Income distribution
The proportion of income given to unit holders of Managed Investment Schemes (MIS) or funds depending on the number of units they hold in the fund.
Index
A representative measure of the value a securities market or a section of that market. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Equity and fixed income market indices are used as the benchmark for index managed funds and ETFs, whose portfolios aim to mirror the components of the index.
Index management
An investment management approach, generally adopted by exchange-traded funds, where a manager manages a fund so that it reflects the market index, rather than trying to outperform it. Also known as passive management. See also active management.
Inflation
A measure of the increase in prices of a basket of goods and services over time. Defined as the Trimmed Mean Consumer Price Index (CPI), as published by the Australian Bureau of Statistics.
Information ratio
A measure of risk-adjusted return of a portfolio (or security) against a benchmark. An information ratio (IR) is a portfolio’s excess returns (ER) above a benchmark (such as an index) per unit of tracking error (see tracking error, TE).
IR = ER / TE
Information Ratio is a measure of efficiency in generating excess return, expressing an investment manager’s performance relative to the level of benchmark-relative risk they took to generate that excess return.
Investment universe
A range of investments with similar features – for instance, specific commodities, investments in the same index or market, or that have the same market capitalisation. A managed fund often has an investment objective to invest in a particular investment universe.