Glossary - O | Skandia UK

OBSR Ratings

Fund ratings awarded are AAA, AA or A.
There are several key factors which lead to the final OBSR Rating determination. These are: Strength of investment process and length of time it has been in place; Continuity of investment personnel; Investment style that has proven durable over time; Clearly defined investment objectives; Strong and consistent past performance record.

Occupational pension scheme

A pension scheme provided by an employer for its employees. Occupational pension schemes are mainly 'defined benefit' or 'defined contribution'.

Off balance sheet

Referring to financial commitments or liabilities that do not generally appear in a company’s balance sheet (eg operating leases or derivative contracts).

Off market

Relating to a transaction which occurs outside a formal market eg transactions in unlisted securities or transactions involving listed shares which were not executed on a stock exchange. Off market transactions are conducted through negotiation rather than an 'auction' system.

Offer

The price at which a person or company is willing to sell (Also known as ask price). For example, a seller will present their stock for sale at the offer price. As a buyer, you will buy at the offer (or ask) price.

Offer to bid

Compares the original purchase cost or offer price (usually of a unit trust) with its bid price, the price you receive if you sell.

Offer to offer

Compares the original purchase cost or offer price (usually of a unit trust) with its current offer price.

Offshore

Anywhere outside the UK not within the authority of HM Revenue & Customs.

Offshore sector

The group of funds all registered outside the UK.

Ombudsman

See Financial Ombudsman.

Open ended investment company (OEIC)

An OEIC is an investment company where shares can be created or cancelled to match demand, in a way similar to the units of a unit trust. The principal difference lies in the fact that there is a 'single price' to which is added the initial charge for purchase, as opposed to unit trusts which always have two prices, the bid price (what you get when you sell back to the managers); and the offer price (what you have to pay when you buy).

Open market option

An option to move the value of your pension fund at retirement to an insurance company to purchase a pension income known as an annuity. Normally used to gain a higher annuity rate.

Opening price

The price at which a security commences trading at the opening of a trading day.

OPRA

Occupational Pensions Regulatory Authority.

The authority set up under the Pensions Act 1995 to make occupational pensions more secure. This organisation closed in 2005 when its responsibilities were taken over by the Pensions Regulator, the new regulatory body for work-based pension schemes in the UK.

Optimisation

A mathematical process which creates a compromise between conflicting objectives (eg between maximising return and minimising risk). An optimisation program will identify the asset mix which is likely to give the highest return for a given risk level, or alternatively, the lowest risk portfolio to achieve a desired return. See also portfolio optimisation.

Option

An agreement which conveys the right to the holder to buy (receive) or sell (deliver) a specific security at a stipulated price and within a stated period of time. If the option is not exercised during that time, the money paid for it (but no more than that amount) is forfeited. See also call option.

Ordinary residence

For the purposes of taxation an individual may be ordinarily resident in the UK although he or she is not physically resident in a particular tax year. The term ‘ordinary residence ‘is broadly equivalent to habitual residence. If an individual is a resident in the UK year after year, he or she is ordinarily resident here and liable for UK tax.

Ordinary shares

Securities which represent an ownership interest in a company. If the company has also issued preference shares, both have ownership rights. The preference shareholder normally is limited to a fixed dividend, but has prior claim on dividends and, in the event of liquidation, assets. Ordinary shareholders assume the greater risk, but generally exercise the greater control and may gain the greater reward in the form of dividends and capital appreciation. If the company is wound up, the ordinary shareholders generally rank behind secured creditors, including debenture holders, in the liquidation process.

Outperformance

Achievement of a higher investment return than a benchmark or other measure against which that return is being compared. For example an equity fund would be said to have outperformed the index if the fund achieved a 5% return against a 3% return by the index over the same period (As opposed to underperformance).

Overfunding

Where a pension arrangement has assets which exceed those required to meet its liabilities.

Overweight

Having a greater exposure to a particular sector or stock in an investment portfolio compared with a neutral or benchmark position (As opposed to underweight).