The glossary has been created to clarify a selection of specialist investment terms used by State Street Global Advisors.
The excess return of the portfolio relative to the return of the benchmark index is a fund's alpha.
A trade that attempts to profit from differences in the price of identical or similar financial instruments, on different markets or in different forms, usually by buying one asset and selling the other. Arbitrage exists as a result of market inefficiencies and provides a mechanism to ensure that prices do not deviate substantially from fair value for long periods of time.
Asset Allocation
An asset allocation aims to balance risk and reward by apportioning assets to achieve an investment's objectives.
The process of selecting a long-term target asset allocation is called strategic asset allocation. The shorter-term variation around that target is called tactical asset allocation.
Authorised Participant (AP)
An entity chosen by an ETF's sponsor to undertake the responsibility of obtaining the underlying assets needed to create an ETF. Authorised participants are typically large institutional organisations, such as market makers.
Basis Point
A measure equal to 1% of 1%, or 0.01%.
Authorised ETF participants accumulate baskets that include all of the securities tracked by a specific index. The baskets then become creation units for an ETF that tracks that index.
A standard against which the performance of a security, managed fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose. By tracking a benchmark, a fund can provide an investor with a return on a market rather than a specific company or stock.
A quantitative measure of the covariance of a given stock, managed fund, or portfolio relative to the overall market (normally represented by a benchmark). A beta above 1 means the instrument moves more than the overall market, while a beta below 1 means it moves less than the overall market. Eg. If a security has a beta of 1.1 to the overall market, and the market moves 10%, the security would be expected to move 1.1 X 10% = 11%.
Bid Ask Spread
The difference between the highest price that a potential buyer is willing to pay for an asset (the bid) and the lowest price that a potential seller is willing to accept (the ask).
Capital Gain
This is the amount that an asset increases in value over the time it is owned. A capital gain is unrealised until the asset is sold, when the gain becomes realised.
Capital Market Instrument
An instrument which facilitates the transfer of capital in the financial markets, such as equity, bond or a SPDR ETF.
Cap Weighted Index
A capitalization-weighted index is one in which the components are weighted according to the total market value of their outstanding stock.
Current Yield
The market value weighted average current coupon of the bonds in the portfolio divided by the current market price of the bonds in the portfolio.
In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common goal of diversification is to reduce risk or volatility by investing in a variety of securities or assets.
A marketplace where securities, commodities, derivatives and other financial instruments are traded. Its main function is to ensure fair and orderly trading, as well as efficient dissemination of price information, for any securities trading on that exchange. Exchanges provide a platform to sell securities to the investing public, and may be physical or electronic.
Exchange Traded Fund (ETF)
An investment product that tracks an index, commodity or basket of assets in a similar manner to an index managed fund, but trades like a stock on an exchange.
Expense Ratio
The annual operating expenses of an unlisted managed fund or ETF, expressed as a percentage of the fund's assets.
Fund Fiscal Year 1 Forward Price/Earnings
The weighted average of each security's Fiscal Year 1 Forward P/E (FY1 P/E). FY1 P/E is calculated by dividing the closing price as of the report date by the mean Earning Per Share estimate for the next unreported fiscal year as of the report date.
Fund Dividend Yield
Fund Dividend Yield is the dividends received by the Fund from its investments, divided by the market value of the Fund, expressed as a percentage.
Fund Estimated 3 (or 5) Year Earnings Per Share (EPS) Growth
Based on the underlying holdings of the Fund, the change in forward earnings estimates for the underlying holdings between 3 (or 5 or some other period) years are used to calculate a 3 year EPS growth.
A hedge is an investment made in one asset to reduce the risk of adverse price movements in some other asset. Normally, a hedge consists of taking an offsetting position in a related security.
All the assets found in a fund. This includes all shares, cash and other financial instruments.
A representative measure of the value a securities market or a section of that market. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Equity and fixed income market indices are used as the benchmark for index managed funds and ETFs, whose portfolios aim to mirror the components of the index.
Index Dividend Yield
Index Dividend Yield is the weighted average of the indicated annual dividend of the underlying holdings divided by price, expressed as a percentage.
Indexed Portfolio Management
Indexed portfolio management selects a group of securities, generally represented by an index, and holds these securities over long periods of time. The portfolio is generally only traded or rebalanced when the index constituents change. Passive portfolio management usually involves lower turnover than active management.
Intraday NAV
An Intraday NAV is based on the last trade price of each holding listed in the basket used for creation and redemption including estimated cash amounts. This value is used to provide an intraday relationship between the basket of securities representing the ETF and the market price of the ETF. An intraday NAV is calculated and published throughout the trading day.
This is a term used to describe an investor's ability to buy or sell a particular security or product. A product which has high trading volumes is easy to buy and sell and considered to be 'liquid'. Also, if Market Makers stand ready to either buy or sell large volumes near fair value at any time, called 'making a market', then this product is also liquid. Liquidity is attractive for investors as it makes their investments more realisable, allowing them to change strategy or generate cash quickly without necessarily incurring high transaction costs.
Management Costs
A measure of the costs incurred when investing in a SPDR ETF. It Includes the Responsible Entity's fee and the Investment Manager's fee, which covers the funds normal operating fees and expenses. It does not include transactional fees such as ordinary brokerage and transactional fees for settling trades, and any interest or other charges on overdrafts.
Market Maker
An entity appointed by the Responsible Entity for the purposes of providing buy and sell quotes in the Units of the Funds in order to help keep the market for the Funds liquid and trading efficiently.
Market Risk
Market risk (or systematic risk) is the potential for an investor to experience gains and losses from general movements in securities prices. Market risk cannot be diversified away and is systematic of participation in that market.
Net Asset Value (NAV) per share
The market value of an ETF's total assets divided by the number of units outstanding.
Price/Book Ratio
Current market price of the stock divided by the most recent reported book value per share for the prior fiscal year.
Price/Cash Flow Ratio
The closing price of a security as of the report date divided by the cash flow per share for the prior fiscal year as of the report date.
Price/Earnings Ratio
The closing price of a security as of the report date divided by the Earnings Per Share for the last 12 months as of the report date.
Primary Market
The part of the capital market in which new securities are issued by companies, governments or other groups. Primary markets are facilitated by underwriting groups, which consist of investment banks that set an initial price range for a given security and then oversee its sale directly to investors. In some countries, primary markets are also known as new issue markets (NIM).
Return on Equity
A measure of profitability calculated as the dollars of profit generated for each dollar of shareholders' equity.
Secondary Market
The part of the capital market where investors purchase securities or assets from other investors, rather than directly from issuing companies. The national exchanges - such as the Australian Securities Exchange - are secondary markets. In any secondary market trade, cash proceeds from the buying investor to the selling investor rather than to an underlying company/entity.
Tracking Error
Tracking error is a statistical measure that describes how closely a fund's return is expected to track its benchmark. Tracking error of x% is interpreted as "over a one year period the fund's return is expected to be within x% of the index return two thirds of the time.
Ex-post tracking error is the annualised standard deviation of actual excess returns or past performance. Ex-ante tracking error is the expected return deviation based on statistical relationships between securities.
A low tracking error means the fund's returns have been very close to its benchmark returns.
Yield to Maturity
The market weighted average rate of return anticipated on the bonds held in a portfolio if they were held to their maturity date.
Index Definitions
Dow Jones Global Select Real Estate Securities Index
The Dow Jones Global Select Real Estate Securities Index measures the performance of publicly traded real estate securities. The Index represents equity real estate investment trusts (REITs) and real estate operating companies traded globally. To be included in the Index, a company must be both an equity owner and operator of commercial and/or residential real estate.
MSCI Australia Select High Dividend Yield Index
The MSCI Australia Select High Dividend Yield Index is a rules-based customized index of listed Australian securities that aims to achieve a higher than average dividend yield.
MSCI World Factor Mix A-Series Index
The MSCI World Factor Mix A-Series captures large-and mid-cap representation across 24 developed countries and aims to represent the performance of value, low volatility and quality factor strategies. The Index is an equal weighted combination of the following three MSCI Factor Indices in a single composite index: the MSCI World Value Weighted Index, the MSCI World Minimum Volatility Index, and the MSCI World Factor Mix A-Series (each, a "Component Index").
S&P 500 Index
The S&P 500 Index is composed of five hundred (500) selected US stocks which are intended to represent the broad US economy.
S&P Developed ex Australia LargeMidCap AUD Hedged Index
The S&P Developed ex Australia LargeMidCap AUD Hedged Index measures the performance of the same securities as the S&P Developed ex Australia LargeMidCap AUD Index with foreign currency exposures hedged to reduce the impact of foreign currency fluctuations between the currency in which each index constituent is denominated, and the Australian dollar.
S&P Developed ex Australia LargeMidCap AUD Index
The S&P Developed ex Australia LargeMidCap AUD Index is a comprehensive benchmark, market value weighted index that currently includes stocks from 25 developed markets. It is comprised of large-capitalisation and mid-capitalisation companies which represent approximately 85% of each relevant local market's total available capital.
S&P Emerging Markets LargeMidCap Index
The S&P Emerging Markets LargeMidCap Index is constructed from the large- and mid-cap segment of each emerging country in the S&P Global BMI representing the top 85% of the float-adjusted market capitalisation of each emerging country.
S&P Global Dividend Aristocrats Index
The S&P Global Dividend Aristocrats Index measures the performance of the highest dividend yielding companies within the S&P Global Broad Market Index that have followed a policy of increasing or stable dividends for at least 10 years.
S&P/ASX 200 A-REIT Index
The S&P/ASX 200 A-REIT Index comprises the leading listed property vehicles in Australia and represents diversified exposure to the Australian listed property market. Exposure is diversified geographically across Australia's major population centers and by sector across a range of property types, including industrial, commercial, retail and hotel/tourism. Investors have been attracted to the Index due to the combination of attractive levels of income and the opportunity for capital growth offered by listed property investments.
S&P/ASX 200 Financials Ex A-REIT Index
The S&P/ASX 200 Financials Ex A-REIT Index is comprised of listed Australian securities involved in the financial sector (except those that are classified as Australian Real Estate Investment Trusts). This includes companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, and financial investment, and real estate management and development.
S&P/ASX 200 Index
The S&P/ASX 200 Index is recognized as one of the leading investment benchmarks for the Australian equity market. The index represents the 200 largest entities in Australia. The S&P/ ASX 200 Index provides investors and fund managers with an effective benchmark for Australian equity performance, as it offers a broader representation of the Australian market.
S&P/ASX 200 Resources Index
The S&P/ASX 200 Resources Index is comprised of listed Australian securities involved in the metals and mining industry (broadly classified as aluminum, non-ferrous metal mining, salt and borate mining, phosphate rock mining, gold and precious metals, producers of iron and steel and related products) and energy (including oil and natural gas, steaming and coking coal, coal seam methane gas and uranium).
S&P/ASX 50 Index
The S&P/ASX 50 Index comprises approximately the 50 largest securities by market capitalization in Australia. The constituents represent the largest national and multinational publicly listed entities on the Australian equity market.
S&P/ASX Australian Fixed Interest Index
The S&P/ASX Australian Fixed Interest Index measures the performance of the Australian fixed rate bond market.
S&P/ASX Government Bond Index
The S&P/ASX Government Bond Index measures the performance of a sub-set of the Australian fixed rate bond market-the Commonwealth and State Government.
S&P/ASX Small Ordinaries Index
The S&P/ASX Small Ordinaries Index is comprised of listed Australian securities included in the S&P/ASX 300 Index but not included in the S&P/ASX 100 Index.

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