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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
But really there is a bigger issue at play here, because this scandal has drawn attention to the risks when the underlying investments don't align with the intended flexibility that the structure of the product is meant to provide.
"Whilst we foresee a continuation of geopolitical tensions affecting markets in the coming year, we remain confident that our portfolio construction and underlying investments leave us well positioned to deliver our long term return targets and dividend growth," Wyatt added.
It has further proposed that, mutual fund units that are redeemable after three years, wherein the underlying investments are made into equity or debt of 'infrastructure sub-sector' be also included in the list of the specified long-term assets under Section 54EC.
These allocations are very important, as more than 90% of a portfolio's variation in returns is attributed to asset allocation.[1] The underlying investments of each fund also drive performance for the individual target date funds.
These include distributions to investors of GFH funds with underlying investments in a number of regional education assets as well as those in regional and global real estate with average blended cash on cash yield returns between 8~11%.
The insurer may provide guarantees of death proceeds or a certain annuitization amount (if purchased) within a variable annuity, thus providing clients with guarantees that otherwise would be unavailable to those clients who purchased the underlying investments directly.
A better approach is to find the one manager who invests in the type of asset you want (UK shares, US shares, Corporate Bonds etc.) with the highest number of underlying investments, with the lowest cost.
It will not look to achieve capital growth, as it aims to receive a coupon payment on its underlying investments of bonds, which will be used to pay a dividend to the relevant investor/ shareholder in the Fund.
Examples of the types of guarantees offered in a contract include the guaranteed minimum accumulation benefit (GMAB), which provides that the value of the annuity will not fall below the principal investment amount regardless of the market performance of the underlying investments.
GFH Financial Group said it has distributed $53 million to its funds' investors who currently have underlying investments in Bahrain, the UAE, the US and India.
GFH Financial Group (GFH) has distributed $53 million to its funds' investors who currently have underlying investments in Bahrain, the UAE, the United States and India.