Hedge Fund - A loose term used to denote managed money programs primarily designed for capital appreciation. In its' original form, hedge funds were designed for institutions to reduce their exposure to the financial markets. They have evolved now to be much more encompassing and are available to investors as well.

Incentive Fee - The fee charged by a fund usually expressed as a percentage of the differential of the new high in equity minus prior equity high.

Leverage - Most fund managers employ some leverage in their programs. It can range widely, and as an investor in a currency program, you should be aware what the leverage ratio is, primarily because, the greater the leverage, the greater the volatility of return. A ratio between 2 and 5 to 1 is not uncommon. Other risk measurements should be used also to better model the potential outcome and volatility.

Management Fee - The fee charged by a fund to compensate for the general management and administration of the funds. This is usually levied on a monthly or quarterly cycle and is expressed as a percentage of total funds under management. The range can be from .5% to 2%.

Sharpe Ratio - A risk/return measurement ratio comparing return with the variability of return. The formula is E-I/sd, where E=expected return, I=risk free interest rate and sd=standard deviation of returns.

Volatility of Return - The standard deviation or degree of fluctuation of the return of a currency funds' performance with a certain period of time.

Fund Rotation - The idea of trading funds in a similar manner that one would trade actual currencies. One would transfer funds from a perceived weakening of a managed fund to one that is perceived as a strengthening fund. Fund managers do not look upon this activity favourably as redemptions create some problems. Nevertheless, there are software programs available that attempt to identify the strongest and weakest funds.