Jargon Buster

Are you puzzled by investment language?

Our jargon buster gives clear and concise definitions and explanations of investment terminology.

To view the definitions please select the relevant letter below. Or alternatively search to find the definition and explanation you are looking for.

Backwardation

A term relating to the commodity futures markets. A commodity is in "backwardation" when later-maturing futures contracts are priced lower than those maturing sooner. For example, this happens when producers sell the commodity in the futures market as a protection against falling prices. See also? contango

Balanced fund

A fund invested in a range of asset classes, particularly equities and bonds

Barbell strategy

An investment technique, typically related to a bond portfolio, under which a manager holds a combination of both shorter-dated and longer dated bonds relative to the benchmark, but where overall duration is broadly in line with the benchmark

Basis point

1/100th of 1% (0.01%)

Bear

Someone who thinks the market, or a particular share, will decline. A bear market is one in which most prices are falling. Also used adjectivally, as in "bearish", "bear market" and so on

Benchmark

A standard asset allocation against which an investment strategy is measured

Benchmark portfolio

Theoretical portfolio of benchmark assets against which the performance of an actual portfolio is measured

Beta

The sensitivity of an asset"s or portfolio"s return to fluctuations in the return of the market or benchmark. If beta is greater than 1.0 the asset or portfolio will move more than the market or benchmark, while if it is less than 1.0 it will move less

Bid price

The price at which a dealer will buy a security from an investor

Bid-ask/bid-offer spread

The difference between the bid and ask prices

Bond

A form of loan. Typically, the investor should receive a regular coupon and the return of the principal originally lent when the bond matures. Note: Not all bonds are interest bearing (see zero coupon bonds), and not all bonds are fixed rate (see index linked, floating rate and stepped rate bonds)

Bonus issue

When a company issues extra shares, free of charge to existing shareholders on a pro rata basis.

Book value

The value at which something ( e.g. a security) is recorded in a company"s balance sheet (often the cost of buying it). If securities have been acquired at different times, the book value will reflect the average buying cost

Bottom-up

An approach to active investment management that gives priority to the selection of companies (with less emphasis on sector and country selection) to build up an investment portfolio. This is the opposite of a top-down approach

Broker/Dealer

An individual or firm that acts as an intermediary between buyers and sellers usually for payment of a commission. He/she may also buy securities to sell for a profit while fulfilling his/her role as dealer

Bull

Someone who thinks the stock market or a particular share will go up. Also used adjectivally, as in "bullish", "bull market" and so on

Bullet portfolio

An investment strategy under which a manager holds a bond portfolio with maturities that are highly concentrated at one point of the yield curve

Buyout

Private equity investment in which equity capital is used to buy an existing business so that the business is subsequently privately held

Jargon Buster is intended to assist in the understanding of some of the many technical terms that frequently appear in the pensions world. The definitions are intended as a guide only.

Jargon Buster is provided by Blackrock for visitors to www.napf.co.uk