International Investment’s Essential Compendium of Acronyms
International Investment’s Essential Acronym Compendium is a collection we’ve put together over the years, in an effort to make sense of the financial services industry’s acronym jungle.
If you can’t find an acronym you’re looking for, have an idea for one that isn’t here, or would like to suggest changes to our definition of a particular acronym, just email us at firstname.lastname@example.org…
Click on the letters below to skip to the definitions
AER: Annual Equivalent Rate
The annual equivalent rate is the interest rate paid or received over the period of a year, (depending on whether one is a borrower or an investor), which assumes that any interest paid is combined with the original balance – so that the next interest payment will be based on the new, slightly higher account balance. Savers typically find the amount of interest they receive on their savings accounts is shown in AER form.
ABCP: Asset-backed commercial paper
Asset-backed commercial paper is a short-term investment entity (90 to 180 days is the normal maturity period). The “assets” in question are such physical assets as trade receivables. These thus-created securities are normally issued by banks and similar types of financial institutions, and typically used by institutional investors for diversification purposes and to generate short-term gains.
ABI: Association of British Insurers
The London-based trade association which represents the UK’s insurance industry. It was created in 1985 by the joining together of a number of already-existing insurance industry trade organisations, including the British Insurance Association and the Life Offices’ Association.
ACD: Authorised Corporate Director
The ACD is a corporate entity, in the form of an individual, who is authorised by the UK’s Financial Conduct Authority to be responsible for the administration of, and generally oversee, the operations of an Open-Ended Investment Company (OEIC) (a standard type of mutual fund sold in the UK). The ACD also appoints the investment manager, usually on the recommendation of the OEIC’s sponsor. It is a key position, and contracts are normally signed for three-year periods.
AEoI: Automatic Exchange of Information
Automatic exchange of information refers to agreements typically drawn up between countries that provide for the exchange of non-resident financial account information with the tax authorities in the other country — typically, the account holders’ country of residence. It is promoted by the Organisation for Economic Cooperation & Development (OECD) as a means of reducing tax evasion. Participating jurisdictions that implement AEoI send and receive pre-agreed information each year, without having to send a specific request for it. See also Common Reporting Standard (CRS).
AIFMD: Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive is a piece of European Union legislation to provide for the cross-border marketing of “alternative” investment products. It was first published in the Official Journal of the European Union on 1 July 2011, and was transposed into UK law on 22 July 2013. The directive covers the management, administration and marketing of alternative investment funds (AIFs, sometimes pronounced “aifs”, rhyming with “waifs”). Its focus is on regulating the Alternative Investment Fund Manager (AIFM) rather than the AIF itself.
An AIF is a ‘collective investment undertaking’ that is not subject to the UCITS regime, and includes hedge funds, private equity funds, retail investment funds, investment companies and real estate funds, among others. The AIFMD establishes an EU-wide harmonised framework for monitoring and supervising risks posed by AIFMs and the AIFs they manage, and for strengthening the internal market in alternative funds. The Directive also includes requirements for firms acting as a depositary for an AIF.
APIC: Additional paid-in capital
Additional paid-in capital is an accounting term found on the balance sheet of companies, under the “shareholders’ equity” section. It referes to the value of the company’s shares that is over the par-value price of the stock. The relevant equation might be written “(issue price – par value) x number of basic shares outstanding”.
ATCK: Adult third culture kid
An ATCK, or adult third culture kid, is what a “third culture kid” grows up to become. And a TCK is what people have begun to call those children who were raised in a culture other than that of their parents for a significant portion of their childhood.
AUA: Allowance for uncollectible accounts
Also known as “allowance for doubtful accounts”, this is an accounting term that enables bookkeepers to include in their balance sheets, and thus allow for, the possibility that certain anticipated monies are probably never going to arrive. When the credit balance of the AUA is subtracted from the debit balance in the accounts receivable, we are left with what is known as the net realisable value of the accounts receivable.
BEP: Break-even point
A business reaches the break-even point when its total sales finally cover the total costs of making them. It is a key milestone for start-ups, as well as for companies that have been down on their luck.
BIPRU: Banks, building societies and investment firms Prudential sourcebook
BIPRU refers to long-used but, as of 1 January 2014, officially superceded definition of a certain type of UK banking institution. The term had been an acronym that referred to a definition contained in something called The Prudential Sourcebook for Banks, Building Societies and Investment Firms.
Although the BIPRU definitions are officially obsolete, they apparently “remain within the glossary of the handbook of the Prudential Regulation Authority” and so can still be used.
As of 1 January 2014, BIPRU was formally replaced by the EU’s so-called Capital Requirements Regulations (CRR), which establish a new regulatory code for credit and investment businesses. The UK’s Prudential Regulatory Authority implemented the CRR straightaway, while the Financial Conduct Authority introduced a new Prudential sourcebook for investment firms, called the IFPRU (Investment Firms’ Prudential sourcebook).
BRICs: Brazil, Russia India and China
This much-used acronym was coined in 2001 by Goldman Sachs executive Jim O’Neill in a research paper, which established the idea of these four large developing countries as representing an unofficial single unit of global economic power, owing to their perceived similarities.
O’Neill, who has now left Goldman, had been the US investment bank’s chief economist, and the paper containing the initial reference to BRICs was entitled The World Needs Better Economic BRICs.
O’Neill subsequently (2013, 2014) coined another term, MINT, to refer to another group of developing countries he thought also shared certain characteristics: Mexico, Indonesia, Nigeria, and Turkey.
BRVM: Bourse Régionale des Valeurs Mobilières
The Bourse Régionale des Valeurs Mobilières is a West African stock exchange, which lists companies based in Benin, Burkina Faso, Guinea Bissau, Côte d’Ivoire, Mali, Niger, Senegal and Togo. The BRVM is located in Abidjan, Cote d’Ivoire.
CAGR: Compound Annual Growth Rate
The compound annual growth rate is a much-used point of reference number used by business executives and investors to measure a company’s development over time. It’s not an accounting term, but it is often used to describe some element of a business, for example its revenue or income; and because of its compounding nature, it dampens the effects of volatility on results.
Basically the CAGR consists of an entity’s annual growth rate as measured over a period of years, on the basis that each year’s growth is “compounded” – that is, the amount of growth registered each year is included in the following’s year’s number.
CBI: Confederation of British Industry
The Confederation of British Industry is a UK advocacy and research group that represents some 190,000 UK businesses. Based in London, it was founded in 1965, and says it speaks on behalf of “companies of every size, including many in the FTSE 100 and FTSE 350, mid-caps, SMEs, micro businesses, private and family owned businesses, start-ups, and trade associations…and in every sector, including agriculture, automotive, aerospace and defence, construction, creative and communications, financial services, IT and e-business, management consultancy, manufacturing, professional services, retail, transport, tourism and utilities”.
CCRC: Continuing care retirement community
A continuing care retirement community is a type of elder care facility which caters for elderly residents from the stage where they are still living largely independentl,y but are interested in having a little help, “all the way to end of life”, as they say, with hospice-type facilities.
CDOs: Collateralised debt obligations
Collateralised debt obligations are asset-backed securities, which involves combining a number of debt assets, such as mortgages, bonds and other types of loans, and repackaging them in tranches that may be sold to investors.
An important type of CDO are MBSs, or mortgage-backed securities. Some high-risk CDOs were blamed for contributing to the 2008 financial crisis, but they continue to have their supporters. (Note: No apostrophe after the O, and the words “collateralised debt obligations” are always lower case.)
CEE: Central and Eastern Europe
The CEE acronym, for “Central and Eastern Europe”, typically refers to a group of former Communist states. It came into use after the collapse of the Iron Curtain in 1989, 1990. CEE countries can, depending on the usage, include: Estonia; Latvia; Lithuania; the former East Germany; the Czech Republic; Slovakia; Hungary; Poland; Romania; Bulgaria; Slovenia; Croatia; Albania; Bosnia-Herzegovina; Kosovo; Macedonia; Montenegro and Serbia. Some other former Communist countries that, depending on the situation and the entity which is defining “CEE”, are sometimes included in the acronym include Belarus, Moldova, Ukraine and Russia; some definitions also include Austria.
CESR: Committee of European Securities Regulators
(pronounced “Caesar”) was the Paris-based, independent committee of European Securities regulators, established by the European Commission on June 6, 2001. It is best known to many in the international financial services industry for its role in regulating UCITS funds. On 1 January 2011, it was replaced by the European Securities and Markets Authority (ESMA), which is part of the European System of Financial Supervision.
CFA: Chartered Financial Analyst
A certification awarded by the CFA Institute.
CFA: Chinese Futures Association
An organisation representing China’s futures industry’s players; headed up by Zhichao Liu, its chairman.
CIP: Centralised Investment Proposition
A relatively new term used to describe a type of investment holding structure, such as investment platforms, that typically make use of model portfolios set up by discretionary fund managers. Such CIPs have the effect of standardising investment advice, which can be a good thing, except in cases in which a client would ideally be better suited to a bespoke structure.
CIPM: Certificate in Investment Performance Measurement
The Certificate in Investment Performance Measurement – formerly the “Certificate in Global Investment Performance Standards” – is awarded by the CFA Institute.
CRS: Common Reporting Standard
The Common Reporting Standard, also known more formally as the Standard for Automatic Exchange of Financial Account Information, is a new framework set up under the auspices of the Organisation for Economic Cooperation and Development. It establishes a system for enabling the automatic exchange of information (AEoI) between constituent countries, based on an OECD legal framework known as the Convention on Mutual Administrative Assistance in Tax Matters.
The CRS will begin to take effect in 2017, when some 58 “early adopters” – including the UK, Spain, France, Portugal, Cyprus, Malta, Germany, Italy, all of the UK’s key overseas territories, Ireland, Iceland, Liechtenstein, Luxembourg, Argentina, and South Africa – are due to begin sharing information automatically. Another 35 jurisdictions are scheduled to come online the following year, including Australia, Canada, China, Hong Kong, Monaco, Qatar, Russia, Singapore, the United Arab Emirates, and Switzerland.
The CRS’s information-sharing concept is seen as borrowing heavily from the Americans’ Foreign Account Tax Compliance Act (FATCA), which was signed into law in 2010 and came into force globally – and in many cases controversially – in 2014. The US, though, is not a signatory to the CRS, arguing that because of FATCA, it has no need to be.
Because FATCA is already established and well known, CRS is sometimes referred to as GATCA, as in “Global Account Tax Compliance Act”, or “Global FATCA”, although purists point out that it is not, in fact, simply a global version of the American FATCA.
The Common Reporting Standard became a reality in May, 2014, after 47 countries tentatively agreed on a reporting standard, and to automatically share key financial information on any non-citizen residents living inside their borders with other CRS-member countries.
Until now, such information-sharing that has taken place has tended to occur only in response to requests by one country of another, which experts note has done little to discourage tax evasion.
Countries that have agreed to participate in the CRS information-sharing network include all 34 OECD countries, as well as Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore, and South Africa.
CSSF: Commission de Surveillance du Secteur Financier
Luxembourg’s financial services regulator. It was created in 1998, when it was formed to assume key regulatory duties previously handled by the former Commissariat aux Bourses and the Institut Monétaire Luxembourgeois (IML), which, that year, became the Banque centrale du Luxembourg (BCL).
CMU: Capital Markets Union
The Capital Markets Union is an ambitious European Commission package of proposed legal and regulatory reforms designed to, in the EC’s words, “mobilise capital in Europe” by removing barriers to a single market in bonds, equities and other areas of financial services. This, the EC claims, would enable funds to be channelled more easily to companies – including SMEs – and to needed infrastructure projects, thus facilitating economic expansion and job creation.
The idea is that this would create new opportunities for savers and investors, while lowering the costs of funding and making Europe’s financial system more resilient. The scheme is being actively promoted by Lord Hill, a British Conservative Party politician who is currently serving as EU commissioner for financial services.
COBO funds: Control of Borrowing (Jersey) Order 1958
On Jersey, the Control of Borrowing (Jersey) Order 1958 is a type of private fund on Jersey that is not governed by the island’s Collective Investment Funds [Jersey] law of 1988. These must only be offered to fewer than 50 investors.
CPM: Cost per thousand (viewers)
The acronym comes from “cost per mille”, with mille representing the Latin word for “thousand”, and is a much-used way of measuring the effectiveness of advertising. The cost unit is calculated by dividing the cost of a unit of advertisement, such as a full page ad in a magazine, by the number of views it is officially understood to receive.
DSGE: Dynamic stochastic general equilibrium
Dynamic stochastic general equilibrium, also sometimes written SDGE or DGE, is in the category of “applied general equilibrium theory”, used in discussions of macro-economics. The so-called DSGE “methodology” is used in discussions about economic subjects such as business cycles, monetary and fiscal policies, ecnomic growth, and so on. Some writers have criticised economists’ reliance on DSGE models ahead of the 2008 global financial crisis, saying that although complex for their time, they weren’t, in the words of one, “able to deal with the shocks we eventually got”, such as financial crisis, default and deflation.
TA: Double tax agreement
Double tax agreements are agreements between countries that seek to eliminate the risk of individuals and companies being taxed twice for the same thing. They may be bilateral or multi-lateral. The European Union is an example of a multilateral DTA, being a group of countries which seek to recognise certain double taxation principles among the member states.
EBITDA: Earnings before interest, taxes, depreciation and amortisation
Pronounced “eh-bit-DAH”, EBITDA is a widely-used measure of company performance and indicator of value. It is calculated by subtracting expenses, excluding tax, interest, depreciation and amortisation, from total revenue. In other words:
EBITDA = Revenue – Expenses (excluding tax, interest, depreciation and amortisation).
Or put another way, EBITDA is basically net income with interest, tax, depreciation, and amortisation added back.
E&OE: Errors & Omissions Excepted
“Errors & Omissions Excepted” is a traditional disclaimer against clerical error that is often used in invoices. (Sometimes “Excluded” is used in place of “Excepted”). It is used to reduce the risk of legal liability for any mistakes.
ECA: Eastern European and Central Asia (region)
ECA, as an abbreviation for the “Eastern European and Central Asian” region, is a definition used mainly in connection with government organisations, NGOs, schools and universities and the military.
EEA: European Economic Area
The European Economic Area (EEA) came into force on 1 January 1994, and is the European Union area in which the free movement of “persons, goods, services and capital” are to be permitted. It is normally defined as consisting of the 28 member states of the EU, along with three members of the so-called European Free Trade Association (EFTA): Iceland, Liechtenstein and Norway.
EGM: Extraordinary general meeting
An EGM, or extraordinary general meeting, is a type of corporate gathering that is called to take place for a specific purpose, unlike, for example, the “annual” general meeting, which takes place at a set time every year. It is called in order for key people involved in the entity, such as shareholders in a publicly-traded company, to deal with some matter that has arisen. The reasons for calling the EGM are always given at the time it’s announced, although the specific rules under which the EGM takes place will normally vary between organisations.
Convening an EGM is mandatory in the UK whenever the net assets of a business fall to half or less of the amount of its so-called “called-up share capital”, according to section 656 of the 2006 Companies Act.
ESMA: European Securities and Markets Authority
The Paris-based European Securities and Markets Authority is the main regulator of the European Union’s securities industry, and one of the EU’s three so-called European Supervisory Authorities. It replaced the Committee of European Securities Regulators, or CESR, in 2011, and strives to ensure the smooth functioning of Europe’s financial markets, the fair and accurate credit rating of EU entities, and to see to it that Europe’s investors are fairly treated by its investment product purveyors.
ET: East [Coast] Time
ET, or US “East [Coast] Time”, is a time zone encompassing 17 US states, generally five hours behind GMT. Also written EST, or Eastern Standard Time.
FAMR: Financial Advice Market Review
The FAMR was launched in August 2015 by the UK’s Financial Conduct Authority (FCA), in what the regulator said was an effort to examine “how financial advice could work better for consumers”. Industry experts named to advise the panel included Aviva’s Andy Briggs; Barclays’ Ashok Vaswani; Defaqto’s Gill Cardy; Intrinsic’s Richard Freeman; and Hargreaves Lansdown’s Ian Gorham. The FCA called for comments from the industry and others keen to comment on the matter, with a deadline for submissions of 22 December 2015. The FCA said it is aiming to issue any proposals resulting from its research ahead of the Budget in 2016.
FCA: Financial Conduct Authority
The FCA was created on 1 April 2013, and is the successor to the UK’s Financial Services Authority. It is a financial regulatory body which operates independently of the UK government, and is financed by charging fees to the UK’s financial services industry’s member firms.
The FCA regulates those financial firms that provide services to consumers, and is responsible as well for maintaining the integrity of the UK’s financial markets.
FFS: Fee for service
Fee for service is typically used in the healthcare sector, especially in the US. Under fee for service systems, services are paid for separately; the X-ray, the operation, then the hospital stay, for example, rather than for the package of treating someone with, say, a broken leg. If the patient is insured, he or she is reimbursed.
FIAR: le fonds d’investissement alternatif réservé
Le fonds d’investissement alternatif reserve, or FIAR, is the French acronym for what is known to the English-speaking funds industry as the Reserved Alternative Investment Fund (“RAIF”).
FPE: Factor Price Equalisation
Factor price equalisation is an economic theory proposed by Paul Samuelson which holds that over time, the prices of identical factors of production – such as wages – will equalised across countries, as a result of international trade in commodities. The concept rests on an assumption that there are two goods and two factors of production, ie, capital and labour.
G7: Group of Seven
The Group of 7, or G7, is a “club” of major global economic powers, as ranked by the International Monetary Fund (IMF), consisting of the US, UK, Canada, France, Germany, Italy and Japan. The G7 grew out of an earlier organisation, known as the Group of Six (G6), which came together informally in 1975, at the suggestion, it is said, of then-French president Giscard d’Estaing, who thought an informal gathering of the leaders of the world’s largest economic powers would be a good idea. An annual summit continues to be held each year, along with emergency meetings when needed.
G6: Group of Six
(See G7, above)
GFC: Global Financial Crisis
This acronym, when preceded with the word “the”, is particularly popular in Asia (Singapore, Australia and Thailand), and refers, of course, to the global financial downturn that began in 2008, although the events that led to it began at least a year earlier.
Business dictionaries often have a definition for the generic term of “global financial crisis”, which is described as an event similar to the one that occurred in 2008, when concerns about the future stability of world financial markets begin to mount, and the fact of the concerns causes people to act in ways to safeguard their investments, which in turn leads to increased and ever more genuine concerns for the viability of the financial markets, and the institutions that comprise them.
GWP (Insurance term): Gross written premium
Gross written premium is an insurance industry term used to refer to the total premiums received from policies issued by an insurance company during a specific period of time; written premiums may be measured as a gross (before deduction of reinsurance costs) or net (after reinsurance costs) number, according to industry sources.
HMRC: HM (Her Majesty’s) Revenue & Customs
Her Majesty’s Revenue & Customs (HM Revenue and Customs is the UK government’s tax-collecting agency. It was created in 2005 by the merger of the Inland Revenue and Her Majesty’s Customs and Excise. Its head offices are in London.
Back to top of glossary
IDD: Insurance Distribution Directive
A relatively new term; the IDD was created in June 2015 by the European Parliament and the European Commission, when they decided to re-cast and repeal an earlier set of EU regulations covering the insurance industry, known as the (2002) Insurance Mediation Directive, at that point known as IMD1.
The original IMD was created to establish a single market for insurance intermediaries and the sale of retail insurance. Over time, it was felt this needed to be overhauled, particularly in the wake of the financial crisis, and plans to re-cast it, as IMD2, were drawn up. These were subsequently set aside, with the plans for the IDD, which, according to the European Parliament, aims to “create a level playing field” while at the same time “curbing further fragmentation of the EU market for retail insurance and its brokers” and establishing “a single electronic registration system for intermediaries in the EU”. Member states will have a two-year period to transpose the IDD into national law, once it is finally adopted.
IFPRU: Investment firms Prudential sourcebook
(See also “BIPRU”). IFPRU refers to the UK Financial Conduct Authority’s new “Prudential sourcebook” for investment firms, called the IFPRU, which, as of 1 January 2014, replaced the long-used BIPRU sourcebook definition definition of a certain type of UK banking institution.
BIPRU was a reference to a definition contained in something called The Prudential Sourcebook for Banks, Building Societies and Investment Firms. Although the BIPRU definitions are officially obsolete, they apparently “remain within the glossary of the handbook of the Prudential Regulation Authority” and so can still be used.
As of 1 January 2014, BIPRU was formally replaced by the EU’s so-called Capital Requirements Regulations (CRR), which establish a new regulatory code for credit and investment businesses. The UK’s Prudential Regulatory Authority implemented the CRR straightaway.
IGD (surplus): Insurance Group Directive (surplus)
A term originating in the Insurance Group Directive – the amount of cash an insurer has beyond what it needs.
IMAS: Investment Management Association of Singapore
The Investment Management Association of Singapore (www.imas.org.sg) was founded in 1997 to promote the development of the investment management industry in Singapore by “fostering high standards of professionalism and promoting exemplary practice among members”. It also serves as a forum in which its members may discuss issues of concern, and for representing them in channels in which a single industry voice is needed. Founding members of IMAS included the Development Bank of Singapore, Nomura Asset Management Singapore, United Overseas Bank, the Stock Exchange of Singapore and the Singapore Society of Financial Analysts.
IMD: Insurance Mediation Directive
The Insurance Mediation Directive was a 2002 package of legislation created by the European Parliament and the European Commission, in an effort to establish a single market for insurance intermediaries and for the sale of retail insurance. Over time, it was felt this needed to be overhauled, particularly in the wake of the financial crisis, and plans were drawn up to recast it, first as IMD2; now it’s known the IDD, which EU member states will have a two-year period to transpose into national law once it is finally adopted. (See IDD.)
IRA: Individual retirement account
The Individual Retirement Account is a type of tax-advantaged retirement plan that is standard in the US, similar to the UK’s Individual Savings Account (ISA). It is provided by US financial institutions, although Americans who move abroad sometimes find that the institutions which have long overseen their accounts suddenly no longer wish to have them as clients, because of the added reporting requirements, and are told they must move them to another provider.
JGBs: Japanese Government bonds
Japanese Government bonds, as the name suggests, are issued by the Japanese government. The government pays interest on the bonds until maturity, at which point the bond is returned to the bond-holder. Like US savings bonds, JGBs are fully backed by the issuing government, giving them a good credit rating and high degree of liquidity, making them popular among risk-avoiding investors.
KID: Key Information Document
The Key Information Document, in Europe at least, is part of the Packaged Retail and Insurance-Based Investment Products legislation, which sets out the structure under which certain types of “packaged retail investment products” and “insurance-based investment products” are to be regulated and sold. It is a document that informs the buyer, in a regulated way, what he or she is getting.
KSA: Kingdom of Saudi Arabia
The country located in the Middle East which supplies much of the world with oil.
LDI: Liability Driven Investment / Investing
LDI is what such entities as defined-benefit pension funds in particular engage in. The investment strategy’s focus is not to make a fast return, but to ensure that enough money is made that all the investor’s liabilities may be met, both current and future. With pension funds, the emphasis is on future liabilities, so the longer investment horizons of private equity funds, for example, may be an option.
LMIC: low- and middle-income countries
MAD: EU Market Abuse Directive
The EU’s first Market Abuse Directive (MAD), came into force in 2005; a proposal for MAD II was issued in October 2011.
The purpose of MAD was to create an EU-wide regime and a framework to prevent market abuse, by establishing a proper and consistent flow of information to the market. According to the EU, it is aimed at boosting investor confidence in the integrity of the integrated European market, while encouraging and greater cross-border cooperation.
The plans for MAD II introduced common criminal sanctions of insider dealing/market manipulation to the MAD framework, in addition to tweaking and aligning the existing MAD framework.
MBFA: Management by flying around
This acronym is meant to accentuate the implicit humour in the idea that flying around from place to place might in itself be a type of management. Most people in business, particularly in the international arena, can name plenty of individuals and companies that employ the MBFA technique.
MCO: managed care organisation
A managed care organisation refers to an entity, such as one located in the US, that seeks to provide a good standard of healthcare at a price, for organisations. This is achieved by such techniques as giving physicians economic incentives to select less costly forms of care; programmes for reviewing the medical necessity of specific services or treatments; etc. It was developed in the US in the wake of the 1973 enactment of the Health Maintenance Organization Act.
MPC: Monetary Policy Committee
The Monetary Policy Committee is an eight-member committee of the Bank of England that, among other things, meets every month to decide the official interest rate in the UK. This rate is known as the Bank of England Base Rate. It is headed up by the Governor of the Bank of England, who, as of 2013, is Mark Carney.
NIC, NIE: Newly Industrialised Countries/Economies
These two more or less interchangeable acronyms refer to a socioeconomic classification applied to a group of major emerging market countries. They are generally described as countries which have economies that have not yet reached “developed country” status, but have, in a macroeconomic sense, developed more fully than those in the larger “developing” category. They are typically also undergoing rapid economic growth, often fuelled by exports. Other typical characteristics include a population that is increasingly moving from the countryside to cities, and growing rapidly. Countries now said to be in this category typically include South Africa, Mexico, Brazil, China, India, Indonesia, Malaysia, the Philippines, Thailand and Turkey.
NPPR: National Private Placement Regime
The AIFMD National Private Placement Regime is a mechanism to allow Alternative Investment Fund Managers (AIFMs) to market Alternative Investment Funds (AIFs) that are not allowed to be marketed under the AIFMD domestic marketing or passporting regimes. This principally relates to the marketing of non-EEA (European Economic Area) AIFs and any AIFs managed by non-EEA AIFMs. However, it also relates to the marketing of feeder AIFs where the master funds manager is a non-EEA AIFM or the master fund is a non-EEA AIF.
OECD: Organisation for Economic Cooperation and Development
The OECD was founded in 1961, and now consists of 34 countries. It was created to pool the efforts of constituent countries in order to foster global economic growth and world trade. Its head offices are in Paris, and its secretary-general since 2006 has been José Ángel Gurría.
The OECD membership includes 21 of the 28 European Union member states. (those that aren’t members are Bulgaria, Croatia, Cyprus, Latvia, Lithuania, Malta and Romania.) The US, Canada, Japan and Australia are members; Russia, China, Brazil, India and the countries of Africa are not.
The member countries are expected to share a commitment to democracy and a market economy, thus providing a standardised platform on which to develop ideas aimed at boosting trade, identifying and promoting good practice within a specific framework, and otherwise working towards a common goal.
Among the efforts currently being fostered by OECD members is the new so-called Common Reporting Standard (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information. This standard, to be implemented by more than 60 countries in 2016 and beyond, sets out a methodology for the automatic exchange of information (AEoI), sought by growing numbers of countries’ tax authorities, which are keen to access what they see as untold riches held off the books in overseas accounts.
PCLS: Pension Commencement Lump Sum
The so-called pension commencement lump sum, sometimes also referred to as the “tax-free lump sum” (though some purists dislike that second term) is defined as “what you can take when you transfer money from your UK pension to a QROPS”.
PE: Private equity/ies
PE, when used in a financial context, normally refers to those businesses and individuals engaged in the business of private equity, which is a type of investment that involves investors taking stakes in companies, but doing so privately, typically through a private equity fund organised by a private equity firm (the “general partner”, or GP) rather than through a public stock exchange. The investor in the GP’s fund is called the “limited partner”, or LP.
Most PE investors are either large institutions, such as pension funds and insurance companies, or multi-family offices, or “accredited” HNW individuals, as the time horizons are long. The companies acquired through PE deals make use of the capital to grow their businesses. At the end of the investment period, the PE stake in the business is typically sold on, often to a rival company in the same industry or a large business that is looking to enter that area.
PEP: Profits per equity partner
This is a legal term, and is used to refer to a figure that those in the legal industry use to evaluate a firm’s profitability.
PFI: Private finance initiative
Private finance initiatives are a way of financing large infrastructure projects “on the never-never” – in other words, not on balance sheet, but “off balance sheet”, through some form of structuring that makes use of outsourcing to private entities, something that governments often find agreeable.
QDOT: Qualifying domestic trust
A qualifying domestic trust, or QDOT, is a type of trust that allows the spouses of US citizens who are not US citizens themselves to claim the marital deduction for estate-tax purposes. Without such a trust, spouses without US citizenship are not eligible for the marital deduction. Some people say its a better choice than having the spouse apply for US citizenship, as it’s typically easier and faster, but it needs to be set up properly, otherwise it may not be considered acceptable.
QROPS: Qualifying recognised overseas pension scheme
QROPS are a type of overseas pension scheme that meets certain requirements set by Her Majesty’s Revenue & Customs (HMRC), and which thus may receive transfers of UK pensions without incurring a tax penalty (such as an unauthorised payment charge). They came into being after a change in the UK’s pension legislation in 2006, known as A Day, as part of a pan-European move to making it possible for financial services transactions to take place freely across EU borders. QROPS can have some tax advantages for some retired or retiring expatriates if they remain tax resident outside the US.
RAIF: Reserved Alternative Investment fund
A new (as of December 2015) Luxembourg alternative fund structure, which is designed to provide an additional – complementary – alternative investment fund regime, and thus to help maintain the competitiveness of Luxembourg’s alternatives investments’ financial services sector. The RAIF is similar both to Luxembourg’s Specialised Investment Fund (SIF) and SICAR regimes, except that unlike these, RAIFs do not need to be approved by, and are not supervised by, the CSSF (Commission de Surveillance du Secteur Financier), Luxembourg’s financial services regulator, thus allowing them to be more speedily brought to market. RAIFs must, though, be managed only by fully authorised AIFMs.
The Luxembourg government approved the RAIF-enabling legislation on 27 Nov 2015, and officially submitted it to the Luxembourg Parliament 17 days later.
The French term for RAIFs is “le fonds d’investissement alternatif reserve”, or FIAR.
RDR: Retail Distribution Review
The Retail Distribution Review is a package of new regulations that came into force in the UK from 2013. Since the day it was announced RDR has transformed the wealth advice industry in Britain, and influenced the way things are done in other countries as well. It called for greater transparency on the part of the industry, and banned the use of commission as a way of paying advisers for their time, which critics have said has resulted in many people no longer receiving advice, since there is reluctance to pay the advice fees advisers say they must charge instead.
RMBS: Residential mortgage-backed securities
Residential mortgage-backed securities are a type of mortgage-backed debt obligation which involves a securitised package of residential loans, such as mortgages, home-equity loans and so on, typically created by banks. They are best remembered to many investors as one of the causes of the 2007 – 2008 financial crisis, as they trapped investors in investments that plunged in value as home-owners defaulted on their mortgages and home prices collapsed.
RMD: Required minimum distribution
Required minimum distribution is a term that has to do with US individual retirement accounts (IRAs). The RMD is the amount that the US government requires those who have IRAs to withdraw annually from their traditional IRAs, as well as from any employer-sponsored retirement plans they may have. They are required to begin making such withdrawals from their IRAs no later than April 1 of the year following the year in which they reach the age of 70½ . (The rules for employer-sponsored retirement plans may vary slightly from this.) In recent years, Congress has enabled individuals who want to avoid having to pay tax on the RMD income to direct their RMD payments directly to a charity.
ROA: Return on assets
Return on assets is a basic ratio: it’s simply ROA is equal to the net income, divided by average assets.
ROA = net income/average assets
SICAV: société d’investissement à capital variable
The SICAV, (or “société d’investissement à capital variable”, in French), is an open-ended collective investment scheme that is a mainstay of the Western European investment landscape. SICAVs are similar to America’s open-ended mutual funds. Like other open-end collective investment entities, investors are, in theory at least, entitled at any time to redeem their stake in a SICAV, and to receive their payment in cash. SICAVs have become popular in the EU as a result of the UCITS directive, which enables them to be traded across member-state borders.
SRO: self-regulatory organisation
A self-regulatory organisation is an entity that oversees an area of industry of a profession in a manner similar to a government, but which is, in fact, independent, although it may operate alongside an arm of government, or in lieu of it. In the US, the Federal Securities Exchange Act of 1934 formally defined what a self-regulatory organisation was, conferring the definition on such entities as the National Association of Securities Dealers (NASD) and the national stock exchanges, such as the New York Stock Exchange. (In 2007 the NYSE and NASD enforcement arms were merged to create a new SRO, the Financial Industry Regulatory Authority, or FINRA.)
Some other SROs include the US Municipal Securities Rulemaking Board (MSRB); the American Arbitration Association; the National Association of Realtors (NAR); the American Medical Association (AMA); and various similar types of bodies in other countries.
TCK: Third culture kid
“Third culture kid” is a term used to refer to children who were raised in a culture other than that of their parents for a significant portion of their childhood. A related term describes the adults they become: Adult third culture kid, or ATCK.
TMT: Technology, Media and Telecommunications
Refers the technology, media and telecoms sector, which is best remembered by some investors for a bubble that burst spectacularly in around 2000.
TPD: Total and Permanent Disablement (insurance)
TPD is a type of protection insurance.
UCITS: Undertakings for Collective Investment in Transferable Securities
UCITS (Pronounced “yoo-sits”) refers to a set of European Union directives that aim to allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state. In practice, however, many EU member nations have imposed additional regulatory requirements.
The initial legislation was first introduced in 1985, but it didn’t take off until the original legislation was tweaked in 2001 (UCITS II and UCITS III).
A measure of the success of the concept is the degree to which UCITS funds have been embraced by investors in such markets as Asia and Latin America. The benefit for fund managers is that they can have a one-size-fits-all approach to coming up with funds, rather than tailoring different ones for each market.
WACC: Weighted average cost of capital
Weighted average cost of capital is a measure sometimes used to evaluate companies one is considering investing in. It is a fairly complicated formula, which essentially involves multiplying the cost of each capital component of a company’s balance sheet by its proportion of the whole, and extracting a number from that. The result should be the total cost to that company of all its sources of capital. Experts say it should only be seen as one way to measure a company’s worth, not as the only way, as different people will calculate it differently, and there are other, better measures to also consider. US investment legend Warren Buffett is said to be among the skeptics, reportedly saying, in 2003: “I’ve never seen a cost of capital calculation that made sense to me.”