AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

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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.
 
middle office

With the front and back offices, the middle (or mid) office completes the key best practice division of duties and responsibilities in a finance and investment operation. Its basic responsibilities include treasury activities (reporting, accounting, monitoring and internal control). Most companies may not have operations sizeable enough to require a middle office; in these cases, its role is performed by the back office or the accounting department.

mini

Refers to a futures contract that has a smaller contract size than an otherwise identical futures contract.

minimum investment

The smallest amount that an investor is permitted to contribute to a hedge fund as an initial investment. Minimum investment requirements can range from US$50,000 to $5 million, but most funds insist on $500,000 to $1 million. The amount is set by the manager and can be dependent on the manager's/fund's domicile's definition of an accredited investor.

momentum

The speed of price change over a period of time. Momentum based investment styles, notably trend following approaches, aim to capitalise on the acceleration in directional price movements, be they upward or downward.

money market

The market for short-term debt instruments.

Monte Carlo simulation
A mathematical technique used to model the price characteristics of an investment structure based on random simulations of the underlying assets or variables that affect the price of that investment. In the context of the modelling carried out at Man, the analysis involves constructing multiple NAV paths for a product, net of all appropriate fees and interest, using random samples of gross returns. The price characteristics that can be modelled using this powerful technique are known as ‘path-dependent’ characteristics, such as risk, return, and drawdowns, which depend on NAV movements over the life of an investment structure.
mortgage-backed securities

A common instrument in fixed income arbitrage strategies. MBS are created when home loans are pooled and packaged into new instruments whose holders are entitled to some share of the cash-flow received from underlying mortgage loans. A key characteristic of these instruments is prepayment risk, which relates to the uncertainty in the timing of cash-flows. Arbitrageurs may either buy MBS and attempt to hedge out their prepayment risk or exploit relative mis-pricings between different MBS.

multi-strategy (for Event driven strategy)

Deals with both Deal arbitrage and Bankruptcy.

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