The process of dividing a portfolio among major asset categories invested in fund in accordance with investment strategies or markets. The purpose of asset allocation is to reduce risk by diversifying the portfolio.
A financial professional within a bank or brokerage house who has expertise in evaluating investments and puts together buy, sell, and holds recommendations on securities of domestic and foreign companies.
Standard against which the performance of a security, index, or investor can be measured. When evaluating performance of any investment, it is important to compare against the right benchmark.
Beta is a measure of securities or portfolio's volatility, or systematic risk, in comparison to the market as a whole. A beta of 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market
Blue chip stock
It is a security from a well-established and financially-sound company that has demonstrated its ability to pay dividends in both good and bad times (Coca-Cola, Microsoft, IBM...).
A person who is authorized for buying and selling securities, insurances or real estates. He is a mediator for transactions at the capital market.
Central bank bill
Central bank bill is a basic security used by central banks for control of cash in circulation.
Cost averaging effect: paying equal amounts on a regular basis, an investor achieves better average price in relation to regularly purchasing the same share quantity.
Denomination is change of nominal value of cash unit under replacement of one currency with another. Denomination means change of unit value in funds from one currency (HRK) to another (EUR).
Custody bank of Investment fund maintains the account and monitors the fund assets.
Long term securities without predetermined maturity. They entitle the owner to vote at shareholders' meetings and to receive dividends the company has declared. There are two types of stocks: common and preferred (preferred stocks generally do not have voting rights) A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows. Duration is measured in bond sensitivities or similar instruments and brings higher oscillation of share value at rate change. In mathematical terminology, it stands for average duration of invested capital.
A fund that invests (no less than 60 % of its volume) in a broad, well-diversified group of stocks.
Maturity is the date the borrower must pay back the money he or she borrowed through the loan. It is also the termination for due date on which an instalment loan must be paid in full. That means the eminent is obligated to pay nominal amount of a stock/share to legal owner.
GNP is an abbreviation for gross national product. It is an income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents.
GDP is an abbreviation for gross domestic product. It is the monetary value of all the goods and services produced by an economy over a specified period, including consumption, government purchases, investments, and exports minus imports.
HANFA stands for the Croatian Financial Services Supervisory Agency, former CROSEC (Croatian Securities Commission). It is the state agency that supervises establishing and business activities of investment funds as well as the Croatian capital market. It ensures that all the market participants (and markets itself) operate in accordance with the regulations.
Final point in time that investor uses during planning of an investment strategy. Within that period one can predict market situation with satisfactory degree of certainty.
Short term securities issued by companies. It is the instrument of monetary market used for acquiring of solvent assets for companies. It is similar to central bank bill and treasury bill, but since it is issued by companies it is less secure than those two. The usual due date is from few to 364 days.
Securities Commission of the Republic of Croatia (as of 01 January 2006 - HANFA)
CROSEC (English abbreviation for Croatian Securities Commission) -as of 01 January 2006 the legal successor is HANFA (Croatian Financial Services Supervisory Agency) that supervises establishing and business activities of investment funds and the whole Croatian capital market. It ensures all the market participants (and markets itself) operate in accordance with the regulations.
Periodical interest payments to holder of securities. Coupon is determined as annulled percentage value.
The degree to which an asset or security can be bought or sold at the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity and an asset can be converted to cash quickly.
A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income. Also known as an asset allocation fund. A balanced fund is geared towards investors looking for a mixture of safety, income, and capital appreciation. The amount the mutual fund invests into each asset class usually must remain within a set minimum and maximum.
NAV (Net Asset Value)
Net Asset Value or value of a fund's investments. It represents final value of securities in investment fund portfolio. It is calculated as total value of all securities in fund portfolio (product of a number of securities and their actual market value) plus the value of other assets (cash on accounts, deposits, approved loans) minus fund obligations.
Custodian bank fee is set in percentage on the annual basis and calculated daily from net value of fund assets. It is emphasized in fund’s Prospectus and Statute.
Money market funds
Those funds are permanently exposed to monetary and/or securities market under condition that fund’s global modified duration (average maturity date) does not exceed 1.5. Exposure to non-government securities or securities without government guarantee should not exceed 50% of fund assets. Fund currency exposure in accordance with base currency should not exceed 20% in any given moment. A mutual fund invests in short-term debt instruments, such as securities, treasury bill etc.
A debt investment with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate. They are mostly issued by the government, banks, municipalities and large companies. They belong to low risk group of securities depending on solvency of issuer.
A mutual fund whose investment objective is to provide stable income while taking on minimal risk. This type of fund invests in income-producing instruments, which may include corporate, government or municipal bonds. Bond fund is permanently exposed to bond market. Secondary exposure to stock/share market is allowed up to 20% of fund’s asset.
A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date. Options are not obliged to be executed. A party is obliged to sell or buy securities that are subject of options only in case of its execution.
Open-end investment fund
Investment fund that collects numerous investors' assets and invests them in different financial instruments. Investment fund can be compared with a big bowl filled with different securities (stocks, bonds, money deposits). By purchasing a unit in investment fund investor becomes the owner of a part of securities from the fund.
The group of assets - such as stocks, bonds and mutuals - held by an investor. A diversification mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Diversification is possibly the greatest way to reduce the risk. This is why mutual funds are so popular. The strategy of investment in open-end investment funds is defined in fund Prospectus and Statute.
Portfolio yield is the annual rate of return expressed as a percentage.
The person responsible for investing a mutual fund's assets, implementing its investment strategy, and managing the day-to-day portfolio trading.
Yield is growth of asset value during given time period which shows profit or loss in the respect of start of investment.
Unit price at the moment of receiving assets on funds bank account plus expenses of issuing Unit Document.
Locations where client is given information about funds and can fill in a Purchase or Sell Request and where he can pay in cash to fund’s bank account (Erste Bank d.d branch offices).
It is a document of fund’s business activity approved by the Croatian Financial Services Supervisory Agency (HANFA) and made in accordance with law stipulations.
Repurchase agreement is an instrument of monetary market. Repo represents sale of securities (usually treasury bill or central bank bill) under commitment of purchase on specific date for a exact amount. Repo is usually used in overnight deals.
Central Depository Agency(SDA) is responsible for central depository of non-material securities of the Republic of Croatia, settlement of securities transactions and assigning of SIN and CFI codes for securities issued in the Republic of Croatia.
Spread represents difference between purchasing price and selling price. In Croatia that term is often used to show difference in income between Croatian bonds on domestic market, same bonds at international market and corresponding German bond.
Is a document of fund’s business activity in accordance with Investment Funds Law which is approved by the Croatian Financial Services Supervisory Agency. All fund Prospectuses and Statutes govern by Erste Invest are available online at: www.erste-invest.hr
Treasury bill - T bill
A government debt security (issued by Ministry of Finance or units of local government) with up to one year maturity. Treasury bills are issued through a competitive bidding process at a discount from par. This means they do not pay fixed interest payments like most bonds do. Issued with maternity of 91 days, 182 days or 364 days.
It represents ownership in assets of a fund acquired by purchase/investment in fund and proven by Unit Ownership document.
Amount paid in lamp-sum during fund's unit purchase. It is calculated from the paid amount and it is included in selling price.
Management fee is expressed on annual level and it is calculated daily on net value of fund assets. This fee also covers possible fee of management consultant. Management fee is described in fund's Prospectus and Statute.
A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. It is marked as percentage. Higher percentage means higher oscillation.
Yield or revenue represents the annual return (assets) to the investments expressed in percentage.
Yield to maturity
The percentage rate of return paid on a bond, note, or other fixed income security if the investor buys and holds it to its maturity date. The calculation is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.
Application for Unit Purchase
An applicant (client, investor) should fill an application for unit purchase in a bank.
Application for Unit Sale
Unit owner should fill in a document for selling units in a fund.
Application for Unit Exchange
Unit owner should fill in a document for exchange of unit managed by Erste Invest in one of bank's branch offices.
Closed-end investment fund
Closed-end investment fund is established as a company with fixed amount of shares that represent the asset value at the beginning of fund establishment. Fund is not obliged to redeem its own shares (units).