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We have tried to avoid the use of technical jargon on the Seneca IM website, however due to the nature of our business some investment terminology is necessary to describe what we do. We have put together this glossary to explain some of the terms we think might need further clarification. If there is anything within this document or anywhere else on the website that you are not sure of, please get in touch and we will be happy to help.

Active Management

There are two main types of investment management: active management and passive management. We at Seneca are an active management company. Active management means that investment decisions are based on the judgment of fund managers (as opposed to passive management where decisions are made systematically). ‘Judgment’ means that our fund managers use analytical research, forecasts, and their own experience to make investment decisions with respect to which securities to buy, hold and sell.

Specialist assets

Specialist or non-traditional assets are investments other than shares or bonds. They are called ‘specialist’ because they represent an specialist to traditional assets such as shares or bonds. The term can cover anything from property and commodities to infrastructure investments, for example, covering green energy, or leasing businesses which specialise in aeroplanes or plant and machinery. We use specialist assets to help diversify a portfolio, as some of these investments are not expected to move in tandem with more conventional investments for much of the time.

Asset class

This is how different types of investments are grouped together, such as company shares, bonds, commodities or commercial property.


A benchmark is something against which the performance of our funds can be measured or judged. This ‘something’ could be a stock market index, an index comprised of the performance of competitor funds, or a fixed performance hurdle such as 5% per annum.


Issued by companies or governments, these are a kind of debt and are typically designed to pay interest, which is sometimes fixed and sometimes variable.

Bull Market

The phase of a financial market in which prices are rising over a sustained period, generally more than a few months.

Bear Market

The phase of a financial market in which prices are falling over a sustained period, generally more than a few months.

Capital growth

The return from any investment is comprised of two parts: income and capital growth. In the case of an investment property, rental income would be considered income while the appreciation in the value of the property would be considered capital growth. Capital growth generally refers to the appreciation in value in the underlying investment, whether shares, bonds, or property.


The interest rate paid by a bond.


The Consumer Price Index, which is a measure of UK inflation.


Diversification refers to the principle of ‘not putting all your eggs in one basket’. In other words, it means investing in a variety of investments and thus not being excessively exposed to the risk of a single investment falling sharply in value. Diversification can be achieved using different assets, funds and geographic regions.


Another name for shares in a company.

General Investment Account (GIA)

A way to hold investments outside of tax wrappers such as pensions or ISAs. They do not offer tax relief, but have few limitations.

Individual Savings Account (ISA)

An individual savings account allowing individuals to hold cash, shares, and funds free of tax on dividends, interest, and capital gains. Investors can put in up to a maximum amount in each tax year.

Investment Themes

An investment theme refers to some sort of broad issue or factor that is influencing markets or certain parts of markets in some way. One example would be ‘demography’, the study of populations, specifically human populations. Growth in populations, aging of populations or movement of people would have ramifications either for particular markets, sectors or individual companies. Understanding how investment themes impact markets and their components helps to improve investment decision making.


The London Interbank Offered Rate is a reference interest rate widely used in financial markets as a basis for lending rates or an indication of the return available on cash.

Market Capitalisation

This refers to the size of a company in terms of the total value of its shares (other ways of measuring the size of a company might be in terms of total revenue or total assets). To calculate current market cap, one simply multiplies the total number of shares in issue with the current share price.

Mid Cap

The term “Mid Cap” is a reference to a medium-sized listed company. Exactly how big a company should be to qualify as a mid-cap varies from market to market. For example, mid-caps might mean companies whose market capitalisation is between £500 million and £1 billion.

Multi-asset Fund

A fund that invests in more than one asset class. A simple multi-asset fund would be one that invested just in equities, bonds and cash. A more complicated multi-asset fund might also include specialist assets.

Self-Invested Personal Pension (SIPP)

A pension plan that allows the holder to choose and manage the investments made.

Strategic Asset Allocation

Strategic asset allocation can be thought of as the broad allocation to each asset class that would be expected to achieve the investment performance objective over time. For example, a simple multi-asset fund might have a strategic asset allocation of 60% global equities and 40% global bonds. Given an understanding of how global equities and global bonds would be expected to behave over the longer term, one would have an understanding of how the fund should behave over the longer term as a result of exposure to bonds and equities in the proportions mentioned.

Systemic returns

The return from any investment is comprised of a systemic return and an idiosyncratic return. Systemic returns are ones that are common to more than one company while idiosyncratic returns are returns that are unique to one company. For example, the rise in shares of exporters that is the result of depreciation of Sterling would be systematic. While the fall in the shares of company ABC plc due the resignation of the CEO would be idiosyncratic.

Tactical Asset Allocation

Tactical asset allocation is generally used in conjunction with strategic asset allocation. Tactical asset allocation refers to decisions to deviate from time to time from strategic asset allocation. Using the example cited, this might mean a decision to have only 50% in equities rather than the strategic allocation of 60% because one might have a slightly negative view on the outlook for equities.

Typical investment cycle

Investment cycles tend to last anywhere between five and 10 years and are in synch with business cycles, which themselves comprise an economic expansion phase and an economic contraction (recession) phase (according to the Bank of England, the typical cycle length in the UK since 1701 has ranged from 5.1 to 8.5 years). A “typical” investment cycle is defined as one in which various asset classes produce total real returns over the entire cycle that are broadly in line with their historic long-term average real returns. It should be noted that there may be investment cycles during which returns from various asset classes are much lower than would typically be expected given historic long-term averages.


The term ‘undervalued’ is used to describe an investment that is cheap in relation to some or other measurement. The measurement could be an objectively derived measure of the value of the investment in question such as breakup value (how much cash shareholders would receive if the company was broken up) or related to the sector in which the investment sits (a company might be considered undervalued if it was yielding more than the sector average).  There are many ways of valuing assets.


This is a term used to describe the frequency and severity with which the price of an investment goes up and down.

Yield (income)

The amount of income you receive in monetary terms will be equivalent to the dividend per share multiplied by the number of shares you own. This is usually expressed annually as a percentage based on the investment’s market value.

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The information in this website does not constitute advice or a personal recommendation and you should not make any investment decisions on the basis of it. It does not take into account the particular investment objectives, financial situations or needs of investors.

The investments on this website constitute Open-ended Investment Companies and Investment Trusts. Their underlying portfolios are comprised of UK and International equities and fixed interest securities including government and corporate bonds, specialist investments including property and unquoted companies and other invested funds. Investors must understand the risks involved, including the risk that the investments may not achieve their investment objectives and you may not get back the original amount invested. For a full description of the risks please refer to the Full Prospectus of the Funds or the latest annual report of the Investment Trust which are available in the Literature section of this website.

Seneca Investment Managers does not provide investment advice to personal investors. If you are uncertain whether any of the investments are suitable for your own circumstances please contact a financial adviser before taking any action. If you do not have an adviser, the Financial Conduct Authority provides information on how to find an adviser on their website. Click here.