A tax levied on profits realized from the sale of a capital asset.

The cash market is a marketplace where business transactions or contracts are realized immediately. Whereas futures market participants trade commodity contracts representing delivery for some specified future date; cash market participants buy and sell commodities for cash and immediate delivery.

A closed-end hedge fund is a hedge fund that issues a fixed number of shares to the public. These shares can be traded in the secondary market.

A compound interest effect occurs when reinvested dividends of an investment fund or hedge fund increase the principal investment amount and, subsequently, the accumulated interests. As a result, the increase in value is greater than if the earnings were regularly distributed.

An investment strategy where rather than periodically subscribing a constant number of shares, one invests a fixed amount of capital each period in order to achieve a more favorable average price per share over time. The cost average effect occurs because with constant monthly payments, an investor receives more shares in down markets and fewer shares in up markets resulting in a lower average price per share.

See Principal Protection

The compounded 'growth' of an investment that has been achieved each year to enable the initial price to grow to the latest selected price over a particular time period.

The manager or adviser of a managed futures [see Managed futures] fund. The term reflects the fact that early futures markets [see Futures] were commodities-based and were set up to enable producers and buyers to hedge against possible price movements in the underlying asset.

A strategy that synthetically reproduces the pay-out of a put or call option through dynamically adjusting the delta hedge of the underlying asset. Unlike a conventional option, the investment exposure (or participation) of the underlying asset will change over the life of the structure.

A bond issued by a company that has a set maturity date and pays interest in the form of a coupon. It has features of both a bond and stock and its valuation reflects both types of instrument. It gives the holder the option to convert the bond into a specific number of shares of the issuing company - in other words, it has an 'embedded option'.

Correlation is a measure of the interdependence or strength of the relationship between two investments. It tells us something about the degree to which the variations of returns from their respective means move together. So if two investments are positively correlated, when one performs above its mean return it is likely that the other will also perform above its own mean return. If two investments are negatively correlated, when one performs above its mean return it is likely that the other will perform below its mean return. Note that correlation says nothing about the mean returns themselves - they could both be up, or both down, or one could be up and one down. To measure the strength of the relationship, we use the correlation coefficient. Values range from -1 (perfect negative correlation), through 0 (no correlation or uncorrelated) to +1 (perfect positive correlation). From a risk management perspective, it is generally favourable if two investments are uncorrelated because it means that there is no identifiable directional pattern or proportional relationship between the deviations of their monthly returns from each of their respective trends - sometimes investment B is positively correlated to investment A when the returns of A are positive and negatively correlated when they are negative, meaning that over a period of time our strategy returns get closer to non-correlation. This produces a smoother overall return profile.

Trustees are normally large banks or insurance companies, who are independent from the investment companies. Their key role is to protect investor’s interests. The investment companies’ securities are registered in the Custodian Trustees name.

The amount of investment capital that can be comfortably absorbed by a manager or strategy without a diminishing of returns. One useful indication of whether or not a manager or strategy faces capacity constraints is to analyse the degree to which they experience slippage [see Slippage] in the execution of their strategy or trades.