ALPHA

A measure used to calculate the outperformance of an portfolio investment relative to a benchmark, usually a stock market index. In other words, it’s the degree to which an investor has managed to “outperform” the market over a period of time. Alpha can be positive or negative, depending on how close it is to the market. Alpha therefore assesses a manager’s ability to deliver value. The higher the alpha, the better the management.

BETA

This is a measure of volatility. It describes the sensitivity of a portfolio or security to market variation. A beta greater than 1 means that the asset is more volatile, that variations are amplified in relation to market movements.

BOLT-ON (ACQUISITION)

An acquisition is said to be “bolt-on” when a company acquires a significantly smaller company. The strategic motive is important here, because although these acquisitions are generally accretive, their revenue is too low in relation to the acquirer to be the main reason for the acquisition. Indeed, “bolt-on” acquisitions generally retain their identity, name and structure, notably due to competitive advantages such as solid brand power, unlike “tuck-in” acquisitions, which are fully absorbed and become an indistinguishable part of the acquirer post integration. Finally, another advantage lies in the fact that these operations are small, low-risk and rapidly integrated.

BUY & HOLD

An investment strategy that consists of holding investments for the long term to optimize value creation and paying little attention to short-term market fluctuations.

CAPEX

Capital expenditure on tangible and intangible fixed assets enabling the company to maintain or expand its production and service capacities.

CASH BURN

Capital erosion corresponds to the cash spent by a company to cover its overheads.

CASH EQUITY

Refers to the liquid portion of an investment that can be rapidly converted into cash.

CLEARING

Clearing refers to the procedure by which financial transactions are settled, i.e. the transfer of funds to the seller and securities to the buyer. A specialized third-party organization called a clearing house often acts as intermediary for the transaction.

COMPOUNDER

A profile of companies positioned around three key characteristics. These are solid predictability in cash generation, sustainable returns on capital employed well above the cost of capital, and attractive growth opportunities. Each of these financial characteristics is attractive in its own right, but combined, they are particularly powerful, forming the ” compounding effect ” enabling a virtuous circle of cash generation, which can be reinvested at high rates of return, generating more cash, which can be reinvested again, and so on. In short, “the beauty of compound interest”.

DEPOSITARY

Financial institution with bank status where holders of securities deposit their securities. Custodians are responsible for managing securities accounts, processing settlement/delivery flows, safekeeping assets, managing securities transactions and providing information to customers.

EBITDA (Earnings Before Interest Taxes, Depreciation and Amortization)

Earnings Before Interest Taxes, Depreciation and Amortization is a company’s operating profit before subtracting interest, taxes, depreciation and amortization.

EMPLOYEE SAVINGS

Allows professionals – craftsmen, shopkeepers, self-employed professionals, farmers, company directors – employing at least one employee to increase their income while reducing their charges and taxes. Their employees will be able to benefit from the same employee savings plans and tax advantages.

EPS (Earnings Per Share)

Earnings per share is calculated by dividing a company’s profit for a given period by the number of ordinary shares in circulation at the end of the period.

FIXED INCOME

Investment securities paying investors regular fixed interest or dividends until maturity. At maturity, investors are repaid the capital invested. Fixed-income products can be assimilated to bonds or derivatives, and can be issued by companies or government entities.

FLY-TO-QUALITY

A return to resilient, quality stocks in an uncertain economic climate.

FREE-CASH-FLOW

Cash generated by operating activities after the investments required to maintain or develop the company’s capacities have been paid for.

FUTURES

A forward contract in which two parties agree to buy or sell a specified quantity of an underlying asset (e.g., a share or a stock market index), on a pre-agreed maturity date and at a pre-agreed price. It makes it possible to anticipate future variations in an underlying asset, and can therefore be used to hedge a portfolio against future market fluctuations.

GOLDILOCKS

Once upon a time, a family of bears went for a walk in the forest while their porridges cooled down. In the meantime, a little girl with golden curls came along and ate one of the porridges, which had become neither too hot nor too cold, just perfect. From this famous tale “Goldilocks and the Three Bears” came an expression well known to financial professionals: Goldilocks. The term Goldilocks refers to an economy that achieves an ideal balance between growth and inflation.

HIGH WATER MARK

This is the highest point a fund or account has reached. The term is often used in the context of performance-based remuneration for fund managers. The principle of the High Water Mark is that it obliges the manager to beat the highest net asset value before being able to charge performance fees.

LONG-SHORT

A hedge fund management strategy that exploits general equity market trends by buying or selling equities short.

M&A (Mergers & Acquisitions)

Fusions & Acquisitions in French refers to business combinations or the purchase of one company by another.

MAX DRAWDOWN

The maximum loss that can be observed between a high and a low point. Max drawdown is easy to calculate and understand: it measures the worst possible loss within a given interval.

MILESTONE PAYMENTS

Payments received when a treatment is pre-approved by a regulatory body, a step that occurs before marketing authorization.

MISPRICING

A discrepancy between the price given by the market for a stock and the real fundamental value of this company as estimated by our analyses. This means an inappropriate stock market price at a given moment in time, compared with the intrinsic value of the asset.

MOMENTUM

Velocity of a stock’s upward or downward trend over a given period of time.

PEA (Stock Savings Plan)

The Plan d’Epargne en Actions is a regulated savings product. It enables you to acquire and manage portfolio shares in European companies, while benefiting from tax exemption under certain conditions. There are 2 types of PEA: the classic PEA (bank or insurance) and the PEA-PME, which is dedicated to shares in SMEs and ETIs. The conditions for opening the plan, the securities it can hold, and the conditions for paying in, withdrawing and benefiting from tax advantages are regulated.

PEE-I (Company or intercompany savings plan)

The Plan d’Epargne Entreprise or inter-company savings plan is a voluntary collective savings scheme with a 5-year horizon, enabling employees and managers in small companies to acquire securities with the help of the company. Both employees and companies can make contributions to the PEE.

PERCOL-I (Plan d’Epargne Retraite d’Entreprise Collectif or Interentreprises)

The Plan d’Epargne Retraite d’Entreprise Collectif or Interentreprises is a collective retirement savings scheme that enables employees and managers in small companies to build up a funded pension with the help of the company.

PER MEDIAN

Company valuation ratio. This is the ratio between the share price and net earnings per share. It expresses the number of years of earnings an investor is willing to pay for a share.

POST-TRADE

Involves order matching, conversion of orders into trades and clearing and settlement activities.

PRE-TRADE

Refers to the steps that take place before an order is executed. It includes sending the order, risk management and routing the order to the exchange.

PRICING POWER

Pricing Power is a company’s ability to gradually increase the price of its products or services year after year, and thus mechanically improve margins, without running the risk of eroding market share or customer dissatisfaction. This is generally possible when the company has significant competitive advantages and high barriers to entry.

MAIN NEGATIVE IMPACTS (PAI)

Key Negative Impacts (KPIs) refer to the potentially harmful consequences for the environment, society and human rights that may result from the activities of the companies making up an investment fund.

Key Negative Impacts (KPIs) can include, among others, environmental pollution, failure to respect fundamental human rights, use of forced labor or involvement in controversial activities such as arms or tobacco production. Under the Sustainable Finance Disclosure Regulation (SFDR), fund managers are required to disclose the main potential negative impacts associated with their investments.

It’s important to mention that considering Key Negative Impacts (KNI) does not mean that the fund necessarily avoids all companies with potential negative impacts. Fund managers can adopt an engagement approach with companies to encourage positive changes in their behavior, or use exclusion criteria to avoid investments in companies with the most damaging negative impacts.

SHARPE RATIO

Measures the excess return over a risk-free investment for 1% of risk taken; risk is represented by volatility. If a fund’s Sharpe ratio is 2, this means that 1% of volatility has generated 2% more performance than a risk-free investment. The higher the ratio, the better the risk/return trade-off.

SFDR RULES

The SFDR (Sustainable Finance Disclosure Regulation) is a European regulation designed to improve transparency and communication on the sustainability of financial products. It requires asset managers to disclose information on the environmental and social impact of their investments, and to classify their financial products according to their level of commitment to sustainability.

Article 6 ” funds are funds that do not take sustainability criteria into account in their investment process, but are nevertheless required to disclose information on their sustainability policy.

Article 8 ” funds are funds with an explicit sustainability objective that integrate environmental, social and governance (ESG) criteria into their investment process. They may also implement exclusion criteria.

Finally, ” Article 9 ” funds are funds that have a specific sustainability objective and measurable positive impact on the environment or society. These funds must demonstrate that they are actively contributing to the achievement of sustainability objectives, and may also implement exclusion criteria.

SHORTER

The act of selling a security short.

STOCK PICKING

An investment approach based on stock selection, as opposed to sector or geographic allocation. Stock picking is based on the conviction that stock selection contributes more than asset allocation to the performance of portfolio. Management therefore focuses on a company’s own qualities, rather than the appeal of a sector or geographic zone.

TAPERING

Gradual reduction in the accommodating monetary policy pursued by the US central bank.

EUROPEAN TAXONOMY

The European Union taxonomy is a classification system established by regulation (EU) 2020/852, listing environmentally sustainable economic activities. An activity is classified as sustainable if it corresponds to at least one of the following six objectives:

• Climate change mitigation ;
• Adapting to climate change ;
• Sustainable use and protection of aquatic and marine resources ;
• Transition to a circular economy;
• Pollution control ;
• Protecting and restoring biodiversity and ecosystems.

TRACKING ERROR

Tracking Error represents the volatility of an investment vehicle’s relative performance compared to its benchmark index. In practical terms, tracking error represents the deviation of relative performance from its average, and is a de facto indicator of the consistency of performance relative to the index. A low tracking error means that performance and risk-taking are close to those of the benchmark, and vice versa.

UPSELLING

Term used to characterize the fact that a customer moves upmarket on a class of products or services. To be distinguished from cross-selling, which defines the situation where a company is able to offer additional products or services to increase a customer’s average basket.

UPSIDE

Term used to define the upside potential of a stock after our analysis and valuation work.

VALORISATION

Valuation of a fund’s assets at a given point in time. Our funds are valued on a daily basis.

VE/CA MEDIAN

Enterprise value divided by sales. It’s a financial ratio that compares a company’s total value to its sales, and measures how much it would cost to buy a company’s value based on its sales.

VE/EBIT MEDIAN

Enterprise value divided by operating income. This is a financial ratio that compares a company’s total value to its operating income, and measures how much it would cost to buy the value of a company based on this operating income.

VOLATILITY

A stock’s volatility is the difference between its performance and its average. The aim is to measure the regularity with which these performances have been obtained. Volatility is a measure of risk: the more volatile the fund, the greater the range of possible returns, whether positive or negative.