Glossary

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Gearing
The gearing percentage reflects the amount of borrowings the company uses to invest in the market.
Gearing ratio
In a simple example, if a company has 100 million of total assets and 13 million of borrowings, shareholders' funds are 87 million. If the total assets grow or fall by 10% to 110million or 90million, and the borrowings remain the same at 13 million, the shareholders' funds grow to 97 million or fall to 77 million. This is an increase or decrease in shareholders' funds of 11.5%, which in both cases is 15% more than the 10% increase or decrease in total assets. This means the shareholders' funds are 15% geared (and the gearing factor/ratio would be 115 in this instance.) Gearing is expressed as a ratio of total assets to shareholders' funds multiplied by 100. It provides an indication of the level of a company's/share's financial and/or structural gearing. A figure of 100 means that there is no gearing. Normally, the higher the gearing factor, the more sensitive an investment trust's shares will be to the movements up and down in the value of the investment portfolio.
Gearing for Closed-Ended Funds
The term used to describe the process of borrowing money for investment purposes. The amount a fund can "gear" is the amount it can borrow in order to invest. Gearing is used in the expectation that the returns on the investments bought will exceed the costs of the borrowings that funded the purchase.
Gearing for Open-Ended Funds
In unit trusts and OEICs borrowing is limited to 10% of the fund's value and is usually for the purpose of managing cash flow rather than to increase the fund's investment exposure.
General (or Generalist Trust)
Trusts that invest across global markets and sectors, with a broadly spread portfolio and an investment objective to produce a balance of income and capital growth.
Gilts
Bonds issued by the UK Government. Also known as gilt edged securities. Along with bonds can be referred to as fixed interest securities.
Gross income
Dividends and interest paid out before income tax has been deducted.
Gross redemption yield
Usually used in bond investments. This yield seeks to indicate the total return you might receive from both income and capital growth (or loss) if you hold your investment over a ten-year period.
Guaranteed fund
Where a fund manager promises to provide a specific minimum return, backed by a legally enforceable arrangement with a third party.