| Terms | Definitions |
|---|---|
| 30-Day SEC Yield With Waivers | 30-day SEC yield with waivers means the yield takes into account a fund’s expense reduction, and reflects an estimated yield to maturity. It should be regarded as an estimate of the fund’s rate of investment income, and it may not equal the fund’s actual income distribution rate, which reflects a fund’s past dividends paid to shareholders. The 30-day SEC yield with waivers is calculated in accordance with SEC standards. |
| 30-Day SEC Yield Without Waivers | 30-day SEC yield without waivers means the yield does not take into account a fund’s expense reduction, and reflects an estimated yield to maturity. It should be regarded as an estimate of the fund’s rate of net investment income, and it may not equal the fund’s actual income distribution rate, which reflects a fund’s past dividends paid to shareholders. The 30-day SEC yield without waivers is calculated in accordance with SEC standards. |
| 30-Day Median Bid/Ask Spread | 30-day median bid/ask spread reflects the median of the difference between the best bid and offer as of the end of each 10-second interval during each trading day of the last 30 calendar days (or since inception, if shorter). |
| Active Management | Actively managed funds are investment strategies that are directly managed by a manager or team of managers who select securities with the intention of beating their intended market index or benchmark. |
| Active Share | Active share represents the portion of portfolio holdings that differ from an index. |
| Active Weight | Active weight reflects over/under relative to an index. |
| Alpha | Alpha compares risk-adjusted performance relative to an index. Positive alpha means outperformance on a risk-adjusted basis. |
| Annual Rate of Return | Annual rate of return is the annual rate of gain or loss on an investment expressed as a percentage. |
| Appreciation | Appreciation is an increase in the value of an investment. |
| Asset | An asset is anything with commercial or exchange value owned by a business, institution, or individual. Examples include cash, real estate, and other investments. |
| Asset Allocation | Asset allocation is the process of distributing money across different asset classes with the intention of maximizing portfolio returns and minimizing risk. It does not guarantee a profit or ensure againt a loss. |
| Asset Class | Asset class is a category of investments that have a similar behavior, risk and return potential. |
| Basis Point (bp) | One basis point (bp) equals 1/100 of a percentage point (1 bp = 0.01%, 100 bps = 1%). |
| Batting Average | Batting average is defined as the percentage of periods an investment has outperformed an index. |
| Benchmark (see Index) | Benchmark refers to an unmanaged group of securities whose performance is used as a standard to measure investment performance. You cannot invest directly in a benchmark. |
| Beta | Beta measures the volatility of a security or portfolio relative to an index. A beta of less than one means lower volatility than the index; more than 1 means greater volatility. |
| Bid-to-Cover Ratio | Bid-to-cover ratio is used to measure the demand for a particular security during offerings and auctions. A high ratio is an indication of strong demand and vice versa. |
| Bond | A bond is an investment that pays a fixed rate of return through interest or dividend income. There are different types: corporate, Treasury, high-yield and municipal with varying durations and risk levels. |
| Bond Rating | A bond rating is an evalulation of creditworthiness for a fixed income investment. Higher-rated bonds are the most likely to fulfill obligations whereas lower-rated bonds are less likely. |
| Capital Gain | Capital gain refers to profits gained from the sale of a capital asset that has increased in value over the holding period. |
| Capital Loss | Capital loss occurs when an asset is sold for less than its purchase price. |
| Capitalization (Cap) or Market Cap | Capitalization refers to the total equity value of a company's publicly traded shares. |
| Capture Ratio | Capture ratio measures the performance an investment "captured" during periods when gains over an index are achieved (up capture) or declined (down capture). A capture ratio of 100% means investment performance went up or down exactly the same amount as the index. |
| Carry | Carry is the excess income earned from holding a higher-yielding security relative to another. |
| Collaterized Loan Obligations (CLOs) | Collaterized loan obligations are securitized portfolios of bank loans structured into slices, or tranches, of varying credit risk. |
| Compound Interest | Compound interest is calculated on the principal amount and the accumulated interest of previous periods, and thus can be regarded as “interest on interest.” In contrast, simple interest is a one-time calculation on the principal amount. |
| Correlation | Correlation measures the degree to which two variables move in relation to each other. A value of 1.0 implies movement in parallel, -1.0 implies movement in opposite directions, and 0.0 implies no relationship. |
| Credit Default Swap | A credit default swap involves regular payments from the buyer to the seller in exchange for repayment of principal value to the buyer if the issuer experiences a credit event such as default. |
| Credit Risk | Credit risk is the that a bond issuer will default, meaning not repay principal or interest to the investor as promised. Credit risk is also known as “default risk.” |
| Credit Risk Transfer (CRT) Securities | Credit risk transfer (CRT) securities are a type of mortgage backed security issued by Fannie Mae or Freddie Mac but with the credit risk borne by private investors. CRTs can incur losses if enough homeowners in a pool of mortgages default on their loans. |
| Credit Spread | Credit spread is the difference in yield between securities with similar maturity but different credit quality. Widening spreads generally indicate deteriorating creditworthiness of corporate borrowers, and narrowing indicate improving. |
| Deflation | Deflation refers to the opposite of inflation-a general decline in the prices of goods and services. |
| Depreciation | Depreciation refers to a decrease in the value of an investment. |
| 30-Day Dividend Yield | The 30-day dividend yield represents the average daily dividends for the 30-day period, annualized and divided by the net asset values per share at the end of the period. |
| Diversification | Diversification is the practice of investing in multiple asset classes and securities with different risk characteristics in an effort to reduce the risk of owning any single investment. |
| Dividend | Dividends are portions of a company's profits that are returned to stockholders. |
| Dividend Yield | Dividend yield is the yield a company pays out to shareholders in the form of dividends. It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock's price. |
| Duration | Duration measures a bond price’s sensitivity to changes in interest rates. The longer a bond’s duration, the higher its sensitivity to changes in interest rates and vice versa. |
| Earnings Growth Rate | Earnings growth rate refers to the annualized rate of growth of earnings for a stock or stocks in a portfolio over a given forward looking or trailing period. |
| Enhanced Beta or Smart Beta | Enhanced beta or smart beta refers to a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices. |
| Equity/Equities | An equity is security or investment representing ownership in a corporation. It is different from a bond, which represents a loan to a borrower. The term is often used interchangeably with “stock.” |
| Excess Return | Excess return indicates the extent to which an investment outperformed or underperformed an index. |
| Expense Ratio - Gross and Net | The gross expense ratio reflects fund expenses as stated in the fee table of a fund's prospectus prior to the deduction of any waiver or reimbursement. The net expense ratio reflects fund expenses after the deduction of any waiver or reimbursement. |
| Factor Investing or Factor Analysis | Factors or factor analysis is an investment approach that involves targeting quantifiable firm characteristics or “factors” that can explain differences in stock returns. Over the last 50 years, academic research has identified hundreds of factors that impact stock returns. |
| Glide Path | Glide path refers to a target date or age-based fund's asset allocation mix shifting from a focus on riskier securities to a focus on less risky securities. |
| Government Securities | Government securities are debt obligations issued by a government or its agencies. |
| Index (see Benchmark) | An index or benchmark refers to an unmanaged group of securities whose performance is used as a standard to measure investment performance. You cannot invest directly in an index. |
| Index Fund | An index fund is an investment fund that seeks to parallel the performance of a particular stock market or bond market index. Index funds are often referred to as passively managed investments. |
| Inflation | Inflation refers to the overall general upward price movement of goods and services in an economy. Inflation is one of the major risks to investors over the long term because it erodes the purchasing power of savings. |
| Information Ratio | Information ratio is a measurement of returns above a benchmark compared with the volatility of those returns. It is an indicator of portfolio management performance in excess of a given benchmark. |
| Interest/Interest Rate | Interest represents the fee charged by a lender to a borrower, usually expressed as an annual percentage of the principal. For example, someone investing in bonds will receive interest payments from the bond’s issuer. |
| Intraday Value, also called Intraday Indicative Value (IIV) or Indicative Optimized Portfolio Value (IOPV) | Intraday value represents a real-time estimate of an exchange-traded fund's fair value, based on the most recent prices of its underlying securities. |
| Inverse (or Short) Exposure | Inverse (or short) exposure means the performance of an investment will move in the opposite direction of the underlying index or asset. |
| Management Fee | Management fees, whether paid as a fund expense ratio or a fee paid to an advisor, are charges levied for managing an investment. The fee is intended to compensate the managers for their time and expertise selecting securities and managing the portfolio. |
| Net Asset Value (NAV) | Net asset value represents the value of a fund's assets after deducting its liabilities from its assets on a per-share basis. |
| Net Zero | Net zero refers to greenhouse gas production being balanced by removal from the atmosphere. |
| Omega Ratio | Omega ratio measures the change in an option's value with respect to the percentage change in the underlying price. It gives option investors an idea of how the option price and the stock price that underlies it move together. |
| Operating Expenses | Operating expenses are asset-based expenses paid out of a fund's or portfolio's assets as a percentage of the value, and can include the investment advisory fee; marketing and distribution expenses; and custodial, transfer agency, legal and accounting fees. |
| Option-Adjusted Spread | Option-adjusted spread measures the spread between a fixed income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. |
| Passive Management | Passive investments seek to match the performance of their benchmark; therefore, holdings generally are not selected or reallocated based on changes in market conditions. As a result, the investment’s performance will typically differ from the performance of actively managed investments. |
| Premium/Discount | Premium/discount indicates whether a security is currently trading above (at a premium to) or below (at a discount to) its net asset value. |
| Price-to-Book (P/B) Ratio | Price-to-book ratio measures share price compared with book value per share for a stock or stocks in a portfolio. |
| Price-to-Earnings (P/E) Ratio | Price-to-earnings ratio measures share price compared to earnings per share for a stock or stocks in a portfolio. |
| Price-to-Cash Flow (P/CF) Ratio | Price-to-cash flow ratio measures the current price of a company's stock relative to the amount of cash generated by the company. |
| Prospectus | A fund prospectus details the investment objectives and strategies of a particular fund or group of funds, as well as the fund's past performance, managers and financial information. |
| Repurchase Agreements | Repurchase (repo) agreements are short-term loans collateralized by U.S. government securities. |
| Return on Invested Capital | Return on invested capital is a measure of how effectively a company used the money invested in its operations. |
| Risk-Free Rate | Risk-free rate of return is a theoretical return of an investment with zero risk and the measure is used as a rate against which other returns are measured. |
| Roll down | Roll down is the tendency of a fixed income security’s market price to approach its par value as it nears maturity. |
| R-squared (R2) | R-squared measures the relationship between portfolio and index performance on a scale of 0.00 (0%) to 1.00 (100%). A higher R2 indicates more of the portfolio's performance is explained by market movements and vice versa. |
| Sales Charge | Sales charge is the amount that investors pay when they buy (front-end load) or redeem (back-end load) shares in a mutual fund, similar to a commission. |
| Security | A security is an instrument of investment such as a stock, bond or fund. |
| Sharpe Ratio | Sharpe ratio measures risk-adjusted performance using excess returns versus the "risk-free" rate and the volatility of those returns. A higher ratio means better return per unit of risk. |
| Sortino Ratio | Sortino ratio measures risk-adjusted performance using excess returns versus the "risk-free" rate and the volatility of negative returns ("bad" volatility). A higher ratio means better return per unit of "bad" risk. |
| Standard Deviation | Standard deviation measures historical volatility. Higher standard deviation implies greater volatility. |
| Systematic Risk | Systematic risk is the risk inherent to the entire market or entire market segment. |
| Term Premia | Term premia refers to the risk premia that investors require to hold a long-term bond to maturity. |
| Total Return Swaps | A total return swap involves paying a floating interest rate in exchange for payments based on the return of a reference asset, such as a corporate bond. |
| Tracking Error | Tracking error is the divergence between the price behavior of an investment and an index. |
| Turnover | Turnover is a measure of portfolio trading activity. Higher turnover may indicate higher transaction costs and vice versa. |
| Volatility | Volatility measures risk using the dispersion of returns for a given investment. |
| Current Yield | Current yield represents the weighted average coupon on securities held in the portfolio as a percentage of the weighted average price. |
| Yield to Maturity | Yield to maturity is the total return anticipated on a bond held to maturity assuming all the securities are held to maturity. |
| Yield to worst (YTW) | Yield to worst is a measure of the lowest possible yield on a bond whose contract includes provisions that would allow the issuer to redeem the securities before they mature. |