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Norm Ai Glossary Flashcards

Learn the terms of the alternative finance space. (83 cards)

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1
Q

Closed-end Mutual Fund

A

A type of investment fund that raises a fixed amount of capital through an initial public offering (IPO) and trades its shares on the stock exchange. Unlike open-end funds, it does not issue or redeem shares after the IPO

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2
Q

Fixed Insurance

A

Insurance policies, such as whole life or term life insurance, that provide a guaranteed death benefit and fixed premiums. They do not offer investment options like variable or universal life insurance policies

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3
Q

Hedge Funds

A

Investment funds that employ diverse strategies to earn active returns for their investors, using leverage, derivatives, and short-selling. They are typically open only to accredited or qualified investors

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4
Q

Note Offerings

A

Debt securities issued by companies or governments to raise capital, typically with a maturity of one to ten years. Investors receive periodic interest payments and return of principal at maturity

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5
Q

Private Placements

A

Securities offerings that are not made available to the general public but are sold directly to a small group of institutional or accredited investors. These offerings are exempt from SEC registration requirements.

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6
Q

Stocks

A

Securities that represent ownership in a corporation, giving shareholders a claim on part of the company’s assets and earnings. Stocks are also known as equities

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7
Q

Global Equities

A

Shares of companies that are traded on international stock markets, providing investors with exposure to global economic growth and diversification across different countries

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8
Q

European Equities

A

Stocks of companies located in Europe, traded on European stock exchanges. They offer exposure to the European economy and markets

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9
Q

U.S. Equities

A

Stocks of companies based in the United States, traded on American stock exchanges like the NYSE and NASDAQ. They represent ownership in U.S.-based companies

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10
Q

Emerging Markets Equities

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Shares of companies located in emerging market countries, which are developing economies with higher growth potential but also higher risk compared to developed markets

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11
Q

Impact Investing

A

Investments made with the intention of generating positive social or environmental impacts alongside financial returns. It focuses on measurable impact outcomes

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12
Q

ESG

A

Environmental, Social, and Governance criteria used to evaluate a company’s ethical impact and sustainability practices, influencing investment decisions

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13
Q

Corporate Bonds

A

Debt securities issued by corporations to raise capital, paying periodic interest and repaying principal at maturity. They are considered higher risk than government bonds but typically offer higher yields

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14
Q

High-Yield Credit

A

Debt securities with lower credit ratings than investment-grade bonds, offering higher yields to compensate for the increased risk of default. Also known as junk bonds

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15
Q

Collateralized Mortgage Obligations

A

Securities created by pooling a large number of mortgages and selling the cash flows as different tranches to investors, each with varying risk and return profiles

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16
Q

Direct Participation Program

A

A pooled investment vehicle that allows investors to directly participate in the cash flow and tax benefits of the underlying investments, commonly in real estate or energy projects

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17
Q

Municipal Securities

A

Debt securities issued by states, municipalities, or counties to finance public projects, often offering tax-exempt interest income to investors

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18
Q

Options

A

Financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before a specific date

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19
Q

Futures

A

Standardized contracts to buy or sell an underlying asset at a specified price on a future date. They are commonly used for hedging or speculative purposes

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20
Q

Commodities

A

Physical goods such as metals, energy, and agricultural products that are traded on exchanges. Commodities are often used as a hedge against inflation

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21
Q

Real Estate Investment Trusts

A

Companies that own, operate, or finance income-producing real estate across a range of property sectors, allowing investors to buy shares in commercial real estate portfolios

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22
Q

Unit Investment Trust

A

An investment company that offers a fixed portfolio of securities with a specific termination date, providing investors with a proportionate share of income and principal

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23
Q

Structured Products

A

Pre-packaged investments that typically include assets linked to interest plus one or more derivatives, offering customized risk-return profiles

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24
Q

Certificates of Deposit

A

Time deposits offered by banks with fixed interest rates and maturity dates, where investors are penalized for early withdrawal

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25
Exchange Traded Fund
A type of investment fund that holds a basket of assets like stocks, bonds, or commodities and trades on stock exchanges, combining features of mutual funds and stocks
26
Government Securities
Debt instruments issued by a government to finance its operations, considered low-risk investments due to the backing of the government’s credit
27
Money Market Accounts
Interest-bearing accounts that offer higher interest rates than savings accounts but require higher minimum balances and limit the number of transactions
28
Treasury Securities
Debt securities issued by the U.S. Department of the Treasury, including Treasury bills, notes, and bonds, used to fund government operations and pay off maturing debt
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Open-End Mutual Fund
An investment fund that issues and redeems shares at the end of each trading day at the fund’s net asset value (NAV), providing liquidity and flexibility to investors
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Security Futures
Contracts to buy or sell a specific quantity of a security at a set price on a future date, combining elements of both securities and futures contracts
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Variable Annuity
An insurance product that provides periodic payments for life, with payouts depending on the performance of the underlying investments chosen by the holder
32
Variable Life Insurance
A type of life insurance policy with an investment component, allowing policyholders to allocate a portion of premiums to a variety of investment options
33
ADRs
Certificates issued by U.S. banks representing shares in foreign companies, allowing U.S. investors to invest in foreign stocks without dealing with foreign exchanges
34
Credit
The ability to borrow money or access goods and services with the understanding that payment will be made in the future. It encompasses various types of lending and borrowing arrangements
35
Real Estate
Property consisting of land and the buildings on it, as well as the natural resources of the land. Real estate investments can include residential, commercial, and industrial properties
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Commercial Real Estate
Properties used for business purposes, such as offices, retail spaces, warehouses, and industrial properties. Investments in commercial real estate often provide rental income and potential appreciation
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Residential Real Estate
Properties used for housing, including single-family homes, apartments, and condominiums. Investors can earn returns through rental income and property value appreciation
38
Venture Capital
A form of private equity financing provided to early-stage, high-potential startup companies in exchange for equity or ownership stakes
39
Growth Equity
Investments made in more mature companies that are looking for capital to expand or restructure operations, enter new markets, or finance significant acquisitions without changing control of the business
40
Late-Stage Private Equity
Investments in established companies that are seeking capital to support growth, improve operations, or facilitate a strategic change, often with the goal of preparing the company for an eventual sale or public offering
41
Private Credit
Non-bank lending to private companies, often providing more flexible terms than traditional bank loans. It includes direct lending, mezzanine financing, and distressed debt
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Separately Managed Accounts
Investment accounts managed on a discretionary basis by a professional investment manager, offering personalized investment strategies for high-net-worth individuals
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Alternatives
Investment assets outside the traditional categories of stocks, bonds, and cash. This includes real estate, private equity, hedge funds, commodities, and collectibles
44
Insurance-Linked Securities
Financial instruments whose value is driven by insurance loss events, such as natural catastrophes. They provide investors with returns that are largely uncorrelated with financial market performance
45
Global Investment Performance (GIPS)
Global Investment Performance Standards (GIPS) are ethical standards for calculating and presenting investment performance that aim to provide full disclosure and fair representation of an investment firm’s performance history.
46
SEC Marketing Rule:
Refers to regulations set by the U.S. Securities and Exchange Commission that govern how investment advisers can advertise and market their services. The rule, which modernized previous advertising regulations, includes provisions around the use of testimonials, endorsements, performance results, and other promotional content, requiring that marketing materials be fair, balanced, and not misleading.
47
FINRA 2210:
FINRA Rule 2210 governs the content, approval, recordkeeping, and filing requirements for communications with the public by broker-dealers. It categorizes communications into retail communications, correspondence, and institutional communications, setting standards to ensure that all such materials are clear, fair, and not misleading, and that they appropriately disclose risks.
48
Broker Dealers
Broker-dealers tend to focus more narrowly on facilitating purchases and sales of assets like stocks. They are only required to satisfy the suitability standard.
49
Registered Investment Advisors (RIA's)
Financial professional firm that advises clients on securities investments and may manage their financial portfolios.
50
Carry (Carried Interest)
Performance fee or profit share earned by an investment manager (like a hedge fund manager, private equity manager, or venture capitalist) as a compensation for achieving above-average returns on the investment.
51
Content
Any communication or material create and distributed by financial institutions or service providers to promote their products, services, or brand. It must adhere to strict regulatory guidelines.
52
Disclosures
Mandatory statements that provide critical information about a financial product or service, ensuring that potential investors or clients are fully informed about the risks, fees, and other relevant details. Ex: risk disclosures, fee disclosures, performance disclsoures, conflict of interest disclosures.
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Risk Disclosures
These disclosures inform investors about the potential risks associated with a financial product, investment, or strategy.
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Fee Disclosures
These provide detailed information about the costs and fees associated with a financial product or service.
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Performance Disclosures
Disclosures that provide historical performance data and other relevant information about a financial product’s returns.
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Conflicts of Interest Disclosures
These disclosures reveal any potential conflicts between the interests of the financial service provider and their clients.
57
Fact Sheet
Concise documents that provide key information about a financial product, typically in an easy-to-read format.
58
Prospectuses
Legal documents provided to potential investors, detailing a financial product or investment offering, including its objectives, risks, terms, and financial statements.
59
Extracted Performance
Performance data of an investment or portfolio that has been “extracted” from actual past results. Performance is based on real, historical data and shows how an investment or strategy performed under specific market conditions over a certain period of time. Ex:
60
Hypothetical Performance
Hypothetical performance refers to the projected or simulated performance of an investment strategy based on historical data or assumptions rather than actual trading. Used in marketing materials to illustrate potential returns, but subject to strict regulatory scrutiny to ensure that such representations are not misleading and are appropriately disclosed.
61
Gross Performance
Gross performance refers to the return on an investment before deducting fees, expenses, and taxes. Gross performance figures are often used to showcase an investment’s returns, but must be accompanied by disclosures clarifying that fees and expenses will reduce actual client returns.
62
Net Performance
Net performance refers to the return on an investment after deducting fees, expenses, and taxes. It's a critical metric for investors as it reflects the actual return they can expect to receive, taking into account all costs associated with the investmen
63
Material Fact
A material fact is any information that a reasonable investor would consider important when making an investment decision. Financial regulations require the disclosure of material facts to prevent misleading investors and to ensure they have all the relevant information needed to make informed decisions.
64
Substantiation
Substantiation refers to the requirement that financial services firms must be able to support and verify the claims they make in their marketing materials. This includes providing evidence for performance figures, claims about investment strategies, and any other statements that could influence an investor’s decision.
65
Third Party Ratings
Third party ratings are evaluations or rankings provided by independent entities or agencies regarding the quality, performance, or risk of financial products or services. Used in marketing materials to enhance credibility, but firms must ensure that these ratings are accurately presented and not misleading, and that proper disclosures about the rating agency and the basis of the rating are included.
66
True Positive
Refers to correctly identifying a condition or outcome, such as accurately predicting a credit risk or detecting fraud. Often used in risk management and compliance, where predictive models are employed to identify potential issues, with a true positive indicating a correct identification.
67
Consumer Financial Protections Bureau (CFPB)
The CFPB is a U.S. government agency responsible for enforcing consumer protection laws in the financial sector, including overseeing banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies. They ensure that consumers have access to transparent information about financial products and services, and that companies comply with federal consumer protection laws.
68
Code of Federal Regulations (CFR)
A codification of the general and permanent rules and regulations published by the executive departments and agencies of the U.S. federal government. The CFR includes regulations that govern everything from securities trading to banking practices, consumer protection, and the conduct of financial institutions.
69
Private Fund Advisor Reporting (PFAR)
PFAR typically refers to the reporting obligations of private fund advisers under the SEC’s Form PF. Private fund advisers must report detailed information about the private funds they manage, including leverage, counterparty exposure, and investment strategies, to assist the SEC and other regulators in monitoring systemic risk.
70
Securities & Exchange Commission (SEC)
The SEC is a U.S. federal agency responsible for enforcing federal securities laws, regulating the securities industry, and protecting investors. They the securities markets, including the stock and bond markets, and enforces laws against market manipulation, fraud, and insider trading, ensuring that investors receive accurate and complete information.
71
Financial Industry Regulatory Authority (FINRA)
FINRA is a self-regulatory organization (SRO) in the United States that oversees brokerage firms and exchange markets. It is responsible for regulating the activities of its member brokerage firms and registered brokers, ensuring they operate fairly and honestly.
72
Internal Rate of Return (IRR)
Measures the profitability of investments, considering the timing and magnitude of cash flows. Commonly used metric in PE & VC to assess performance over the life of a fund or investment.
73
Mulltiple on Invested Capital (MOIC)
Represents the return multiple relative to the initial investment, indicating how many times the investment has increased in value. Common metric in PE & VC.
74
Distributed to Paid In (DPI)
Reflects the amount of capital returned to investors relative to the amount of capital they have contributed. It’s a measure of cash distributions to investors. Common metric in PE.
75
Total Value to Paid-In (TVPI)
Combines both realized and unrealized returns, showing the overall performance of a fund relative to the capital invested by Limited Partners (LPs). Common in PE.
76
Cash Flow Yield
Measures the cash flow generated by portfolio companies as a percentage of the initial investment. Common in PE.
77
Exit Multiples
Reflects the sale price of a portfolio company as a multiple of its earnings, revenue, or another financial metric. It is a common measure of success for VC-backed exits. Common in VC.
78
Net Asset Value (NAV)
The total value of the fund’s assets minus liabilities, providing a snapshot of the fund’s value at a point in time. Common Hedge Fund metric.
79
Sharp Ratio
Measures the risk-adjusted return of the fund, comparing the fund’s return to the risk-free rate and the volatility of its returns. Common Hedge Fund metric.
80
Alpha
Represents the fund’s performance relative to a benchmark index, indicating the value added (or subtracted) by the fund manager. Common Hedge Fund metric.
81
Beta
Measures the fund’s volatility in relation to the market or a benchmark, indicating its sensitivity to market movements. Common Hedge Fund metric.
82
Return on Investment (ROI)
Measures the gain or loss generated on an investment relative to its initial cost. It is commonly used to assess the profitability of individual investments within a portfolio. Common VC metric.
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EBITDA Growth
Measures the growth in Earnings Before Interest, Taxes, Depreciation, and Amortization of a portfolio company, reflecting operational improvements and profitability increases driven by the PE firm. Common PE metric.

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