Alternative Investments — A particular class of investments which includes private equity, hedge funds, real estate, commodities and arts. Often institutional investors allocate a portion of their investments to alternative assets in order to diversify their portfolios.
Alternative Investment Market (AIM) — Established in 1995, the London-based AIM is a sub-market of London Stock Exchange which allows small and medium-sized companies to float shares with a relatively lower regulatory burden and tax advantages for investors.
Angel Investor — Typically a wealthy individual who invests in companies which are in the early stages of development.
Asset Stripping — The practice of buying a company cheaply with the intention to sell off its assets individually at a profit.
BRIC — Brazil, Russia, India and China.
Bond — A loan or debt security which the issuer promises to repay with interest when it reaches date of maturity.
Buyout — The purchase of a controlling interest of a company by an outside investor (in a leveraged buyout) or a management team (in a management buyout).
Collateral — Hard assets of the borrower for which a lender has a legal interest until a loan is fully paid off.
Debenture — A bond which is not secured by property or collaterals.
Debt Service — The ratio of a loan payment amount to available cash flow earned during a specific period.
Default — A company’s failure to comply with the terms and conditions of a financing arrangement.
Derivatives — A security (such as option or futures contract) whose value depends on the performance of an underlying security or asset.
Dividends — The regular payments made by a company to the shareholders and owners of certain securities.
EBITDA — Earnings before interest, tax, depreciation and amortisation. It is a measure that is close to the underlying cash earning stream of the company before servicing the capital base.
Equity — The ownership structure of a company represented by common shares, preferred shares or unit interests.
Flipping — The act of selling shares immediately after an initial public offering.
Fund-of-Funds — A fund created to invest in several investment funds. Typically, investors in a fund-of-funds to diversify their investment portfolio.
Hedge Fund — An investment fund that has the ability to use leverage, take short positions in securities, or use a variety of derivative instruments in order to achieve a return that is relatively less correlated to the performance of market indices. Hedge fund managers are typically compensated based on assets under management as well as fund performance fees.
Initial Public Offering (IPO) — The first sale of stock by a company to the public.
Institutional Investor — A class of professional investors (such as pension plans, insurance companies and university endowments) that invest capital on behalf of companies or individuals.
Integrated Finance — A specialized branch of financing aimed at providing equity, mezzanine, and senior debt financing. The integrated finance provider offer equity as well underwriting of the senior debt.
Internal Rate of Return (IRR) — The interest rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a specific time in the future.
Investment Vehicle — A broad term refers to any method (such as mutual funds and pension funds) by which to invest.
Leverage — The use of debt to acquire assets, build operations and increase revenues.
Leveraged Buyout (LBO) — The purchase of a company by an outside investor using mostly borrowed capital.
Leverage Ratios — The measurements of a company’s debt as a multiple of cash flow.
Liquidity — The ability to convert as asset into cash quickly. It is considered safer to invest in liquid assets because it is easier to get back money out of the investment.
London Interbank Offered Rate (LIBOR) — An interest rate at which banks can borrow funds from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers’ Association. The LIBOR, the world’s most widely used benchmark for short-term interest, is important because it is the rate at which the world’s borrowers are able to borrow money. Apart from UK, the US, Canada and Switzerland rely on the LIBOR for a reference rate.
London Metal Exchange (LME) — Located in London, it is the world’s premier non-ferrous metals market established for over 130 years. The LME offers futures and options contracts for aluminium, copper, tin, nickel, zinc and lead besides other metals.
Market Capitalization — The value of a publicly traded company as determined by multiplying the number of shares outstanding by the current price per share.
Price Earnings Ratio (PE Ratio) — The ratio of a public company’s price per share and its net income after taxes on a per share basis.
Red Herring — A preliminary prospectus containing the details of an IPO offering. The name refers to the disclosure warning printed in red letters on the cover of each preliminary prospectus advising potential investors of the risks involved.
Return on Investment (ROI) — The proceeds from an investment, during a specific time period, calculated as a percentage of the original investment.
Royalties — Payments made for the use of an asset (in the case of mining usually a metal or mineral) delivered to the “owner” of the asset (usually a government), either at gross or net value of the asset, as determined by the owner.
Secondary Market — A market for the sale of partnership interests in private equity funds.
Secured Debt — A debt that has seniority in case the borrowing company defaults or is dissolved and its assets sold to pay creditors.
Sovereign Wealth Funds (SWFs) — The government-owned investment funds which are set up for a variety of purposes. The SWFs are owned by state agencies such as central banks, state investment companies, state pension funds, and oil funds. The SWFs are typically long-term investors and invest in stocks, bonds, infrastructure, real estate, luxury hotels.
Strategic Investor — Typically a relatively large corporation that invest in a company in order to have access to a proprietary technology, product or service. The investment is part of its achieving its strategic goals.
Takeover — The transfer of control of a company.
Total Shareholder Return — The financial return as measured by dividends and capital gain in a given period over the opening share price.
Unsecured Debt — A debt which does not have any priority in case of dissolution of the company and sale of its assets.
Venture Capital — A segment of the private equity industry which focuses on investing in new companies with high growth rates.