Accrued interest

The amount of interest accrued that a buyer of a bond has to pay to the seller in the form of coupons.

Bond ratings

This is the classification assigned by a recognised rating agency (Moody's or Standard & Poor's) denoting the long-term credit rating (probability of default) of an economic agent or financial instrument. If there is no instrument rating, these agencies take account of the issuer rating. The rating groups are prepared on the basis of a pre-defined set of rules.

Cluster risk

Positions which exceed a threshold defined by the LLB. For bonds, these thresholds are defined on the basis of the respective rating. These positions represent a cluster risk and we recommend that the affected positions are replaced in favour of other quality investments in order to increase your portfolio's level of diversification. Liechtensteinische Landesbank AG defines positions as cluster risks which exceed the following thresholds:

Large cap equities: 5 %
Small and mid cap equities: 3 %
Bonds depending on the rating:
AAA: 7 %
AA: 5 %
A: 3 %
BBB: 2 %
< BBB: 2 %

Currency abbreviations

CHF – Swiss franc
EUR – euro
USD – US dollar
GBP – Pound sterling
JPY – Japanese yen
DKK – Danish krone
SEK – Swedish krona
NOK – Norwegian kroner
CAD – Canadian dollar
AUD – Australian dollar
NZD – New Zealand dollar
SGD – Singapore dollar
HKD – Hong Kong dollar
ZAR – South African rand
RUB – Russian rouble
THB – Thai baht
AED – United Arab Emirate dirham
CZK – Czech koruna
HUF – Hungarian forint
PLN – Polish zloty
TRY – Turkish lira
MXN – Mexican peso

Diversification

Allocation or distribution of assets to several investment instruments such as equities, bonds and money market papers as well as to various sectors, countries and currencies. Diversification allows for the level of investment risk to be reduced with the same level of return.

Duration

The duration, which is usually expressed in terms of years, is a risk parameter which measures the sensitivity of fixed-income securities in the event of interest rate changes. It corresponds to the average capital commitment term. Should interest rates change by one per cent, the expected price change roughly corresponds to the duration in per cent.

Efficiency curve

Presentation of all efficient combinations in a risk-return diagram. All possible combinations of individual financial instruments are shown here within an upper limit, which is referred to as the efficiency frontier or the efficient border.
Portfolios positioned above this efficiency frontier are generally not possible, while portfolios below it have to be labelled as inefficient.

Expected yield

The expected yield denotes the average income that it is assumed (forecast) will be generated on the basis of a specific calculation method for the future.

Fund splitting

Our fund splitting activities see us consider the current composition of our funds at an individual security level. A sector analysis is applied for equity funds, while the bond ratings and terms are analysed for bond funds. All funds are split according to currency and asset classes. The data is updated on a monthly basis.

Investment horizon

Period for which an investor wishes to invest part of his assets.

Investment strategy

A planned approach to investing that takes account of the investor's personal needs and requirements, in particular as regards risk capacity and risk tolerance as well as the expected return.

Investor profile

The investor profile forms the basis of all investment strategies. What investment options do you have, how does your investment horizon look, what is your level of risk capacity and risk tolerance and what knowledge do you have of the world of finance?

Issuer concentration

The term "issuer concentration" is used to describe scenarios in which the sum of the individual financial instruments from the same issuer (equities, bonds and structured products) exceeds a threshold of 10 %.

Maximum portfolio turnover

Restrictions as regards the portfolio value which may be reallocated for an investment proposal as part of an optimisation measure.

Minimum position size

Minimum size that a position must have in the investment proposal as part of an optimisation measure.

Minimum transaction size

Minimum size that a proposed transaction must have in the investment proposal as part of an optimisation measure.

Opportunity monitoring

Within the framework of the LLB Expert advisory mandate, we systematically monitor your portfolio and regularly – you determine how often – draw your attention to areas of potential for optimising your portfolio and market opportunities.

Optimal portfolio

The term "optimal portfolio" refers to a portfolio for which there is no other portfolio that can generate the same income with a lower level of risk or which has the same level of risk and can generate a higher level of income.

Optimisation

The construction of a portfolio that generates the maximum expected return with a pre-defined level of risk. The underlying concept here is that of diversification, that means a combination of investments which exhibit the lowest possible correlation with one another. As such, the investment selection process must take account of the overall portfolio.
This involves measuring the variance of the portfolio returns. The use of reallocation proposals as part of the portfolio construction process should result in the maximisation of returns without increasing the level of risk.

Reference currency

The currency in which an investor normally thinks, counts and fulfils his obligations. In the case of an investment fund, this is the currency in which performance is measured.

Restrictions

Restrictions are special instructions from the clients which take precedence over the investment strategy recommended by LLB.

Risk monitoring

Within the framework of an LLB Invest advisory mandate, we monitor your portfolio systematically and inform you regularly – you define how often – whether your level of portfolio risk corresponds to your applicable investor profile and as regards cluster risks and issuer concentration. In the LLB Expert advisory mandate, we also monitor the individually set restrictions.

Total expense ratio (TER)

Key figure which compares the total costs arising from the operation of the fund with the average value of the fund assets over a pre-defined period. In addition to management, portfolio management, administration and audit costs, fees for statutory publications and the exchange listing as well as for legal counsel and taxes are included.

Volatility

Volatility is an indicator for measuring a portfolio's risk. It describes the fluctuation range within which an investment's return is likely to move. Viewed statistically, volatility refers to the annualised standard deviation of the return distribution and is expressed as a percentage. A high level of volatility in the monthly returns means a higher fluctuation range for future income and/or greater uncertainty regarding future performance. This uncertainty equates to a greater degree of risk.

Yield to maturity

A bond's calculated yield from all payment streams (coupons, redemption) relative to the spot price.

For a printed version of the glossary, please ask your client advisor.