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Account keeper (also known in France as the Teneur de compte conservateur de parts or TCCP) (account keeper-unit custodian)
The account keeper is a company entrusted with managing savers' individual accounts. The company is accredited by the Comité des Établissements de Crédit et des Entreprises d’Investissement (French Committee of Credit Institutions and Investment Firms), on the opinion of the AMF. An FCPE's account keeper must be independent of the company responsible for its financial management. It receives unit subscription and redemption instructions, processes them and initiates the corresponding payments or settlements.
The account keeper-unit custodian is the company responsible, for all of the assets invested in an employee savings plan, for :
> administration : processing of employee payments, fund switching operations, withdrawals, etc.,
> communication : sending of account statements, telephone platform, online services, and so on.
The Autorité des Marchés Financiers (French Financial Markets Authority) is an independent public organisation responsible for :
- ensuring the proper conducting of financial transactions and information quality;
- defining the rules governing the markets, financial professionals and collective savings products;
- overseeing the markets, for example through audits, investigations and penalties;
- educating individuals and acting as their mediator.
To find out more see : www.amf-France.org
An option available when certain investments mature (such as PERPs - popular pension savings plans) that allows savers to recover their savings in the form of guaranteed, regular payments, starting from their retirement and continuing for the rest of their lives, whose amount is revised over time. When principal is converted into an annuity, it is surrendered to the insurer in return for the payment of the annuity. On the beneficiary's death, the payment of the annuity is stopped, unless special conditions have been agreed, for example stipulating payment to a spouse.
The asset allocation describes the dividing of a savings portfolio between various investment instruments (such as equities, bonds or money market instruments) according to a given risk profile. The goal of the allocation process is to increase the return on a portfolio while reducing its overall risk.
There are usually three main families of asset allocations: conservative allocations (the objective of this type of allocation is usually to limit the risk of losses), balanced allocations (representing a compromise between a high expected return and a relatively low risk) and dynamic allocations (intended to maximise the return in exchange for accepting a high level of risk).
An asset class is a category of transferable securities in which a UCITS invests and that partly dictates the category to which it belongs. The main asset classes include equities, bonds and money market instruments.
Source : Dictionnaire de la gestion collective – Gérard Blandin – SEFI Editions.
Asset management company : responsible for the financial management of FCPEs
Asset management companies are responsible for the administrative, accounting and financial management of FCPEs; they must be accredited by the AMF.
They are financial intermediaries tasked with :
- Applying the management policies (and particularly investment choices) defined in the FCPE's rules,
- Performing securities transactions (purchasing and sale of the equities, bonds and other instruments that make up the fund's portfolio).
Asset management companies are chosen by the companies setting up employee savings schemes. The asset management company creates the collective portfolio according to the FCPE's objective and policy. It may therefore buy, sell or exchange any of the securities contained in the portfolio, and make any reinvestments, on behalf of the fund; it may maintain the fund's cash allocation, within the limits imposed by the regulations, particularly to respond to redemption requests. In accordance with the provisions of article L. 233-7 of the French Commercial Code, it must declare any crossing of the threshold provided for by this article. Subject to the powers granted to the Supervisory Board, the asset management company acts on behalf of unitholders and represents them in dealings with third parties in connection with any actions or agreements affecting the fund. It produces the accounting documents and publishes the periodic information documents.
Availability (of savings)
The sums saved in PEEs (company savings plans) are available from the 5th year following each payment. The available savings therefore consist of the portion of the sums saved for more than 5 years, which may be withdrawn at any time. The sums saved in PERCOs (collective pension savings plans), on the other hand, become available on the date of the employee's retirement.
A unit used to measure interest rates, which is equal to 0.01%.
Transferable securities representing a share in the debt issued by a company, a State or local authorities. Interest, whose rate is set in advance, is paid on bonds in return for a loan from the bond's buyer.
This Euro-denominated "share" index is representative of the top 40 French stocks by liquidity and market capitalisation. It is calculated by Euronext and available on datastream.
Capital gain or loss
The capital gain is the positive difference between the selling price of a security or an FCP unit, and its purchase price. If the difference is negative it is referred to as a capital loss.
Company mutual fund (FCPE)
Funds whose sole purpose is to collect the sums paid into employee savings plans. They are managed by asset management companies that have specific accreditation. They hold the transferable securities (equities, bonds, etc.) of which portfolios are composed. The price of their units changes according to the performance of the securities that make up the Fund.
The coupon is the interest paid to holders of a bond or a UCITS invested in bonds.
CSG – CRDS
The CSG (General Social Security Contribution) was introduced in 1991 as a tax to fund the social security system. The CRDS (Contribution for the Repayment of Social Debt), which was introduced in 1996, is a temporary tax earmarked for the CADES (Social Debt Repayment Fund). The CSG and the CRDS are payable by every individual who is tax resident in France. They apply to income from gainful employment and replacement income, as well as income from assets and fixed-income investment products subject to withholding tax or exempt from income tax.
The depositary is mainly responsible for checking the compliance of the management decisions made on behalf of the FCPE and for the safekeeping of the FCP's assets (i.e. its securities and cash).
It executes the purchase, exchange and sale orders for the securities contained in the portfolio and performs the checks required to allow the fund to exercise the rights attached to the securities held in the portfolio. It also handles the collections and payments generated by the fund's management.
Within six weeks of the end of each half year, the depositary checks the inventory of the fund's assets produced by the asset management company; it certifies the inventory of the fund's assets at year-end. It verifies the compliance of the transactions executed with the provisions of the mutual fund regulations. It must take all of the precautionary measures that it considers to be necessary. If a major dispute arises with the asset management company, it informs the AMF.
It also keeps the fund's issuer account. The depositary is a service provider responsible for the safekeeping of securities and for checking the compliance of the management decisions made on behalf of the UCITS. It may outsource part of its functions to another establishment able to act as an account keeper-custodian (and particularly the safekeeping of assets to a custodian), on a contractual basis. It cannot, however, outsource its responsibility for checking the compliance of the decisions made by the UCITS' asset management company.
The fraction of the profits made that a company pays out to each of its shareholders. The dividend amount is suggested by the board of directors and approved by the general meeting. Dividends are usually paid in cash, but the company may also offer payment in shares.
An investment strategy based on high sensitivity to risk (portfolio composed of at least 75% equities).
Early release (cases of)
Cases of early release are specific cases, linked to employees' personal circumstances, in which the sums paid into an employee savings plan may be recovered early, without the loss of any tax or social security advantages.
The role of the European Central Bank, which was founded in June 1998, is principally to manage the single currency (the Euro) and to define and implement the economic and monetary policy of the Economic and Monetary Union (EMU). The ECB, in cooperation with the Euro system (the EMU's 12 Central Banks), performs its monetary policy duties by manipulating the eurozone's refinancing or policy rate.
This term refers to the financial market in an economy that is rapidly developing, but whose development is not free from risks and imbalances. Emerging stock markets may offer potentially high returns and be highly volatile. Investors must beware of possible local currency controls and restrictions on the repatriation of investments. It is preferable to invest in such markets through specialised UCITSs.
Employer matching contribution
A payment made by an employer into a company savings plan (PEE or PERCO) to top up employees' payments.
Employee Savings Plan
Savings schemes set up by companies to help their employees to build up savings securely and with a good rate of return, through contributions by the company ("employer matching contribution") and tax and social security advantages.
In collective management terms, this refers to a UCITS' investment in a particular asset class (such as equities, bonds or money market instruments), which dictates the market and/or foreign exchange risks for unitholders.
Source : Dictionnaire de la Gestion Collective - Éditions SEFI
See Mutual fund
See Company Mutual Fund
A feeder UCITS is an undertaking whose assets are entirely and permanently invested in equities or the units of a single, master UCITS, in forward financial instruments and, on an ancillary basis, in cash.
In this context, the master UCITS is either a general-purpose investment vehicle, such as a SICAV or an FCP, which may or may not be an umbrella fund; an FCPR (venture capital mutual fund), an FCPI (innovation-focused mutual fund) or an FCIMT; or a simplified investment vehicle.
Professionals who sell or buy securities on the financial market on behalf of investors. They include banks, investment firms and online brokers.
Financial intermediation is referred to when the financial world is interposed between seekers and providers of capital, in other words when financial intermediaries buy securities issued by companies and, to finance themselves, issue securities in their turn that are placed with savers, or collect funds in the form of deposits or passbooks (known as indirect finance). Financial intermediation is therefore very different from the simple role played by the financial intermediary in a direct finance context.
Flat-rate withholding tax
The flat-rate tax that a taxpayer may opt for before receiving income. They are otherwise subject to the progressive income tax scale.
Fund of funds
A SICAV, FCP or FCPE that invests in other SICAVs or FCPs rather than directly investing in equities or bonds.
See "Fund shifting"
Fund switching refers to the redistribution of savings between different investment vehicles within the same savings plan (contrary to a transfer, which involves the moving of all or part of the saver's savings from one savings plan to another). This type of operation is used, for example, to boost savings by allocating a larger share of assets to vehicles invested in equities or, conversely, to reduce the risk exposure by refocusing the portfolio on less risky vehicles, invested in bonds or money market instruments.
Fees charged when certain sums are reallocated between different investment vehicles within the same employee savings plan.
A type of voluntary employee savings scheme that gives employees a financial stake in their company's performance. Incentive plan payments may be made directly into employees' bank accounts, in which case they are subject to income tax. They may also be paid into a PEE or PERCO and are in this case exempt from tax.
A fund management technique that consists of achieving a performance that is as close as possible to that of an index appropriate to the management objective. For example, the index-linked management of US equities would involve achieving a performance that was as close as possible to that recorded by the S&P 500 or the Dow Jones index. In index-linked management, a commonly adopted strategy is to hold the assets that make up the index in the exact same proportion as in the index.
A complex monetary phenomenon whose cause, according to monetarist economists, is a faster rise in the money supply than in the Gross Domestic Product (GDP). It is measured through an index of products representative of the change in wholesale and retail prices. It has a direct influence on interest rates and therefore on the behaviour of the financial markets. These may undergo major corrections following inflationary tensions resulting in an interest rate hike.
Source : Dictionnaire de la Bourse et des termes financiers – SEFI Editions.
Interest rate risk
This risk is related to the volatility of interest rates on the financial markets. A UCITS (and therefore the UCITS' unitholders) is exposed to an interest rate risk if it holds investments in bonds or debt securities.
Source : Dictionnaire de la Gestion Collective - Editions SEFI
Period for which an investor wishes to invest their funds on the financial markets. The investment strategy is developed based on this parameter (and the level of risk acceptance).
Source : Dictionnaire de la Bourse et des termes financiers - SEFI Editions.
Management and operating fees
Fees paid as remuneration for asset management and to cover the fees borne by the FCPE, including for custody, distribution and meetings of the supervisory board, and the statutory auditor's fees. They are calculated as a percentage of the assets and may be paid by the FCPE or the company.
The market value of a company, arrived at by multiplying the number of the company's shares by their quoted market price.
Merger/acquisition (of a fund)
A merger is an operation whereby one or more funds combine to form a single fund. Merger/acquisitions are the most common form of merger. After a merger/acquisition, the acquiring fund still exists, while the acquired fund is no longer in existence and all of its assets and liabilities are taken over by the acquiring fund.
In this last case, the saver's assets are automatically transferred from the acquired fund to the acquiring fund and they receive a new number of acquiring fund units in exchange for their old units, which is calculated as follows : Number of units held in the acquired fund x Value of an acquired fund unit on the merger date / Value of an acquiring fund unit on the merger date.
Multi-Company Fund (FME)
An FCPE set up for the benefit of employees who do not belong to the same group of companies.
Mutual fund (FCP)
A portfolio of transferable securities that is jointly owned by unitholders. Mutual funds are managed by asset management companies and are usually offered by financial institutions, banks and insurance companies.
Net Asset Value (or NAV)
The net asset value of a fund on a given date is the known value of its assets on this date, divided by the number of units in issue. Fund unit subscriptions and redemptions (reimbursements) are carried out on this basis.
Obligations Assimilables du Trésor (French government bonds). These securities are bonds issued by the State that are tradable on the financial markets. The investment period for these bonds is known from the start and the repayment of the principal is guaranteed at maturity.
A management method that consists of trying to replicate the performance of a stock market index (e.g. the CAC 40, the Dow Jones or the S&P 500) as faithfully as possible by putting together a portfolio that reproduces the target market index on a smaller scale. The management process may be automatic and automated and may not involve a manager monitoring whether the securities contained in the portfolio are undervalued or overvalued.
Performance (annualised, rolling, calendar and aggregate)
The performance of an investment vehicle is expressed as the percentage by which it has changed over a given period.
The annualised performance is arrived at by converting the performance obtained over a period of more than one year into its annual equivalent. For example, a performance of 10% over 2 years is equivalent to an annualised performance of 4.88%.
The rolling performance is calculated from date to date for a given period ending at the calculation date (e.g. the rolling one-year performance, calculated on 20 October, is the performance over the past year from 20 October of the previous year).
The calendar performance is calculated from 1 January to 31 December. It can therefore only be calculated for a previous year that has already ended.
The aggregate performance is the total performance of a fund from a given date, without taking into account the time elapsed since this date.
Plafond Annuel de la Sécurité Sociale or Pass (Annual Social Security Ceiling)
The Pass is provided for by article L.241-3 of the French Social Security Code. It is used to calculate social security contributions, according to the general change in wages, under conditions laid down by decree. The amount is determined by the Minister for Social Security at least once a year.
Plan d’Épargne d’Entreprise or PEE (Company Savings Plan)
A collective savings scheme allowing employees to build up personal savings, with their company's help, within an advantageous financial and tax framework, subject to a 5-year lockup period (except in cases of early release).
Plan d'Epargne Groupe or PEG (Group Savings Plan)
A collective savings scheme that allows employees of a group of companies to build up savings invested in transferable securities, within an advantageous tax framework, subject to a lockup period for these savings, usually of 5 years.
Source : AMF - Autorité des Marchés Financiers (French Financial Market Authority).
Plan d'Epargne Interentreprises or PEI (Inter-company Savings Plan)
A collective savings scheme set up by agreement within several companies, covering a specific occupational sector or geographic area. PEIs have a two-fold objective: giving very small companies and SMEs easier access to company savings plans, and sharing the costs connected with such a scheme.
Source : AMF - Autorité des Marchés Financiers (French Financial Market Authority).
Plan d'Épargne pour la Retraite COllectif or PERCO (Collective Pension Savings Plan)
A collective scheme for pension savings that benefits from an advantageous tax framework.
All of the transferable securities held by a SICAV, FCP or FCPE.
A mandatory scheme in companies with more than 50 employees that consists of paying a share of the profits made to employees.
Redemption (= reimbursement, = withdrawal)
Recovery by an employee of all or part of their savings.
Reference index (benchmark)
This indicates the type(s) of asset in which a fund will invest, and their proportions. It is composed of a large basket of transferable securities, usually in the form of a stock market index or a combination of indices (e.g. a fund whose index is 50% MSCI Europe + 50% MSCI World excluding Europe will invest 50% of its assets in European companies and 50% in non-European companies).
An FCPE subject to index-linked management strictly follows the composition of its reference index or benchmark; if the management is "benchmarked", the manager has a margin for error in relation to the fund's benchmark (see tracking error). This benchmark is also used to compare the performance of funds whose investment universes are similar.
The financial institution that manages the accounting recognition of the funds paid into and withdrawn from an FCPE by employees or the company.
Réserve Spéciale de Participation or RSP (Special Profit-sharing Reserve)
Risk aversion (level of)
An indicator of a saver's behaviour in terms of the level of return that they expect and the risk of loss that they are willing to bear when they choose their investment product.
The level of risk aversion can be measured using tools that determine the risk profile of each individual. A saver may therefore accept a low expected return if they refuse to bear any risk of loss (this would be a Conservative saver), accept a moderate risk of loss in exchange for a higher expected return (a Balanced saver), or be willing to suffer large losses in the hope of making equally large returns (a Dynamic saver).
The choice of investment product is based not only on the saver's profile, but also on the investment period; the longer the savings period, the lower the investment risk.
Funds put together with the objective of maintaining a stable risk exposure over time. The weighting of the various types of asset (such as equities, bonds and money market instruments) differs according to the type of profile chosen. There are usually three types of profile : conservative, balanced and dynamic :
- Dynamic funds are mainly invested in risky assets with a high potential return. They are suited to savers who wish to invest over the long term or who are willing to accept a high exposure to risk.
- Balanced funds are half invested in fairly safe assets, which stabilise the portfolio, while the other half is invested in more dynamic assets, whose role is to boost the return. They are suited to savers who wish to invest over the medium term or who are willing to accept a moderate exposure to risk.
- Conservative funds are mainly invested in low risk assets with a limited potential return. They are suited to savers who wish to invest over the short term or who are willing to accept a low exposure to risk.
An investment strategy based on a low sensitivity to risk (e.g. money market funds).
Generic term denoting all transferable securities, such as equities, bonds and UCITSs.
An indicator used to measure the percentage by which a 1% change in market interest rates would change the price of a bond or the net asset value of a bond Fund. A sensitivity of 3 means that, if interest rates changed by 1%, the fund's net asset value would change by 3%. A Fund's exposure to interest rate risk can therefore be assessed using this concept.
A transferable security representing a share in a company's equity. The purchase of shares by investors entitles them to a percentage of the company's profits (in the form of dividends) and a right to vote at general meetings.
Social security charges
The charges imposed on income from gainful employment and replacement income, as well as income from assets and investments. These charges include the CSG, the CRDS and additional contributions.
Social security contributions
Socially Conscious Companies
Companies accredited by the administrative authorities, whose shares are not listed on a regulated market and that either employ staff under State-subsidised contracts or as part of professional integration programmes, or are entities whose directors are elected by their members and that meet certain director and employee pay rules.
Source : AMF - Autorité des Marchés Financiers (French Financial Market Authority).
Socially responsible management
A type of management applied to UCITSs. As well as looking at financial characteristics, the manager takes social and environmental parameters into account (see the detailed case studies on the website).
Société d'Investissement à Capital Variable or SICAV (Open-ended Investment Company)
A company that issues shares and manages a portfolio of transferable securities for all of its Shareholders.
Source : AMF - Autorité des Marchés Financiers (French Financial Market Authority).
The statutory auditor is granted a six-year term by the asset management company's board of directors, subject to the AMF's approval. It carries out the checks and audits required by law and, where necessary, certifies the accuracy of the information published, and the fairness and compliance of the financial statements and accounting information contained in the fund's annual report. It informs the asset management company and the AMF of any anomalies or inaccuracies that it finds during its audits. The statutory auditor's fees are published in the fund's annual report. If the fund is a feeder FCPE, the statutory auditor will have concluded an information exchange agreement with the master UCITS' statutory auditor (see article 412-3 of the AMF's general regulations).
Stock market indices
Baskets of national or international, general or sectoral listed securities, used as instruments to capitalise on the performance of the equities or bonds of which they are composed. They may form the basis of complex hedging or asset management products.
Source : Dictionnaire de la Bourse et des termes financiers - 5ème édition – SEFI Editions.
Each FCPE has a Supervisory Board, made up of representatives of the company and unitholder employees. The Board is chaired by an employee representative. The FCPE's rules set out the procedure for designating the representatives of the company's unitholders :
> either by election,
> or by decision made by the relevant work councils or union organisations.
The Supervisory Board meets once a year to examine the FCPE's management report and annual financial statements. It exercises the voting rights attached to the securities held by the FCPE. One or more authorised representatives of the FCPE are therefore designated to represent it at the issuing companies' general meetings. The Board may present resolutions at general meetings. Where appropriate, it approves changes to the FCPE's rules. The Supervisory Board is responsible for :
> giving its opinion on significant changes to the fund's rules (management policy, identity of the manager, etc.), where appropriate,
> examining the FCPE's financial statements and annual management report,
> exercising the voting rights attached to the securities held by the fund or authorising the asset management company to exercise these voting rights.
The Supervisory Board is tasked particularly with examining the FCPE's financial, administrative and accounting management. It may ask to interview the fund's asset management company, depositary and statutory auditor, which must obey its summons. It decides on mergers, demergers and liquidations. The fund's rules specify the changes and amendments to the rules that cannot be decided on without the Supervisory Board's approval. Without prejudice to the powers of the asset management company referred to in article L. 214-25, and the liquidator's powers referred to in article L. 214-31, the Supervisory Board may take legal action to defend or assert unitholders' rights or interests.
Meeting minutes will be produced in the name of each of the funds covered by the meeting or by the Supervisory Board's decisions. The Supervisory Board approves an annual report made available to every unitholder and whose content is stipulated by rules set out by the AMF.
This type of bid, for the whole of a company's equity, is triggered when a shareholder acquires more than one third of the voting rights. The bid is made in cash and is much higher than the quoted market price. A competitor may perhaps make a counter bid. The target company may also respond with a measure to defend itself against takeover bids.
Source : Dictionnaire de la Bourse et des termes financiers - 4ème édition - SEFI Éditions.
Tax credits were discontinued on 1 January 2005. They were intended to prevent the double taxation of the profits paid out by companies through dividends. For individual shareholders they were equal to 50% of the net dividend amount. 50% was added to the amount taxed and then deducted from the tax due. If there was a surplus, in other words if the tax credit was higher than the tax due, the surplus was refunded.
Transfers consist of moving all or part of your savings from one plan to another (whereas fund shifting consists of adjusting the savings' distribution within the same plan). They allow you to invest in a plan that is more in keeping with your objectives without having to make another payment and/or diversify your portfolio through investment vehicles that are only available in the new plan.
A generic term for a negotiable security issued by a company or a public authority that can be quoted or traded on the stock market. The two main categories of transferable securities are equities and bonds.
Undertaking for Collective Investment in Transferable Securities (UCITS)
A savings product that gives investors a stake in a collective portfolio invested in transferable securities. They are managed by professionals and may be SICAVs or FCPs.
The valuator takes care of an FCPE's administrative and accounting management. They ensure the accounting treatment of all of the transactions carried out on the FCPE by its manager and calculate its net asset value, as often as stipulated by the fund's rules. If the valuator is not an internal department within the asset management company, it is a company that values the portfolios of one or more asset management companies on a daily basis. This portfolio valuation process assumes the valuation of each line in the portfolio and therefore precise knowledge of the positions taken. For this reason, the valuator is also required to regularly match the positions shown in their computer system with the positions held in an account opened with the depositary.
An indicator of the scope and size of the rise or fall in the value of a security or a Fund relative to its average value. In other words, volatility measures the instability, and therefore the risk, associated with a financial asset. In mathematical terms, this involves calculating the standard deviation of the changes in the Fund's performance. The higher a UCITS' volatility, the riskier it is considered to be.
Payments made by an employee into their employee savings plan(s) (PEE or PERCO). The total annual voluntary payments made are capped at a quarter of the employee's gross annual salary, possibly after the deduction of the incentive plan payments invested by the employee.
Weighted average acquisition price
The weighted average acquisition price is used to calculate the capital gain made by FCPE unitholders when they redeem their assets.
This curve expresses the difference in cash compensation according to the maturity date of investments. Its slope is usually positive, because, as a rule, short-term yields are lower than long-term yields, except if the yield curve has been inverted.
Source : Dictionnaire de la Bourse et des termes financiers - 5ème édition - SEFI Éditions.
These definitions have been provided for information purposes only. Societe Generale cannot be held liable for them under any circumstances.