Active managers seek to add value relative to the benchmark by making active decisions with regard to market timing, stock selection and asset allocation.

Alternative assets can be defined as investments that are generally not included in the traditional investment classes of shares, fixed interest (bonds) and cash. There are two major types: those that are alternatives because of how they are traded or not traded (based on investment methods), and those that are alternatives because of what is traded (those where the assets are non-traditional). Alternative methods generally involve securities that are not publicly traded and subject to less disclosure and regulation. Examples include private placements of debt and equity, such as venture capital, leveraged buyouts, mezzanine financing, individually designed swaps and other derivatives. Alternative strategies are trades frequently made in mainstream and/or listed securities but in a non-traditional manner, eg both long and short positions may be taken to reduce risk and leverage may be used.

The process by which a fund manager selects how an investment is spread across each of the asset classes. The main asset classes are Australian shares, international shares, Australian listed property trusts (LPTs), global real estate investment trusts (REITs), Australian fixed interest (bonds), international fixed interest (bonds), alternatives and cash.

An index, or other market measurement, which is used by a fund manager as a yardstick to assess the risk and performance of a portfolio.

A form of analysis or investment style that focuses on individual stocks and de-emphasises the significance of economic and market trends. In bottom-up investing, therefore, the focus is on a specific company rather than on the industry in which that company operates or on the economy as a whole.

An increase in the value of an asset.

A decrease in the value of an asset.

An index that measures the prices of a selected group of goods and services that typify those bought by ordinary Australian households. It allows comparisons of the relative cost of living and is used as the primary measure of inflation.

Investments that tend to produce lower, more stable returns over the longer term than growth investments such as shares. Defensive investments generally include Australian and international fixed interest investments (or bonds) and cash.

This strategy simply means spreading investments across a number of different asset classes or different managers with the objective of minimising volatility and investment risk.

A distribution of profits made by a company to its shareholders.

In fixed interest investments this is a measure of the portfolio's sensitivity to interest rate changes. It takes into account the maturity date of a debt plus its coupon payments. As an indicator of risk, duration is useful for two reasons. Firstly, it provides a means of assessing the degree of mismatch between the assets and the benchmark or liabilities of a portfolio. Secondly, it provides an indication of portfolio volatility or risk.

Emerging markets are financial markets in countries with developing economies, where industrialisation has begun and the economy has links with the global economy. The financial markets in these countries are relatively immature compared to those of the world's major financial centres, but are becoming increasingly sophisticated and integrated with international markets. These markets potentially provide high returns but are subject to high risk and volatility.

Enhanced index managers aim to outperform the benchmark by a small margin. They employ index management with a number of technical, non-index sensitive enhancement strategies.

An investment which pays a fixed rate of interest (in the form of a coupon) and may be issued by governments or companies. These investments are generally for a longer term than cash investments and may pay a higher rate, but with higher risk attached.

Gearing is the strategy of borrowing money to purchase investments. Using gearing to increase the size of an investment may enhance returns in a rising market but can also magnify losses in a falling market.

Global real estate investment trusts are traded on major share exchanges in North America, Europe, Asia and emerging markets. Global real estate investment trusts can provide investors with a greater variety of investment opportunities not available locally. For example, globally, there are around 400 stocks versus 40 in the Australian listed property market. Investors can also gain access to a variety of overseas sectors, including institutional grade residential, hotels, aged care and healthcare sectors as well as retail, office and commercial sectors.

A quantitative global tactical asset allocation model focuses on the relative asset misvaluations that exist within and between country markets and uses a disciplined, quantitative approach to exploit them. Assets are actively allocated across liquid equity, fixed income and cash markets. The active management approach is pursued through long / short trades in stocks versus stocks, bonds versus bonds, stocks versus bonds and currencies, across and within 14 markets. The manager focuses on country, asset and currency level allocation and does not make active decisions at the individual security or industry sector level. Investment strategies are implemented through exchange traded futures and options and over-the-counter forward currency contracts.

These types of assets are expected to experience capital growth and a degree of risk is involved. They include: Australian and international shares, direct resources and property investments.

A manager who seeks capital gain from expected further growth in company earnings. Typically, growth managers focus less on price/earnings and other valuation measures and more on forecast earnings growth. Growth managers have less regard to price, concentrating on investments that will produce large amounts of capital growth over the long term. They focus on earnings growth and cash flow, believing that the growth generated in earnings will force the stock price to rise. These companies usually have high P/E ratios.

High yielding fixed interest securities (such as corporate bonds and credit derivatives) generally earn a higher rate of return than traditional fixed interest securities but also have an increased level of risk.

An investor has a long position when they own a stock and hold on to it in the hope of profiting from an increase it its price. It is the opposite of a short position.

A strategy of portfolio construction that uses a mixture of long and short position stocks. Long/short equity managers typically seek to add value by buying stocks they have a positive view on and selling stocks they have a negative view on.

A managed fund is a type of investment that pools investors' money with the money of other investors to form a fund which is then managed by a professional fund manager. The main advantage of a managed fund is that the pooling effect creates a large fund and therefore creates investment opportunities not usually accessible to individual investors.

A 'specific sector' fund invests in only one asset class (eg international shares) while a 'multi-sector' (or 'diversified') fund invests in a number of asset classes.

A measurement reflecting the value of a defined group of securities. For example, the S&P/ASX 300 Accumulation index reflects the collective value of Australia's largest 300 publicly listed companies.

At the single-sector level, an overweight allocation means that a fund has a higher allocation to a security or sector than the given benchmark index. At the diversified fund level, an overweight allocation means that the fund has a higher allocation to an asset class than its strategic benchmark.

A property investment generally involves buying units in listed property trusts (that are bought and sold on the stock exchange). These investments can be across a range of property sectors including commercial, retail, industrial and diversified sectors. Property generally provides the potential for higher returns than cash and fixed interest but is generally considered to be a higher risk investment.

Quantitative managers utilise a range of quantitative techniques in portfolio construction, removing the subjective analysis and emotion from the investment process.

When an investor buys a share, they are buying a portion of that company and therefore become entitled to dividend payments. In the event that the company is wound up, they are entitled to a claim on any remaining assets once all outstanding debts have been paid. The return on shares includes capital growth (or loss) and dividends (income paid out of the company's profits). Historically, shares have tended to outperform all other asset classes over the long term, but are generally considered to be a higher risk investment.

A short position occurs when an investor sells a share they do not own. Before the sale can take place, shares must be borrowed. In order to complete the transaction, and make a profit, the shares are eventually repurchased, usually at a lower price. This technique is used when an investor believes the share price will drop. It is the opposite of a long position.

A process that is used to meet the long term goals of the fund by determining the exposure to each asset class.

United employs a dynamic market linked strategic asset allocation strategy.

A bias towards a particular style of investing, such as a value management style or a growth management style.

Style neutral managers ensure that their portfolios do not have any style biases such as value or growth. The portfolio is constructed within strict risk parameters so that it is in line with the benchmark on a number of style characteristics such as value/growth and small/large cap. Style neutral management ensures that any outperformance will be derived from stock specific factors.

A process by which a fund moves away from its strategic asset allocation to take advantage of perceived differences in the relative values of the various asset classes.

Thematic managers aim to identify the major themes influencing investment markets. Thematic investing is usually conducted on a global basis with little regard to regional allocation. Portfolio construction takes advantage of the themes that have been identified before they influence the market.

A form of analysis that begins with forecasting broad economic trends then assesses the impact on industries and, finally, on individual companies. This is the opposite of bottom-up analysis.

Calculates the annualised standard deviation between the returns of a fund compared to a market index. From an investor's perspective it provides a measure of how a portfolio's returns deviate from the index's returns.

At the single-sector level, an underweight position means that a fund has a lower allocation to a security or sector than the given benchmark. At the diversified fund level, an underweight position means that the fund has a lower allocation to an asset class than its strategic benchmark.

A manager that has a value oriented focus on the mispricing of investments. They buy shares that are underpriced, usually as a result of short-term influences, and seek profits when they appear overvalued or when a price correction occurs. The price earnings (P/E) ratio is a key valuation measure and these shares usually have a low P/E ratio.

The level of fluctuation in the value of an investment over a period of time. From an investor's perspective, the higher the level of volatility, the lower the potential return. Volatility is, therefore, one measure of risk.

A measure of the return on an investment expressed as a percentage (calculated by dividing the income from an asset by its current capital value).