AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

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.
 
intermediary

A person or institution who acts on behalf of another person to make investment decisions, conduct transactions, or who acts as a middleman between investors and firms raising funds. In connection with futures trading, an intermediary may be a Futures Commission Merchant, Introducing Broker, Commodity Pool Operator, Commodity Trading Advisor, or an Associated Person.

International Swaps and Derivatives Association (ISDA)

A trade association of participants in the market for OTC derivates headquartered in New York. It has created a standardised contract (the "ISDA Master Agreement") and a set of definitions (the "ISDA Definitions"), which provide the framework for transaction documents covering swap and derivative transactions (typically interest rate, commodity and foreign exchange rates swaps) between counterparties.

intrinsic value

A measure of the value of an option or a warrant if immediately exercised, that is the extent to which it is in-the-money. The amount by which the current price for the underlying commodity or futures contract is above the strike price of a call option or below the strike price of a put option for the commodity or futures contract.

introducing broker

In the US, a person (other than a person registered as an Associated Person of a Futures Commission Merchant) who is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on an exchange who is not authorised to accept any money, securities, or property to margin, guarantee, or secure any trades or contracts that result there from.

investment advisor

See Investment manager.

investment manager

Often referred to as the Investment Advisor in the United States. The Investment Manager enters into an agreement with the Fund to make investment decisions on its behalf, usually on a discretionary basis, in return for a management fee (based on NAV) and a performance fee (a percentage of NAV appreciation over a given period). The Performance fee is sometimes also referred to as an Incentive fee.

investment statement

The document describing features of a product and its associated terms and conditions.

investor

See Eligible investor. See Accredited investor. Investors in hedge funds can be categorised in many ways but the most clear distinction is between fund of hedge funds managers and direct investors: 1. Fund of hedge funds managers: These entities manage diversified portfolios of hedge funds (usually in the form of collective investment schemes), and provide their investors with services such as fund selection and risk management in return for a fee. 2. Direct investors: Hedge funds are aimed primarily at institutional and sophisticated investors. Direct investors include pension funds (public and private), endowments, foundations and family offices.

IRR
See Interest rate of return.
ISDA
See International Swaps and Derivatives Association (ISDA).
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