This consists of spreading investments across different types of financial instruments (equities, bonds, money-market products, etc) from various regions or sectors (asset class). As the profile becomes more dynamic, more equities are added to the portfolio.

The different categories of investments are referred to as asset classes. The main asset classes are equities, bonds, money-market instruments from around the world. European equities or government bonds are examples of asset classes.

A company or government borrows money from an investor to finance their investments, which the borrower undertakes to pay back on a specific date. During this time, the lender receives a coupon based on an interest rate, which is defined at the start. At maturity, the lender usually receives all of the capital. However, during its life, a bond may be sold, just like stocks. Bonds are recommended for investors interested combining regular income with capital preservation.

Capitalisation shares do not entitle the investor to a dividend. Any income to which the investor is entitled is reinvested into the fund (accumulation principle).

The custodian bank fulfils duties and obligations with regard to cash deposits, transferable securities and other assets. It is specifically responsible for the custody of a fund’s assets and for ensuring that the sale, issue, redemption and cancellation of shares or fund shares comply with the fund's regulations.

Custody fees are due by the client if they decide to hold their shares or units at a bank.

Shares that entitle the investor to a regular dividend (usually paid once year).

A stock market index or a group of stock market indices that reflect the UCI's neutral investment policy. The index is used to benchmark the fund's performance against the stock market. E.g. MSCI World, Nasdaq...

This technique consists of managing a portfolio by selecting experienced and successful fund managers from around the world and offering access to this via one investment vehicle (such as an investment fund). Having complementary management styles in a portfolio provides greater diversification and better control over the risks. This approach can be used to cover an asset class in which the fund promoter lacks specific expertise, for example commodities or emerging markets.

Shares (or stocks) are proof of ownership that represent a share of the company’s capital and allow the shareholder to participate in the distribution of earnings. Owning shares entitles the shareholder to participate in decisions made at the Shareholders’ Meeting. Shares in listed companies can be freely sold on the stock market.

This measures fluctuations in a fund's price. The higher the volatility, the greater the risk of investing in the fund.

Bond funds invest mostly in fixed-income securities. The aim is to achieve long-term capital growth.

Fees owed by the investor to the financial intermediary for fund subscription. The entry fees are usually expressed as a percentage of the net asset value (NAV). NAV + Entry fee = purchase price for the investor.

For example: subscription of 100 shares or units
NAV €100
Entry fee: 5%
Purchase price: NAV 100+5% =105
Purchase of 100 shares: 105*100 = €10,500: this is the amount owed by the investor.

For example: subscription for an amount of €10,000
NAV €100
Entry fee: 5%
Purchase price: NAV 100+5% =105 10,000/105 = 9.523 shares or units

These funds invest mainly in equities: some may also hold also cash in their portfolio. Equity funds are grouped by geographical regions (Europe, United States, etc), by investment theme (growth stocks) or by industrial sector (pharmaceuticals, media, technology, etc).

A common fund in transferable securities (or FCP) has no legal personality and is managed by a management company. Investors are considered as unitholders.

An investment fund pools money from a large number of investors and invests it in securities (equities, bonds, and money-market instruments). Funds are managed by investment professionals and offer investors the opportunity to invest in securities with small amounts of capital.
The diversification offered by funds makes them less volatile than investing directly in specific financial instruments. By pooling money from a large number of investors, the fund manager can access a wide variety of securities that would not be available for individual investors. This diversity means that the risk is spread as securities do not usually experience losses at the same time. Some funds invest in other funds rather than directly in equities or bonds, with the aim of diversifying investments or gaining access to more remote or complex markets. These are known as funds of funds.

The issue prospectus is the reference document used for fund subscriptions and provides detailed information on all the sub-funds.

Funds with a defined risk profile. The allocation of shares, bonds and cash is adjusted to reflect the investor's profile (in terms of needs, risk tolerance and investment horizon). Profile funds are midway between traditional funds and management mandates.

The net assets of the fund divided by the number of shares or units in circulation. The NAV represents the value of the share or unit and is used to determine the issue and redemption prices. The NAV is expressed in the currency of the sub-fund.

For example: on 31 Dec 2000, X fund had net assets of €100,000 and had 59,000 shares in circulation. 100,000 divided by 59,000 = €1.69, which is the NAV.

The Net Assets are obtained by calculating the value of the fund's assets (securities, cash, etc) minus its liabilities (fees and other costs, such as subscription tax, etc).

Part I of the law of 30 March 2008 governs UCIs created within the scope of the 1985 directive and which are freely marketable in the European Union. The UCIs governed by this law are only authorised to invest in transferable securities (equities, bonds, etc) that are listed - i.e. admitted to official listing on a stock exchange.

Part II of the law of 30 March 1988 governs UCIs created outside the scope of the 1985 directive and which are not freely marketable in the European Union. This group includes funds of funds, money-market funds, cash funds, venture capital funds, real-estate funds and futures.

This is the overall return on an investment compared to the capital invested. The term "outperformance" is used to refer to the situation in which a fund's returns are greater than its benchmark index.

The calculation is as follows:
(last NAV / initial NAV) - 1 x 100
Eg: Initial NAV: 100 current NAV: 110 (110/100) - 1 * 100 = 10
The fund's performance for the given period was 10%.

A charge or commission paid when an investor sells a share or unit in a fund. The redemption fee is paid back into the fund to cover fees incurred by the fund for selling off securities required to redeem the share or unit. NAV-redemption fee = the price paid to the investor.

This is a risk-adjusted measure of return that is used to evaluate the performance of a portfolio, measured in terms of volatility. The higher the ratio, the better the fund’s returns relative to the risk.
How the Sharpe Ratio is calculated:
Annualised performance of a portfolio - performance of a risk-free asset* = annual volatility of the portfolio
*such as short-term interest rates.
Example: Comparison of two investments A and B with the same returns (10%) and annual volatility of 10% and 5% respectively. If we imagine that the return on a risk-free asset is 5%, the Sharpe ratios of both investments are as follows:
Ratio B = (10-5)/10 = 0.5
Ratio A = (10-5)/5 = 1
Investment A has achieved a return of 10% with less risks than investment B: investment A is therefore a better investment than B from a risk/return point of view.

Short-term funds invest mainly in cash and short-term assets. They offer investors a higher return than a pure money-market fund and a high level of security.

An investment company with variable share capital, which is at all times equal to its net assets. Investors are considered as shareholders. A SICAV has legal personality. It is governed by a Board of Directors, which is in charge of the fund administration and management, in keeping with terms and conditions of the prospectus.

A SICAV with multiple sub-funds is legal entity with at least two sub-funds that allows investors to diversify their portfolio by acquiring units in If an investor decides to change their investment orientation (eg moving away from a conservative to a more aggressive profile), switching between sub-funds is easy and usually does not give rise to charges or fees.

A sub-fund is an individual investment fund within a collective investment scheme. The sub-fund's investment policy defines the investments in transferable securities (equities, bonds, short-term investments, etc). The sub-fund has its own currency and usually offers access to a range of share classes. SICAVs with many sub-funds offer investors greater choice with regard to the selection of their investments.

These are fees that investors must pay to redeem a share or a unit in a sub-fund before investing in another sub-fund. Shares or units are redeemed and issued at the NAV for the various sub-funds.

- Capitalisation shares: Interest payments and dividends received by these funds are automatically reinvested, which increases the fund’s invested capital. The investor only receives interest income (in the form of capital gains) when the fund is sold.

- Distribution shares: A fund paying out regular interest income or dividends on a set date to the investor.