AIMA

The Alternative Investment Management Association

Alternative Investment Management Association

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Glossary

AIMA's Glossary has been developed for all those with an interest in the alternative investment industry - from the beginner to the advanced practitioner.

You will find a considerable overlap of content with the traditional fund management industry - the instruments used, the service providers employed, etc.  However, the hedge fund industry is individual in the way in which it uses these resources.

For reasons of law and accuracy, this is not a wiki.  It is a work-in-progress, however, and we invite you to submit new items for inclusion below (including the proposed definition).

  • We express our sincere thanks to Stanley Marchon, Vincent Kuhn, Nicolas Watin-Augouard, Stephen Foster and Sunil Gopalan for the creation of this resource. 
  • Special thanks are also extended to Anne Taulbut and Jennifer Nye of Katten Muchin Rosenman Cornish for the extensive legal review.
   
market-on-opening

An order to buy or sell at the beginning of the trading session at a price within the opening range of prices.

master-feeder fund

A common [hedge]-fund structure through which a manager sets up one or more separate "feeder fund" vehicles to accommodate different types of investors (e.g., US taxable investors, US tax-exempt investors and offshore investors) - -which in turn invest in a "master fund" vehicle that often is an offshore vehicle. The purpose of such an arrangement is to create a single trading vehicle for different categories of investors.

maturity

Period within which a futures contract can be settled by delivery of the actual commodity.

MBS
See Mortgage-backed securities.
mean reversion

Mean reversion models rely on the tendency of prices to overreact (temporarily overshoot their usual levels) when there are large flows in the market – for example due to the actions of institutional investors. Models generally consider baskets or clusters of stocks. The arbitrageurs look to find occasions when the usual relationships between these related stocks have diverged and take positions designed to profit from the reversion to the usual relationship. The main Mean reversion strategy is Statistical Arbitrage.

memorandum

See Prospectus.

MER
See Management Expense Ratio (MER).
merger arbitrage

Merger Arbitrage funds invest in companies involved in a merger or acquisition process. They typically go long the targeted company and sell short the stock of the acquiring company. This strategy aims to capture the price spread (i.e. Merger Spread) between the current market price of the targeted company and the price offered by the acquiring firm. The performance of Merger Arbitrage funds depends on their ability to assess the probability of success / failure of the corporate transactions. The exposure of Merger Arbitrage funds to market risk depends on the transactions, arrangement. Merger Arbitrage strategies are generally characterized by a relatively high return and a significant correlation with major stock indexes.

mezzanine debt

Mezzanine debt (or mezzanine capital) is a broad financial term that refers to unsecured, high-yield, subordinated debt or preferred stock that represents a claim on a company's assets that is only senior to that of a company's shareholders.

micro cap

See Small cap.

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