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Our Glossary

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Depository A bank that continually checks whether the purchase, sale and valuation of securities made by the fund administrator comply with the law and the fund’s statute. It checks in particular the compliance with the legal and statutory investment limits.
Derivative Investment instrument derived from a particular underlying asset. The value of the financial derivative depends on the value of the underlying asset. The underlying asset could be, for example, a bond or a share. The basic types of financial derivatives include futures, options, swaps and forwards. See also Leverage.
Derivative Funds (Hedge Funds) Derivative funds invest in almost all financial and commodity instruments and in almost all regions and are thus not subject to such strict supervision as the other funds. Therefore, it depends in particular on the fund manager, which strategy will be chosen and what the results of the fund will be. Very often, these funds make use of the so-called leverage effect (which means that great yields, but also great losses can be achieved with just a small investment).
Diversification Distribution of an investment into different investment instruments in order to reduce investment risk.
Dividend Proceeds paid by a joint-stock company as a share of the profits. The amount of the dividend usually depends on the economic result of the company and on its approval by the general meeting of the company.
Dividend Funds They pay yields in the form of dividends. These payments are either regular or irregular, depending on the results of the fund. They are convenient for investors preferring regular rent. Dividends are mostly paid in gross amount and the investors must assess the tax on it by themselves.
Duration Duration is an indicator developed by Frederick Macaulay and used to assess the risk associated with bonds. It measures the level of risk of interest rate changes in fixed-interest securities. Duration means the average time during which the invested capital is tied up in years. The longer the bond fund’s duration, the more pronounced is the change (increasing or decreasing) in the value of the business assets according to the changing interest rates. Let’s present a simple example in which we take no regard to interest rate: If we lend 1.2 million and receive it after one year, it means that the funds were tied one year. However, when we get back 100,000 per month, then the lent money remains tied on average only half a year. Unlike the time until bond maturity, duration takes into account also the inflow of interest. The greater the duration (average time during which the invested capital is tied up in years), the higher the interest rate risk of the bonds – because in this period, the market interest rates may rise or fall and consequently the rate of the bonds may decrease or increase.


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