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.
 
short squeeze

A market situation in which the lack of supplies tends to force shorts to cover their positions by offset at higher prices.

short-term trading

An approach in which the fund manager focuses on opportunistic trades, holding investments for only brief periods. Such funds often engage in "day trading".

side letters

A letter agreement usually negotiated between a manager and an investor in respect of an investment in a fund, containing terms which may be more preferable to those offered in the funds’ offer document. Such terms may offer the investor reduced fees, special redemption rights, special reporting rights, etc.

slippage
The difference between the sample or target price for buying or selling an asset and the actual price at which the transaction takes place.
small cap/micro cap

Purchasing stocks issued by small companies. Small-cap companies generally have $250 million to $1 billion of market capitalization, while micro-cap companies have less than $250 million of market capitalization.

soft dollars

Credits that can be used to pay for research and other services that brokerage firms provide to hedge funds and other investor clients in return for their business.

sophisticated investor

See Accredited investor.

Sortino ratio
A measure of risk-adjusted performance that indicates the level of excess return per unit of downside risk. It differs from the Sharpe ratio (see Sharpe ratio) in that it recognises investors’ greater tolerance for volatility in profitable periods (‘good volatility’) compared with their tolerance for volatility in periods of negative performance (‘bad volatility’), and uses a measure of ‘bad volatility’ as provided by semi-deviation - the annualised standard deviation of the returns that fall below a target return. Also called the "upside potential ratio".
special situations

An event-driven investment strategy, in which the manager seeks to take advantage of unique corporate situations that provide the potential for investment gains. See Event driven.

specialist system

A type of trading commonly used for the exchange trading of securities in which one individual or firm acts as a market maker in a particular security, with the obligation to provide fair and orderly trading in that security by offsetting temporary imbalances in supply and demand by trading for the specialist's own account. See Open outcry.

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