S&P (Standard and Poors)

Standard & Poors is one of the world's foremost providers of independent credit ratings, indices, risk evaluation, investment research, data, and valuations.

S&P 500 Composite Index

An index of 500 widely held common stocks that measures the general performance of the US market.

S&P/TSX

The S&P/TSX is the largest and most widely followed common stock index in Canada. Formerly called the TSX and prior to that the TSE.

S&P/TSX Composite Index

An index of widely held Canadian common stocks that measure the general performance of the Canadian market.

S&P/TSX Total Return Index

The value of the S&P/TSX Composite Index with dividends re-invested over time.

Sharpe ratio

The Sharpe Ratio is a measure of risk-adjusted performance. It measures the excess return earned per unit of risk taken. Annualized Sharpe Ratio converts the monthly ratio to an annual figure.

Short exposure

The percentage of a fund's assets that are invested in short positions. For example, a manager may be 60% long and 100% short, resulting in a market exposure of 40% net short.

Short-selling

The act of borrowing stock to sell high today with the expectation of buying it back at a lower price in the future and then returning the stock to the lender. An investor pays a stock lender a small fee to borrow the shares (usually arranged by a brokerage firm).

Short squeeze

A situation in which a lack of supply and an excess demand for a traded stock forces the price upward causing losses for short sellers. Short squeezes occur more often in thinly traded small cap stocks and losses from short squeezes are accentuated when a number of short sellers attempt to cover a short position simultaneously.

Single-strategy fund

Fund that invests assets in a single strategy and one or more managers.

Small-cap securities

Stocks with a market capitalization of less than $250 million in Canada.

Sortino ratio

The Sortino ratio is a measure of return per unit of risk. Whereas the Sharpe ratio focuses on all volatility ("good" or "bad"), the Sortino ratio uses the downside standard deviation to highlight only the “bad volatility”.

Special situations

Particular circumstances involving a security that would compel investors to trade the security based on the special situation, rather than the underlying fundamentals of the security or some other investment rationale. An investment made due to a special situation is typically an attempt to profit from a change in valuation as a result of the special situation, and is generally not a long-term investment.

Squeeze

See Short Squeeze

Standard deviation

A measure of the dispersion of a set of (return) data from its mean. The more spread apart the data is, the higher the deviation. Standard deviation is applied to the annual rate of return of an investment to measure the investment’s volatility (risk). Annualized standard deviation converts the monthly deviation to an annual figure.

Statistical arbitrage

This strategy profits from temporary pricing discrepancies between related securities. This irregularity offers an opportunity to go long the cheaper security and to short the more expensive one. As the prices of the two related securities revert to their norm, or mean, gains will be realized.

Stock symbol

A unique series of letters assigned to a security for trading purposes. Stock symbols are also known as ticker symbols.

Stop-loss measures

Stop-loss measures are designed to limit trading losses by automatically selling a position when a certain price is reached.

Strategy

The investment approach a manager takes to reach the fund's objectives. For example, Global Macro is a strategy within the opportunistic style of funds. Strategy and style are often used interchangeably.

Stress-testing

A simulation technique used on asset and liability portfolios to determine their reactions to different financial situations.

Structured products

A term used to describe engineered products offering exposure to a variety of investment strategies in an investor-friendly package such as closed-end funds, and guaranteed principal repayment notes.

Style

Hedge funds can be categorized into three main styles: Relative Value, Event-Driven and Opportunistic. Each of these styles has a few to several different strategies. Style and strategy are often used interchangeably.

Style drift

The tendency of a manager to deviate from or alter the fund’s investment style or strategy over time.

Survivorship bias

The tendency for poor performing funds to drop out while strong performers continue to exist.  This results in an overestimation of past results.