# Glossary

## Absolute return

Measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital.

## Active management

An investment approach that seeks to exceed the average returns of the financial markets.

## Alpha

Measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances.

## AUM (Assets Under Management)

The total market value of a mutual fund's assets, minus their liabilities.

## Benchmark

Index to which the fund measures its performance.

## Beta

Sensitivity to market movements. Describes the relation of a stock’s or portfolio’s return with that of the financial market as a whole.

## Compound return

The annual rate of return that represents the cumulative effect, averaged over a specified time frame.

## Confidence level

A statement that the true value of a parameter for a population lies within a specified range of values with a certain level of probability.

## Consistency

Number of time periods when the fund’s performance has outperformed the benchmark index.

## Correlation

A statistic representing how closely two variables co-vary; it can vary from -1 (perfect negative correlation) through 0 (no correlation) to +1 (perfect positive correlation). A value of 0 shows that there is no linear correlation between the variables.

## DrawDown

Measure of the decline from a historical peak, expressed as a percentage.

## Fund of Funds

An investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.

## Gross exposure

The sum of the long and the short positions in a portfolio, expressed as a percentage of AUM.

## High-water mark

A requirement that the fund must recoup any prior losses before the investment manager may take a performance fee.

## Index

A comparative measure stating the performance in relation to a given starting point.

## Information ratio

The ratio of the excess annualised return against the Tracking Error, over a fixed period of time. The higher the ratio, the better, as it reflects the extent to which a fund outperformed its benchmark per unit of active risk over the investment period.

## Long-only fund

A fund that can only take long positions.

## Long position

The holder of the position owns the security and will profit if the price of the security increases.

## MTD (Month-To-Date)

Return from the beginning of the month to date.

## NAV (Net Asset Value)

The total market value of a mutual fund's assets, minus their liabilities, divided by the number of shares outstanding.

## Net exposure

The long positions minus the short positions in a portfolio, expressed as a percentage of AUM.

## Risk

Commonly expressed as standard deviation (see below).

## Sharpe Ratio

Measurement of a portfolio's risk-adjusted return, i.e. the efficiency of the portfolio. Calculated as portfolio return minus risk-free interest divided by the standard deviation of portfolio return. The higher the Sharpe ratio, the more favorable the relationship between return and risk.

## Standard deviation

A measurement commonly used to reflect an investments risk level. Refers to the variation, or expected variation, of the performance over time. A high standard deviation entails large variations and thus high risk and vice versa.

## Tracking Error

A ratio expressed as a percentage which measures the deviation of the return of a fund compared to the return of a benchmark over a fixed period of time. The more passively the investment fund is managed, the smaller the tracking error.

## Value at Risk (VaR)

Measures the potential future losses which will not be exceeded within a specified period and with a specified probability. The measurement is expressed as a percentage of AUM.

## YTD (Year-To-Date)

Return from the beginning of the year to date.

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