Low investment – one of the advantages of investing in mutual funds in comparison with traditional investing, is low initial investment, which reflects in less costs when buying securities. For some investors, investing in securities is unaccessible in terms of high initial investment required and high costs connected with the purchase of such security. Mutual fund takes advantage of this fact, for its assets include many small investments of individual clients and its investments are less expensive than investments of small clients. Advantage of lower investment in share certificate enables to use advantages resulting from investing large amount of financial means.
Stock – security of asset nature, that is conformation of share in joint-stock company’s assets and thereof rights resulting. The stockholder has no right to return his/her share, however, he/she can usually sell the share at the market for market price.
Stock fund – invests exclusively or mostly in stock. Investing in stock mutual funds usually brings high profit in the long run, but is also connected with high risk and high exchange rate fluctuation.
Current share price – is mutual fund net assets value: number of shares in circulation ratio. Number of shares in circulation means number of issued shares, which is decreased by the number of returned shares.
Association of Asset Management Companies – association of the most significant companies active in the field of collective investing in Slovakia.
Benchmark – index, towards which the fund performance is compared. It must meet the conditions of easy quantification, transparent composition and general familiarization. Benchmark is usually one of the market indices, or their combination. Benchmark must correspond to fund investment strategy orientation.
Net Asset Value (NAV) – is mutual fund asset value created especially by securities, monetary means on accounts and monetary market instruments, from which all fund liabilities are deducted and receivables added. It is a basis for calculation of mutual fund share certificate value, which is calculated by division of NAV and overall number of shares in circulation.
Depository – bank or branch office of foreign bank. Role of a depository is to supervise observation of given rules by the asset management company. Depository is entrusted fund assets and thus it gains complete outline of all transactions with the fund assets. Depository is accountable for correct determination of fund assets value and fund.
Portfolio diversification – distribution of portfolio risk among more assets.
Bond – security of debt nature, in which the emitter undertakes to pay the buyer a nominal value specified in it together with defined interests.
Bond fund – fund investing means of shareholders exclusively or mostly in state or company bonds. These funds are usually connected with lower risk than stock funds, but usually bring also lower profit. They are suitable for conservative investors who are reluctant to take higher risk.
Emitter – entity emitting securities (e.g. in case of state bonds it is the state).
Fund of funds - (FoF) mutual fund that invests means of shareholders exclusively in shares of other mutual funds. More effective distribution of risk is possible for the investor.
Monetary market fund – fund investing especially in short-term bonds or monetary deposits. This fund is suitable for conservative investors, because the risk connected with its portfolio is the lowest of all funds. However, the profit is adequate to the risk.
Index – reflects value of securities included in it. They are classified as price indices including exclusively the price of securities defined in advance and performance indices including not only price, but also profit from securities included in the price.
Investment period – optimal period, at the end of which the profit from mutual fund investment should live up to expectations of shareholders.
Investment strategy – described approximate goals of fund managers, risk connected with investing in the given fund, and also profit expected by the fund manager. The strategy also includes outline of financial market instruments to be used.
Investor – body corporate or natural person, who has bought or is interested in buying share certificates.
Purchase price – is price, which will be paid by the asset management company to the investor in case of returning the share. Purchase price is calculated from the current share price, decreased by costs connected with repayment of returned share (i.e. termination charge).
Limitation and distribution of risk – expression specified by Act on Collective Investing, serves to protect shareholders’ interests. The Act exactly specifies, in what assets can a mutual fund invest and also specifies proportional amount of investments in individual parts of mutual fund assets.
Initial share value – Initial share values is a value of the first share specified by the statute. Asset management companies may specify the current price as a product of the number of shares highlighted in the share certificate and initial share value, however within 3 months since the commencement of share certificate issuing.
Mutual fund – is created and managed by the asset management company, which is permitted to perform this activity. It is created via deposit of monetary means from individual investors, while the minimum volume of assets is specified by Act No 203/2011 on Collective Investing as amended by the later regulations (hereinafter referred to as “ZKI“) in the amount of SKK 50 million. Manager of mutual fund invests the gathered means in assets specified by ZKI – securities, such as domestic and foreign stock and bonds, deposit notes, deposit certificates, treasury notes, mortgage bond, on deposit accounts etc.
Share certificate – share certificate is a security, to which shareholder’s right to respective share in assets in open-end mutual fund and right to share in profit from these assets are connected. Share certificate may be for one or more shares in assets in open-end mutual fund. Share certificate is issued by the asset management company during investing in mutual fund. From such gathered means, it creates fund assets, whose amount must be at least SKK 50 million. Share certificate of open-end mutual fund – shareholder has the right to be paid share certificates from assets in this mutual fund at his request. It may be in the form of principal with its owner’s name – then a documentary security is concerned, or, in case of booked share certificates, records of booked share certificates of open-end mutual fund may be kept by the central depository or a depository of respective open-end mutual fund and the asset management company as individual records. Share certificate of close-end mutual fund – its owner has no right to return it to the asset management company to be repaid. Owner of the share certificate obtains repaid value of the share certificate in accordance with the conditions listed in the statute of this fund. Such share certificate has a booked form, i.e. its owner has it on his account in the Central Securities Depository of the Slovak Republic.
Charge for depository – annual fee charged by the fund depository.
Portfolio – all securities in the fund ownership. Each fund invests according to certain principles of its specified investment strategy, which result from investment goals, trade region, investment branch, growth speed etc.
Share sale price – price, for which the investor acquires the share certificate. Sale price is a sum of the current price of the share certificate and costs connected with issue of the share certificate (i.e. enrollment charge).
Sellable leaflet of mutual fund – must include information necessary for the investors to make correct judgement on the offered possibility for investment and risks connected with such investing, e.g. its name and date of establishment, place where to acquaint oneself with the statute of such mutual fund, data on tax investors connected with the mutual fund, persons to audit annual financial statements, rights connected with the share certificate, share certificate form, whether it is publicly tradable and at which public market, way of issue of share certificates, investment strategy and financial purpose of the fund. It also includes rules for evaluation of assets in mutual funds, calculation of the share price and enrollment and termination charges, information on the asset management company, members of its Board of Directors, data on mutual funds it manages, on the amount of share capital and equity and data on the depository. Sellable leaflet must include also clear and comprehensible explanation of the mutual fund risk profile.
Transfer charge – one-off fee charged by some asset management companies during transfer of monetary means between funds managed by the given asset management company. In case of such transfer, enrollment and termination charges are automatically omitted when transfer fee is charged.
Redemption – repayment of share certificates.
Administration fee – fee charged by the asset management company for the administration of the mutual fund.
Mutual fund statute – is an inseparable part of the shareholder’s contract with the asset management company. The shareholder accepts stipulations of the statute as he/she acquires the share certificate. Each mutual fund must have its statute, where the following shall be specified: data on the name of the open-end mutual fund, year of its creation and period of its lifetime, business name of the asset management company managing the open-end mutual fund, its seat and identification number, business seat and name of the depository and amount of remuneration for activities of depository agreed in the depository contract, aims and goals of the investment strategy of the asset management company with assets in open-end mutual fund, especially what securities and monetary market instruments and at which regulated markets will be acquired from gathered monetary means, as well as potential branch and territorial classification of investments, rules of risk limitation and distribution, if they are more strict, as specified by this act, principles of managing the assets in open-end mutual fund, especially what costs may be paid from open-end mutual fund assets except remuneration for activities of depository and for open-end mutual fund report and the way of their calculation, rules of evaluation in open-end mutual fund assets and rules of usage of profit from these assets, way of publishing management reports concerning open-end mutual fund assets and where to obtain these reports, remuneration for open-end mutual fund administration and the way of its calculation, way of exercising the voting rights which are connected with securities in open-end mutual fund assets, form of share certificates, initial share price, procedure and conditions of share certificates issue and exercise of right to repayment of share certificates, maximal amount of charges connected with issue and payment of share certificate charged to a shareholder and way of their specification, procedure in case of change of the statute and the way of informing the shareholders about these changes, procedure in case of change of the sellable leaflet and simplified sellable leaflet and the way of informing the shareholders about these changes, declaration of the asset management company’s Board of Directors, that the facts listed in the statute are current, complete and true.
Fund volatility – fund risk rate, i.e. probability of deviation from the expected value.
Enrollment charge – one-off charge which arises when share certificates are purchased. It is a proportion of the share market price or amount specified in advance (usually in case of monetary funds).
Fund performance – fund assets evaluation measurement. In Slovakia it is measured after deduction of management and depository charge. Performance calculation is based on the precondition, that fund net dividends (profit) paid were reinvested in the fund in full amount.
Termination charge – one-off charge that arises when selling share certificates.
Blend fund – mutual fund that invests in both the stock and bonds.
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