Incentive fee

See Performance fee.

Index

A composite of securities that serves as a barometer for the overall market or some segment of it. The best known of these are the DJIA and the S&P 500, both of which reflect the performance of large American companies. In Canada, the S&P/TSX is the most widely followed index.

Index arbitrage

An investment strategy that attempts to profit from the differences between actual and theoretical futures prices of the same stock index. This is accomplished by simultaneous buying or selling a stock index future while selling or buying the stocks in that index.

Index fund

A passively managed fund with portfolio composition constructed to mirror the performance of a specific index.

Inefficiencies

See Market inefficiencies.

Information ratio

The information ratio evaluates the return a manager adds over and above a relative index, given the amount of risk that the manager assumes.

Information statement

A legal document similar to an offering memorandum that states the risk and return objectives, terms and investment parameters of a specific fund.

Institutional sector

Refers to high value institutional investors such as endowments and foundations.

Interest-rate swap

An agreement between two parties that wish to switch floating-rate loan payments for fixed-rate loan payments in the same or different currencies. The rationale behind interest rate swaps is that one party may have access to better fixed-rates and the other may have access to better floating rates.

Investment Manager

See Fund manager

IPOs (initial public offerings)

The first public sale of stock by a private company to the general public. IPOs are usually issued by smaller firms who need capital from external shareholders to expand operations, but can also be done by large privately-owned companies looking to become publicly traded.

Issuer

A legal entity that offers securities or investment vehicles for sale for purpose of financing its operations.