Glossary of market-linked guaranteed investments

Alternative Guaranteed Investment

The expression "Alternative Guaranteed Investment" means that the contents of the portfolio are periodically reviewed in order to better control risk, improve the return and take advantage of market opportunities.
 

Alternative Guaranteed Investment Plus

A variation on Placement garanti Gestion active Plus, for which the selection and strategies were reviewed to improve potential returns.
 

Hedge funds

Private fund where the manager is free to negotiate on several markets (stock, fixed income, foreign currency, etc.). This way, the manager can take advantage of market highs and lows.
 

Institutional fixed-interest securities

The financial obligation of a government or company to pay a predermined amount on a specific, predetermined date (e.g.: Government of Canada bond).
 

Long position

The position of a person owning securities and wanting them to rise in price.
 

Market Capitalization

A company's market capitalization is the amount that would have to be paid in order to hold all of its stock. A company's market value is calculated by multiplying the total number of shares in circulation by the current share value. For example, if a company has two million shares in circulation and the share price is $20, the company's capitalization is $40 million.
 

Maximum Growth

This is the maximum return that will be paid to the investor when his deposit reaches maturity. For example, if the index to which his deposit is linked increases by 60% in five years (the equivalent of a compound annual rate of 9.86%) and the maximum growth is 50% (compound annual rate of 8.45%), the return will be 50% (compound annual rate of 8.45%).
 

Participation Rate

The index participation rate is the percentage of market index growth that is earned by the holder of a term deposit. For example, if the index increases by 60% (compound annual rate of 9.86%) in five years and the participation rate is 75%, the return will be 45% (compound annual rate of 7.71%).
 

Pre-issue Interest Rate

The annual interest rate calculated on the deposit between the acquisition date and the issue date.
 

Short position

The position of a person owning securities and wanting them to fall in price.
 

Short selling

The selling of a security that the seller does not own. If an investor thinks that the price of a security will fall, she may borrow the stock from a broker and sell it with hopes of buying it back later for a lower price and transferring it back to the broker. For example, an investor may borrow 500 shares of ABC on January 1st and sell them at $10 each. On February 1st, she may buy ABC shares at $8. Her profit (before underlying costs) is ($10 – $8) X 500 shares = $1 000.