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Asset-backed securities are a type of financial investment that is collateralized by an underlying pool of assets—usually ones that generate a cash flow from debt, such as loans, leases, credit card balances or receivables.

Active Share

Measures how much an equity portfolio’s holdings differ from the benchmark index constituents.


Indicating when a strategy, trader or portfolio manager has managed to beat the market return over some period.


Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Bloomberg Global Aggregate Bond Index

An index of global investment grade debt from 28 local currency markets. It includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging market issuers.

Bloomberg U.S. Aggregate Bond Index

A broad bond index covering most U.S. traded bonds and some foreign bonds traded in the U.S. The Index consists of approximately 17,000 bonds.

Call Premium to Earn

The weighted average potential cash flow to be earned from written call options measured as a percentage of stock assets.


Collateralized debt obligations are a complex structured finance product that is backed by a pool of loans and other assets and sold to institutional investors. A CDO is a particular type of derivative because, as its name implies, its value is derived from another underlying asset.


Commercial mortgage-backed securities are fixed-income investment products that are backed by mortgages on commercial properties.


Collateralized loan obligations are securities that are backed by a pool of loans.


Corporate bonds are debt obligations issued by corporations to fund capital improvements, expansions, debt refinancing or acquisitions.


Is a statistical measure of how two securities move in relation to each other. Correlations range from -1 to +1, where a +1 indicate two securities move in lockstep, while a correlation of -1 indicates completely random movements.

Credit Quality Ratings:

  • AAA: The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
  • AA: An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
  • A: Obligations with this rating are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
  • BBB: An obligation that exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
  • BB; B; CCC; CC; C and Distressed: These obligations are regarded as having significant speculative characteristics.
  • Government: Debt securities that have the full faith and credit of the government. U.S. government guarantees that interest and principal will be paid on time.

Downside Capture Ratio

A statistical measure of an investment manager’s overall performance in down-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped.

Effective Duration

This measure of duration takes into account the fact that expected cash flows will fluctuate as interest rates change and is, therefore, a measure of risk. Effective duration can be estimated using modified duration if a bond with embedded options behaves like an option-free bond.

EPS Growth Estimate

Expected growth in earnings based on analyst consensus. Earnings per share (EPS): Net income divided by basic shares outstanding.

Equity Hedge

Hedged equity strategies which typically involve establishing both long and short positions in equity instruments.


Mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments.

FTSE EPRA/Nareit Developed Global Real Estate Index

A free-float adjusted, market capitalization-weighted index designed to track the performance of listed real estate companies in developed countries worldwide.

Forward P/E Est

A version of the ratio of price-to-earnings that uses forecasted earnings for the next 12 months for the P/E calculation.


Government bonds are a debt security issued by a government to support government spending and obligations.

Gross Exposure

Gross exposure refers to the absolute level of a fund’s investments. It takes into account the value of both a fund’s long positions and short positions and can be expressed either in dollar or percentage terms. Gross exposure is a measure that indicates total exposure to financial markets, thus providing an insight into the amount at risk that investors are taking on. The higher the gross exposure, the bigger the potential loss (or gain).

HFRI Equity Hedge (Total) Index

Investment managers which trade a variety of equity strategies, such as, among others, equity market neutral, fundamental growth, fundamental value, quantitative directional strategies, short bias and sectors such as energy, materials, technology and healthcare.

HFRI Fund Weighted Composite Index

A global, equal-weighted index of over 2,000 single-manager funds that report to HFR Database.

HFRI Macro (Total) Index

Investment managers which trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets.

Long/Short Strategy

An investing strategy of taking long positions in stocks that are expected to appreciate and short positions in stocks that are expected to decline. A long/short strategy seeks to minimize market exposure while profiting from stock gains in the long positions and price declines in the short positions. Although this may not always be the case, the strategy would be profitable on a net basis as long as the long positions generate more profit than the short positions, or the other way around.

ICE BofAML 3-Month T-Bill Index

Is an unmanaged index that measures the returns of 3-month Treasury Bills.

LT Debt Capital

Ratio of long-term Debt to Total Capital. Long-term debt (LTD): Debt that is due in more than one operating cycle or one year.


Strategies that typically include CTA/Managed Futures, equities, fixed income, commodity, currency, etc.

Max Drawdown

The maximum loss from a peak to a trough of a portfolio before a new peak is obtained. Maximum drawdown is an indicator of downside risk over a specified time period. It can be used both as a standalone measure or as an input into other metrics such as “Return over maximum drawdown” and Calmar Ratio.

Morningstar Global Real Estate Category

Global real estate portfolios invest primarily in non-U.S. real estate securities but may also invest in U.S. real estate securities. Securities that these portfolios purchase include: debt & equity securities, convertible securities and securities issued by Real Estate Investment Trusts (REITs) and REIT like entities. Portfolios in this category also invest in real-estate operating companies.

Morningstar Multisector Bond Category

Multisector bond portfolios seek income by diversifying their assets among several fixed income sectors, usually U.S. government obligations, U.S. corporate bonds, foreign bonds and high yield U.S. debt securities. These portfolios typically hold 35% to 65% of bond assets in securities that are not rated or are rated by a major agency such as Standard & Poor’s or Moody’s at the level of BB (considered speculative for taxable bonds) and below.

Morningstar Options Trading Category

Options trading strategies use a variety of options trades, including put writing, options spreads, options-based hedged equity and collar strategies, among others. In addition, strategies in this group that engage in option writing may seek to generate a portion of their returns, either indirectly or directly, from the volatility risk premium associated with options trading strategies. Funds in the category will typically have beta values to relevant benchmarks of less than 0.6.

Net Exposure

Net exposure equals the value of long positions minus the value of short positions. Expressed as a percentage, this number is a measure of the extent to which a Fund is exposed to market fluctuations.

Price/Earnings-to-Growth (PEG) Ratio

P/E divided by the company’s expected 12-month earnings growth rate. In general, a PEG ratio of less than 1 is considered to be indicative of an undervalued stock.


A valuation ratio of a company’s current share price compared to its book value.

Put Premium Cost

The weighted average price of put options owned measured as a percentage of stock assets.

Relative Value

Managers that take a long or short position across asset-backed, master limited partnership (MLP), real estate, convertible arbitrage, corporate and sovereign fixed income strategies, as well as volatility investment strategies.


Residential mortgage-backed securities are a debt-based security, backed by the interest paid on loans for residences.


The percentage of a fund or security’s movements that can be explained by movements in a benchmark index.

Russell 2000 Value Index

The Russell 2000 Index measures the performance of the 2,000 smallest value companies in the Russell 3000 Index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.

Russell 3000 Value Index

A market-capitalization weighted equity index maintained by the RussellA market-capitalization weighted equity index maintained by the Russell Investment Group and based on the Russell 3000 Index, which measures how U.S. stocks in the equity value segment perform by including only value stocks.

S&P 500

An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

Sharpe Ratio

The average return earned in excess of the risk-free rate per unit of volatility or total risk. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.

Sortino Ratio

A variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset’s standard deviation of negative portfolio returns, called downside deviation, instead of the total standard deviation of portfolio returns.

Spread Duration

The sensitivity of the price of a security to changes in its credit spread. The credit spread is the difference between the yield of a security and the yield of a benchmark rate, such as a cash interest rate or government bond yield.

Standard Deviation

A measure of the dispersion of a set of data from its mean. Standard deviation is calculated as the square root of variance. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility.

Tracking Error

The variation between the performance of a portfolio and performance of the benchmark over a specified time period.

Treynor Ratio

A performance metric for determining how much excess return was generated for each unit of risk taken on by a portfolio.

Weighted Average Days to Expiration

The weighted average time until the expiration date of the options.

Weighted Average Moneyness

How much an option contract’s strike price is in-the-money (ITM) or out-of-the-money (OTM) expressed as a percentage of the price of the option contract’s underlying asset.

Upside Capture Ratio

A statistical measure of an investment manager’s overall performance in up-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen.

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