Glossary - F
This section provides an explanation for some of the jargon used to describe structured retail products. If you would like us to add additional words then please let us know by clicking here.
A Fonds Commun de Placement or “unincorporated investment fund” is an investment vehicle whose management is entrusted to a regulated body or “société de gestion”.
Final index level
This is the final level of the underlying index used in calculating the return from a structured product.
Often the final index level is the average level of the index calculated over, say the final 12 months of the term of the product (see averaging).
A return based on the assets of an underlying basket. Usually, an asset is considered to have a fixed growth if it hasn't fallen. Otherwise, the fall is recorded. Other structures are based on a pre-determined number of top-performing assets to be given a fixed growth, while the remainder assets are recorded at their performance, positive or negative
In most structured product the calculation of the final return is based on the movement of some underlying price or index. In order to determine this movement the level of the underlying must be taken at specific times (usually at the start and end of the product’s term). These price or index levels, used in calculating the return, are sometimes called fixings.
A return based on a fixed interest rate for an initial period, followed, at the discretion of the provider, by a variable coupon usually linked to Euribor or similar other interest rate indices. Once the provider has made the switch to the variable coupon payment, all future coupons will be interest-rate linked. These products are also known as Flipable or Switch.
This type of open-ended fund allows for a protected level to be set at regular intervals, typically once a year. Most of the investment will be placed in equities, the rest in buying put options and selling call options.
This is the name given to a particular type of structured product that offers a minimum return, usually at least the sum invested, plus some additional return based on the performance of the stockmarket. The key feature of this particular product is that it has no defined term i.e. it is open-ended so investments and redemptions can be made at any time.
The fund (it is usually a Unit Trust or OEIC) invests primarily in shares and purchases put options to protect this share portfolio in the event of any fall in the stockmarket. Often the cost of these put options is recouped by selling call options on the shares that are held in the fund.
Flow & Others
Highly standardised structured products, usually issued in large numbers and on a regular basis.
Sweden Exchange-listed products that do not have a primary subscription period.
Fondo Garantizado RF
Money Market Capital Protected Fund, an investment vehicle whose management is entrusted to a regulated body, or “Sociedad Gestora de Instituciones de Inversion Colectiva”. It will usually guarantee 100% capital and a number of income coupons over the investment term.
Fondo Garantizado RV
Equity Capital Protected Fund, an investment vehicle whose management is entrusted to a regulated body, or “Sociedad Gestora de Instituciones de Inversion Colectiva”. It will usually guarantee 100% capital with participation in the upside of an underlying.
Chilean Guaranteed Fund
Fonds voor gemene rekening
Investment fund without corporate capacity. It issues participations and is characterized by an investment manager that has responsibility for its investment policy and a custodian in charge of the safe custody of the securities.
FTSE Eurotop 100
The FTSE Eurotop 100 index is an index of shares of the largest 100 companies weighted by market capitalisation in Europe.
The FTSE100 index is an index of shares of the largest 100 companies weighted by market capitalisation in the UK.
Index of the top 60 shares by market capitalisation from the Eurozone, plus 20 shares from under-represented sectors of activity.
Fundo de Investimento
Investment Fund in Brazil
A futures contract is a form of derivative contract, typically traded on a regulated exchange. The contract allows the buyer for example, to fix a price now for the underlying at a set date in the future. If the price on that date is higher than the purchase price of the futures contract then the buyer will make a profit but conversely if the price is lower then he will make a loss. Profits and losses are exactly proportional to the size of the futures position and the final level of the underlying.
Futures contracts allow buys and sellers to take a view on whether the reference underlying index, price or rate will rise or fall before the contract expires.
Typical futures contracts are referenced to equity indices such as the FTSE100 or S&P500, government bond prices such as Gilts or US Treasury Bonds, and interest rates such as sterling LIBOR.