Watch Portfolio Managers John Pattullo (Henderson Diversified Income Trust) and Ollie Beckett (TR European Growth Trust) tackle questions from investors in the latest episode of Trust TV.
Bull market: A financial market in which the prices of securities are rising, especially over a long time. The opposite of a bear market.
Bond yield: The level of income on a security, typically expressed as a percentage rate. Note, lower bond yields mean higher prices and vice versa.
Dividend: A payment made by a company to its shareholders. The amount is variable, and is paid as a portion of the company’s profits.
Gearing: A measure of a company’s leverage that shows how far its operations are funded by lenders versus shareholders. It is a measure of the debt level of a company. Within investment trusts it refers to how much money the trust borrows for investment purposes.
High yield bonds: A bond that has a lower credit rating than an investment grade bond. Sometimes known as a sub-investment grade bond. These bonds carry a higher risk of the issuer defaulting on their payments, so they are typically issued with a higher coupon to compensate for the additional risk.
Leverage: The ability to buy or sell a particular security or asset in the market. Assets that can be easily traded in the market (without causing a major price move) are referred to as ‘liquid’.
LIBOR: (London interbank offered rate): A widely-used benchmark rate that banks use to charge each other for short-term loans. It serves as a reference for short-term interest rates more widely.
Liquidity: The ability to buy or sell a particular security or asset in the market. Assets that can be easily traded in the market (without causing a major price move) are referred to as ‘liquid’.
Long end [of the yield curve]: The long end of the yield curve refers to longer dated bonds, typically around ten years. Opposite of the short end.
Phillips curve: The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship.
OEIC: Open-ended investment company. This is a common structure for UK-domiciled funds. Most are UCITS-compliant.
QE (Quantitative easing): An unconventional monetary policy used by central banks to stimulate the economy by boosting the amount of overall money in the banking system.
Yield curve: A graph that plots the yields of similar quality bonds against their maturities. In a normal/upward sloping yield curve, longer maturity bond yields are higher than short-term bond yields. A yield curve can signal market expectations about a country’s economic direction.