1. A method of hedging a portfolio of stocks against the market risk by short selling stock index futures. 2. Brokerage insurance such as the Securities Investor Protection Corporation (SIPC). 1. This hedging technique is frequently used by institutional investors when the market direction is uncertain or volatile. Short selling index futures can offset any downturns, but it also hinder any gains.2. SIPC is an insurance that provides brokerage customers up to $500,000 coverage for cash and securities held by a firm.
An investment fund that selects securities based on quantitative analysis. In a quant fund, the managers build computer-based models to determine whether an investment is attractive. In a pure "quant shop" the final decision to buy or sell is made by the model; however, there is a middle ground where the fund manager will use human judgment in addition to a quantitative model. If computers can beat world champion chess players, shouldn't they be able to beat the traders on Wall Street? That's the thinking behind quant funds, whose name comes from the term "quantitative analysis". The advantage is that computers aren't swayed by emotion, and they obviously react much faster than a person ever could. The problem is that humans have to program those computers, and even computers can make mistakes when they are programmed incorrectly. Remember the saying "garbage in, garbage out". To take advantage of the power of computers, you still have to figure out a superior investment strategy. The term "quantitative fund" also doesn't tell you anything about the actual investment strategy being used. Any study of a company or an industry based on quantitative data can be considered a quant strategy.
A type of mutual fund that guarantees an investor at least the initial investment, plus any capital gains, if it is held for the contractual term. The idea behind this type of fund is that you will be exposed to market returns because the fund is able to invest in the stock market, but you will have the safety of the guaranteed principal. The initial investment is protected by an insurance policy in case the fund is unable to pay the investor back his or her principal. The initial investment can only be paid back after the guarantee period is over; if the investor sells before this period, he/she is subject to the current value of the fund and any losses that may arise. This type of fund tends to have higher expense ratios than other types of mutual funds. While protected funds state that you will be guaranteed at least your original investment in addition to being exposed to market returns, these funds are often heavily invested in fixed-income securities and have less weighting in the stock market.
A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.Also known as an "offer document". There are two types of prospectuses for stocks and bonds: preliminary and final. The preliminary prospectus is the first offering document provided by a securities issuer and includes most of the details of the business and transaction in question. Some lettering on the front cover is printed in red, which results in the use of the nickname "red herring" for this document. The final prospectus is printed after the deal has been made effective and can be offered for sale, and supersedes the preliminary prospectus. It contains finalized background information including such details as the exact number of shares/certificates issued and the precise offering price.In the case of mutual funds, which, apart from their initial share offering, continuously offer shares for sale to the public, the prospectus used is a final prospectus. A fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management.
A division of ProFunds Group that manages short and leveraged investment funds that trade on various stock exchanges. These funds are designed to allow investors to take hedging and speculative positions without having to purchase derivatives. ProShares trade like any other ETF and can be purchased and sold like stocks. ProShares offers dozens of different ETF products, all designed to perform specific speculative investment strategies. They are divided into three categories: short, ultra and alpha. Short ProShares behave inversely to the market, while Ultra ProShares amplify market performance by a factor of two. The Alpha fund tracks the performance of the Credit-Suisse Index.
A type of fund that is registered with the Securities and Exchange Commission (SEC) and is sold to individual investors through investment dealers and in open market transactions. Retail funds are often categorized as mutual funds, and carry lower initial investments and management expense ratios than non-retail funds. Because retail funds are registered with the SEC, they are restricted in the amount of overall risk they can expose themselves to, such as option trading and short selling. These risks are considered as such due to the nature of their volatility and speculative nature.If you compare retail funds to non-retail hedge funds, you will notice that non-retail hedge funds typically require larger initial investments and are marketed privately to high net worth clients.
The return that an asset achieves over a period of time compared to a benchmark. The relative return is the difference between the absolute return achieved by the asset and the return achieved by the benchmark. Relative returns are most often used when reviewing the performance of a mutual fund manager. Because holders of mutual funds are charged management fees, they expect a manager to achieve returns higher than the benchmark index. For example, if the fund you are holding achieves an absolute return of 12% over the past year while the benchmark index provides a return of 15%, then the fund has achieved a relative return of -3% for the year.
A mutual fund that confines itself to investments in securities from a specified geographical area, such as Latin America, Europe or Asia. A regional mutual fund will generally look to own a diversified portfolio of companies based in and operating out of its specified geographical area. However, some regional funds can also be set up to invest in a specific segment of the region's economy, such as energy. For the investor, the primary benefit of a regional fund is that he/she increases his/her diversification by being exposed to a specific foreign geographical area. These funds are practical for the average investor, since most people wouldn't have enough capital to adequately diversify themselves across many investments in the region.Regional funds select securities that pass geographical criteria. They are not to be confused with other mutual funds such as international funds, which attempt to provide investors with a diversified portfolio spanning the globe, or country funds, which provide investors with diversified exposure to companies in one specific nation.
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