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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 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 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 per cent long and 100 per cent short, giving him a market exposure of 40 per cent 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 a measure of return per unit of risk. Whereas the Sharpe ratio focuses on all volatility ("good" or "bad"), Sortino uses the downside standard deviation to highlight only the bad volatility ¾ which is what concerns investors the most. Sortino compares portfolio return to a MAR (minimum acceptable return), which sometimes is defined as treasury-bill yields.

Special situations

An investment strategy that invests in event-driven situations such as mergers, hostile takeovers, reorganizations, or leveraged buyouts.

Squeeze

See Short Squeeze

Standard deviation

Standard deviation measures a set of (return) data in relation to its mean. Increasing levels of dispersion around the mean lead to higher standard deviations, indicating a higher degree of volatility. 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 to revert to their norm, or mean, gains will be realized.

Stock symbol

A unique symbol assigned to a security. Stock symbols are also known as tickers or 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 hedge funds. Strategy and style [often] used interchangeably.

Stress-testing

A simulation technique used on investment portfolios to determine their potential reactions to different financial shocks.

Structured products

The term is chiefly industry jargon to describe expertly engineered products offering exposure to a variety of investment strategies in an investor-friendly package.

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 [often] used interchangeably.

Style drift

The tendency of a manager to deviate from the fund's specific strategy.

Survivorship bias

The overestimation of historical returns caused by poor performing funds dropping out while strong performers continue to exist. Both hedge funds and mutual funds experience survivorship bias.