A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

I

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

Index arbitrage involves trading the difference in value between the stock index futures and the underlying stocks.

Index fund

A passively managed fund that mirrors the performance of a specific index. These funds typically charge very low fees and appeal to investors who recognize that most mutual funds fail to beat broad indexes such as the S&P 500.

Inefficiencies

See Market inefficiencies.

Information ratio

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

IPOs (initial public offerings)

The initial public sale of stock by a private company. IPOs are usually smaller firms who need capital from external shareholders to expand operations. IPO investments are risky as the value of the stock on the first trading day can be extremely volatile.

Issuer

Entity that offers securities or investment vehicles for sale.