Japan hedge fund

 

Hedge fund glossary of terms A - B

7.  hedge fund glossary of terms A - B

Alpha

Measures the value that an investment manager produces, by comparing the manager's performance to that of a risk-free investment (usually a Treasury bill). For example, if a fund had an alpha of 1.0 during a given month, it would have produced a return during that month that was one percentage point higher than the benchmark Treasury. Alpha can also be used as a measure of residual risk, relative to the market in which a fund participates.

 

Annual rate of return

The compounded gain or loss in a fund's net asset value during a calendar year.

 

Arbitrage investment strategy

An approach that aims at exploiting price differentials that exist as a result of market inefficiencies. Arbitrage plays typically involve purchasing a security in one market, while selling an instrument with similar performance characteristics in another market -- earning returns that far exceed the risk incurred.

 

Average annual return (annualized rate of return)

Cumulative gains and losses divided by the number of years of an investment's life, with compounding taken into account. The measure is used to compare returns on investments for periods ranging from partial to multiple years. Cumulative gains and losses divided by the number of years of an investment's life, with compounding taken into account. The measure is used to compare returns on investments for periods ranging from partial to multiple years.

 

Average monthly return

Cumulative gains and losses divided by the number of months of the investment's life, with compounding taken into account.

 

Average rate of return

The mean average of a fund's returns over a given number of periods. It is calculated by dividing the sum of the rates of return over those periods by the number of periods

 

Beta

Gauges the risk of a fund by measuring the volatility of its past returns in relation to the returns of a benchmark, such as the S&P 500 index. A fund with a beta of 0.7 has experienced gains and losses that are 70% of the benchmark's changes. A beta of 1.3 means the total return is likely to move up or down 30% more than the index. A fund with a 1.0 beta is expected to move in sync with the index.

 

Bottom-up investment strategy

An approach that seeks to identify investments that will produce strong returns, before assessing the influence that economic factor will have on those assets

 

8.  hedge fund glossary of terms C - E >>


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