Glossary

 

The 60/40 blend is composed of 60% Standard & Poor's 500 Index (S&P 500) and 40% Bloomberg U.S. Aggregate Bond Index (Agg) and assumes monthly rebalancing. The S&P 500 is an unmanaged index that is widely regarded as the standard for measuring large cap U.S. stock market performance. The Agg is an unmanaged index that is widely regarded as a standard for measuring U.S. investment grade bond market performance. These indices do not incur expenses and are not available for investment. These indices include reinvestment of dividends and/or interest.

 

The Bloomberg U.S. Aggregate Bond Index (Agg) is an unmanaged index that is widely regarded as the standard for measuring U.S. investment grade bond market performance. This index does not incur expenses and is not available for investment. The index includes reinvestment of dividends and/or interest income.

 

The Russell 2000 Growth Index (Russell 2000G) is a market-capitalization-weighted index representing the small cap growth segment of U.S. equities.

 

The Russell 3000 Index is a market capitalization wighted equity index maintained by FTSE Russell that seeks to be a benchmark of the entire U.S. stock market.

 

The S&P 500 Index is an unmanaged index that is widely regarded as the standard for measuring large cap U.S. stock market performance. The index does not incur expenses, is not available for investment, and includes the reinvestment of dividends.

 

Source for any Bloomberg index is Bloomberg Index Services Limited. BLOOMBERG^® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg owns all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

 

 

Active Share is a measure of the percentage of holdings in a portfolio that differ from those of the benchmark. It is calculated by taking the sum of the absolute value of the differences of the weight of each holding in the portfolio versus the weight of each holding in the benchmark and dividing by two.

 

Alpha is a measure of the difference between the portfolio’s actual return versus its expected performance, given its level of risk as measured by Beta. It is a measure of the historical movement of a portfolio’s performance not explained by movements of the market. It is also referred to as a portfolio’s non-systematic return.

 

Basis point is a unit that is equal to 1/100th of 1%.

 

Book value is the total assets of a company, minus all liabilities and any intangible assets.

 

Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.

 

Correlation is a measure of the strength of association represents the degree to which the volatility of an investment is related to the volatility of the market during a given period.  A Correlation Coefficient of +1 indicates a perfect linear association between an investment and the market, while a Correlation Coefficient of -1 indicates a perfect negative linear association.  A value of 0 suggests a lack of association.  It is important to note that this statistic provides no information about causation.

 

Convexity measures the sensitivity of a fixed income security’s duration to changes in interest rates. Securities with lower convexity generally are more sensitive to interest rates than securities with comparable duration and yield but greater convexity.

 

Duration measures the sensitivity of a fixed income security’s price (or the aggregate market value of a portfolio of fixed income securities) to changes in interest rates. Fixed income securities with longer durations generally have more volatile prices than those of comparable quality with shorter durations. Effective Duration reflects the impact of any embedded options on this measure.

 

Earnings Per Share (EPS) is a company’s earnings per outstanding share of common stock.

 

Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain and expand the company’s asset base.  Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value.

 

Margin of safety - Buying with a “margin of safety,” a phrase popularized by Benjamin Graham and Warren Buffet, is when a security is purchased for less than its estimated value. This helps protect against permanent capital loss in the case of an unexpected event or analytical mistake. A purchase made with a margin of safety does not guarantee the security will not decline in price.

 

MBS refers to mortgage-backed securities.

 

Option-Adjusted Convexity is a convexity calculation for securities with embedded options and takes into account that expected cash flows will fluctuate as interest rates change.

 

Option-Adjusted Spread is a spread calculation for securities with embedded options and takes into account that expected cash flows will fluctuate as interest rates change.

 

Option-Adjusted Duration is a duration calculation for fixed income securities with embedded options and takes into account that expected cash flows will fluctuate as interest rates change.

 

Price-to-Book (P/B) Ratio is the ratio of a company's stock price to its book value per share.

 

Price-to-Earnings (P/E) Ratio is the ratio of a company's stock price to its twelve months’ earnings per share.

 

Price-to-Free Cash Flow (P/FCF) Ratio is the ratio of a company's stock price to its twelve months' free cash flow per share.

 

Standard Deviation is a measure of dispersion that represents the degree to which an investment’s returns vary around a mean. The greater the Standard Deviation, the more volatile an investment’s returns were during the period measured. This statistic is calculated using the population standard deviation formula: Standard Deviation = Square root of [(Sum of squared deviations from mean)/(Number of returns in the period measured)] If the return periodicity is less than one year, the standard deviation is multiplied by the square root of the number of periods in one year in order to arrive at an annualized measure.

 

Spread is the difference in yield between a risk-free asset such as a Treasury bond and another security with the same maturity but of lesser quality. 

 

The Weighted Average Coupon is computed by weighting each security’s coupon rate by its market value in the portfolio.  A security's coupon rate is its annual coupon payments relative to the security’s face or par value.

 

Years to maturity is the remaining life of a bond, the number of years until the bond matures and the issuer repays the bond principal.

 

Yield to maturity is the rate of return anticipated on a bond if it is held until the maturity date.

 

The yield to worst (YTW) is the lowest potential yield that can be received on a bond, assuming there is no default.