Underlying investment

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Underlying Investment

The sum of the investments represented in a mutual fund or annuity. When one buys a share in either of these investment vehicles, the share represents a right to the dividends, coupons, and capital gains or losses in each of the securities represented in the fund or annuity in proportion to their representation in it. For example, suppose a mutual fund consists of 50% of Stock A, 25% of Stock B, and 25% of Bond C. All other things being equal, ownership of a share in that mutual fund effectively means that one owns half a share of Stock A and one quarter of a share in Stock B and Bond C. One refers to these investments collectively as the underlying investment. See also: Underlying asset.

Underlying investment.

The investments in a mutual fund, a variable annuity's separate account fund, or other fund makes are considered the fund's underlying investments.

The value of a single share or unit of the fund is based on the combined value of all its underlying investments, minus fees and expenses, divided by the number of outstanding shares or units.

In some cases, when the item underlying a derivative investment is a security, such as the individual stock underlying an equity options contract, it is also called an underlying investment.

However, when the underlying item is a consumable commodity, such as corn, or a financial product, such as an equity index, it is called the underlying product, the underlying instrument, or sometimes simply the underlying.

References in periodicals archive ?
National Futures and Commodities Exchange's enhanced monitoring solutions consist of the following updates: equity portfolio summary investment reports; documentation of trading activity transactions at the company level underlying investments; detailed reports for underlying investment such as exclusive investment exposure to all funds; accurate scaling of performances against wide range of indices; portfolio precise reporting such as diversification by geography, industry, vintage year, or as required; and appraisal processing at the underlying investment phase, accustomed real-time by cash-flows.
Al Khalij Commercial Bank (al khaliji) has announced the introduction of three new structured deposits connected to special underlying Investments.
Al Khalij Commercial Bank (al khaliji) has announced the launch of three new structured deposits linked to different underlying Investments.
The Company's underlying investments are priced in US dollars,
has introduced a new variable universal life insurance policy that will give consumers the potential for cash value accumulation and can guarantee that their death benefit will not lapse regardless of how the underlying investments perform.
If the underlying investments rise, owners can lock in a higher guarantee after five years.
Nearly all are are traded at less than the value of their underlying investments, but the extent of the gap, or discount, varies widely between trusts and with the ups and downs of the stock market.
Consequently, like mutual funds, the cash value of the annuity is linked to the performance of the annuity's underlying investments.
If the investment performance of underlying investments is poorer than expected (or if sufficient premiums are not paid), the policy may lapse or not accumulate sufficient value to fund the intended application.
Al Khalij Commercial Bank (al khaliji) has introduced three new-fangled structured deposits that facilitate clients to take advantage of growth in the underlying investments.
The doctor of philosophy in economics led a team of actuaries and attorneys to develop a new payout mechanism, one measured in units rather than dollars, with the value of the units based on their underlying investments.
Detailed tracking of underlying investments by a private equity fund of funds manager can be a very time consuming, specialised and resource hungry middle office operation," said Mark Schoen, head of global product and strategy for Europe, Middle East and Africa.