The sustainable investor for a changing world

Financial glossary


Target Return

Funds that seek to achieve a defined return over a particular period, regardless of market movements

Technical analysis

Technical analysis refers to the analysis of past prices to predict future prices. Technical analysis aims to identify support levels (the level below which the price is unlikely to decrease) and resistance levels (the level above which the price is unlikely to increase). Classical technical indicators are Bollinger bands, moving average convergence divergence (MACD), relative strength index (RSI). According to the efficient-market hypothesis, even in its weakest form, this kind of analysis is irrelevant in forecasting prices. Behavioural finance, however, gives credit to it.

Theme-based investing

Thematic investing involves finding a general theme that is expected to provide positive investment returns, and then choosing stocks that might benefit from that theme


Top-down is a term used in asset management to explain a process of selecting securities. There are successive allocations from a global perspective (choosing stocks from all around the world) to regional and sector-based allocation. Asset managers start with the widest universe of securities and progressively reduce their focus. The opposite term is bottom-up.

Tracking error

The Tracking Error (TE) is a measure of dispersion of relative performance of the fund compared to the benchmark. It measures whether the fund has moved closely to the market (low TE) or on the opposite whether it has behaved differently from the market (high TE).


Tranching is a mechanism widely used in securitisation to reallocate the risk/return profile of a portfolio into different slices. One of the key goals of this process is to provide credit enhancement to newly-created senior tranches (AAA, low credit risk). Intermediate tranches (mezzanine) and subordinated tranches with high credit risk (equity) are then also available. The two main principles of tranching are:

  • Reallocation of credit default risks of the asset pool from equity to senior tranches.
  • Reallocation of cash-flows generated by the asset pool from senior to equity tranches.



A trustee is a legal entity which performs tasks (generally administrative) on behalf of a beneficiary. Trustees are used to run special purpose vehicles (SPV) or pension funds for example.

© 2021 BNP PARIBAS ASSET MANAGEMENT USA, Inc., All rights reserved.
BNP PARIBAS ASSET MANAGEMENT USA, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended.
These documents and video clips may also include information obtained from affiliated investment management companies within BNP Paribas Asset Management, the brand name of the BNP Paribas group’s asset management services. The documents and video clips are produced for informational purposes only and do not constitute: 1. an offer to buy nor a solicitation to sell, nor shall they form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. Any opinions included in these documents and video clips constitute the judgment of the author/ presenter at the time specified and may be subject to change without notice.