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.
 
stock-futures arbitrage

An approach that seeks to take advantage of differences between a stock's current price and its expected future price by buying a group of stocks and shorting futures contracts in the corresponding index or by purchasing the futures contracts and short selling the stock.

stop loss

See Performance trigger.

stop order

This is an order that becomes a market order when a particular price level is reached. A sell stop is placed below the market.

straddle

(1) See Spread; (2) an option position consisting of the purchase of put and call options having the same expiration date and strike price.

strategy

The particular investment process employed by a manager in the application of an investment style.

stress testing

A simulation technique used on asset and liability portfolios to determine their reactions to different financial situations.

structured product

Typically provides principal protection (see Principal protection), invests across a range of styles and managers, provides increased investment exposure (see Leverage) and requires a high level of structuring expertise with respect to blending investment approaches, financing, liquidity and risk management.

style

A generic investment approach - such as equity hedge and long/short, event driven, arbitrage, global macro, or fund of funds - that has developed as a result of numerous managers aiming to exploit a particular type of market inefficiency, sharing a broadly similar conceptual understanding of that inefficiency, and employing a broadly similar investment methodology in order to extract value. Practitioners of a particular style will have their own investment process or strategy with unique distinguishing features and techniques.

subordinated debt

This is a loan secured by collateral on which the lender has a second position behind the senior debt lender. Because of the higher risk to the subordinated debt lender, some type of additional compensation is usually necessary, typically in the form of warrants or options on the company's stock. Often, repayment can be arranged as interest only for some portion of the term of the debt.

support

In technical analysis, a price area where new buying is likely to come in and stem any decline.

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