A portion of the Investment Company Act of 1940 that permits the exclusion of investment companies from standard registration requirements with the Securities…

The return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation (expressed as a percentage) that…

A stock index designed to measure absolute returns. The absolute return index is actually a composite index made up of five other indexes. This index…

A conflict of interest arising between creditors, shareholders and management because of differing goals. For example, an agency problem exists when…

An interest rate swap whose notional value adjusts according to rising interest rates by indexing the floating portion to a constant maturity swap (CMS)…

A provision under the U.S. Bankruptcy Code prohibiting creditors from beginning or continuing proceedings for collecting owed amounts from a firm who…

The risk that offsetting investments in a hedging strategy will not experience price changes in entirely opposite directions from each other. This imperfect…

The former chairman of the Nasdaq and founder of the market-making firm Bernard L. Madoff Investment Securities. Madoff, who also ran a hedge fund, was…

A bond future is a contractual obligation for the contract holder to purchase or sell a bond on a specified date at a predetermined price. A bond future…

A ratio used to determine return relative to drawdown (downside) risk in a hedge fund. Calculated as: Generally speaking, the higher the Calmar ratio…

The CFP legal team has provided its official definition, along with trademarks: CFP and Certified Financial Planner marks are certification marks owned…

When an investment vehicle is no longer accepting new investors, but is still operating for existing investors. This can apply to mutual funds, hedge…

A group of indexes made up of 25 tranches of commercial mortgage-backed securities (CMBS), each with different credit ratings. The CMBX indexes are the…

A special purpose vehicle (SPV) with securitization payments in the form of tranches. Collateralized debt obligation cubeds (CDO-cubeds) are backed by…

A special purpose vehicle (SPV) with securitization payments in the form of tranches. A collateralized debt obligation squared (CDO-squared) is backed…

Unlike stock traders, who buy and sell equities, commodity traders focus on investing in commodities. These traders either takes positions based on forecasted…

A fixed-income investment management style that permits managers to add instruments with greater risk and greater potential return - high-yield, global…

The additional risk associated with investing in an international company rather than the domestic market. Macroeconomic factors such as political instability…

Security with a risk level and pricing based on the risk of credit default by one or more underlying security issuers. Credit default contracts include…

The outsourcing of currency risk management to a specialist firm, known as the overlay manager. This is used in international investment portfolios to…

A hedge fund strategy with which the fund manager takes more short positions than long positions.Before the 1990s, there were funds called "short-only…

The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as…

A portfolio consisting of positions with offsetting positive and negative deltas. The deltas balance out to bring the net change of the position to zero…

A possibile situation where the financial markets plunge into chaos if the massive derivatives positions owned by hedge funds and the large banks were…

When a company incurs a new debt in order to pay a special dividend to private investors or shareholders. This usually involves a company owned by a private…

A slang phrase referring to a tactic a hedge fund would use to try to mislead other funds that attempt to mimic its trades.  By making small trades but…

An investment philosophy that attempts to amplify the returns of an underlying portfolio or index fund while also minimizing the effects of tracking error…

A hedge fund strategy that seeks to exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization…

An exchange traded fund (ETF) that tracks other ETFs rather than stocks, bonds or derivatives. These ETFs track the performance of other ETFs which may…

A hedge fund strategy in which the manager takes significant positions in a certain number of companies with "special situations." These "special situations…

A fee or charge assessed to an investor for withdrawing money prior to a previously stipulated date. This is almost always expressed and charged as a…

An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income arbitrage strategy…

A type of mutual or hedge fund that is not restricted to investing in any company with a predetermined market capitalization. This type of fund structure…

A securitized product that aims to provide maximum leverage. Some popular flow derivatives include vanilla options, leveraged synthetic spot positions…

An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Institutional investors include…

A financial instrument's value that is derived on the future levels of freight rates, such as "dry bulk" carrying rates and oil tanker rates. Freight…

An asset portfolio whose delta rate of change is zero. A gamma neutral portfolio can be created by taking positions with offsetting deltas. This helps…

A restriction placed on a hedge fund limiting the amount of withdrawals from the fund during a redemption period. The implementation of a gate on a hedge…

Born in Budapest, Hungary, in 1930, George Soros is considered by many to be one of the world's greatest investors. A famous hedge fund manager, Soros…

A hedge fund strategy that bases its holdings--such as long and short positions in various equity, fixed income, currency, and futures markets--primarily…

Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related…

A method of accounting where entries for the ownership of a security and the opposing hedge are treated as one. Hedge accounting attempts to reduce the…

An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both…

A simplified derivative instrument that allows investors to hedge or speculate on economic events such as housing prices, commodity prices, interest rates…

A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging transactions purchase opposite…

A slang phrase that refers to the relentless phone calls that some hedge fund managers make to analysts in an attempt to persuade the analysts to change…

An investment structure in which several investment vehicles, while each remaining individually managed, pool their assets together by contributing to…

A corporation or trust engaged in the business of investing the pooled capital of investors in  financial securities. This is most often done either through…

Mutual fund shares purchased by individual investors as opposed to institutional shareholders. In general, the amount invested in the fund is what distinguishes…

A set of two tradable indexes that hold credit default swaps (CDSs) representing a diversified basket of 35 European companies that have liquid debt offerings…