheme in 30 lakhs and the total number of units is 3 lakhs then NAV equals 10 i.e. (30/3)
Asset Management Company (AMC): This is a company managing pooled funds of different individuals like Mutual Funds or Hedge Funds. The examples are HDFC Mutual Fund, Reliance Mutual Funds.
Asset under Management (AUM): It is the total market value of all the assets managed under any fund by the fund manager. Fund AUM is the total market value of an individual Mutual Fund Scheme. Company AUM is the market value of all mutual fund schemes under one Asset Management company.
New Fund Offer (NFO): Whenever a new funds or Mutual Fund scheme is launched, it needs to raise some initial capital from the Public very often with an initial unit price to be Rs.10 in India. NFO is similar to the IPO of stocks to launch a fund scheme for the first time in the Market.
Benchmark Index: The benchmark Index is the funds that represent the average market condition for different strategies. Funds used Benchmark Funds to compare the performance with the market.
Entry Load: The fee collected from investors at the time of buying units of Funds.
Exit Load: The fee collected from investors at the time of redemption of Funds.
Systematic Investment Plan (SIPs): It is one of the many plans of Mutual funds that allows users to invest regularly. For example, investing 10k per month in one of the SIPs.
Systematic Transfer Plan (STP): It is one of the many plans of Mutual funds which allows users to systematically transfer funds from one scheme to another scheme. For example, transferring 10k per month from Debt Fund to Equity Fund.
Systematic Withdrawal Plan (SWP): It is one of the many plans of Mutual funds which allows users to systematically withdraw funds. For example, if a user has invested 10 lakhs in one of the schemes, he can withdraw 10k per month systematically until the investment lasts.
Fixed Maturity Plans (FMP): One of the close-ended funds, where funds stay open for a period and post that it’s closed for fixed time/maturity post which funds can be withdrawn.
Annual Management Fee: This is the fee charged annually from the investors by managers for investing funds on behalf of them. It can be some percentage, for example, 0.5%, of the assets of the funds. This is a mandatory fee charged from investors irrespective of the performance.
Annual Performance Fee: This is the fee charged annually, mostly in Hedge Funds, from the investors by the managers only if a manager outperforms with respect to a high watermark or benchmark index. This fee is charged only if the manager outperforms.
Alpha: It indicates how well the manager has performed compared to the Benchmark Index.
Beta: It is a measure of volatility and shows how risky is the fund compared to the market. If the value is less than 1 it’s less risky, if greater than 1 it’s riskier.
Sharpe Ratio: It is basically the risk-adjusted return of the fund. If the value is greater than 1, it shows that it’s performing better and giving a higher return for the amount of risk taken.
Bull Market: When the prices in a market are following an upward trend, it’s said to be a bull market.
Bear Market: When the prices in a market are following a declining trend, it’s said to be a Bear market.
Capital Gain: the Profit the investor gets between purchasing and selling an asset.