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Glossary
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  AIMR Compliance
The Association for Investment Management and Research (AIMR) promotes Performance Presentation Standards. These put forth a standardized format for the calculation and presentation of performance composites. MMR asks all tracked managers to indicate whether their performance is reported in compliance with AIMR standards, and if so, to specify the level of compliance. Investors should take care independently to verify any claims of AIMR compliance. To obtain a copy of the standards, write The AIMR at P.O. Box 3668, Charlottesville, VA, 22903, or call (804) 980-3647. GIPS standards have superseded the old AIMR reporting standards. See GIPS below.
  Annualized
In MMR, the term "annualized" means "on a per-year compounded basis, for the years ended with the most recent calendar quarter." For example, if you log on in August 1999: A manager's 1-year annualized return is the return achieved from end-2Q98 to end-2Q99. The manager's 5-year annualized risk is the compound annual standard deviation achieved between end-Q94 and end-2Q99. Note that "annualized" and "calendar" are not the same.
  Asset-weighted
See dollar-weighted
  Audited
Audited means that the manager's reported performance for all discretionary accounts has been verified by a third party. In MMR, "audited" refers to a AIMR Compliance Level II verification audit, rather than a GAAP audit. See also reporting methods.
 
 
  Balanced
A balanced product incorporates both equity instruments (stocks) and fixed-income securities (bonds).
  Blend
In MMR, "blend" refers to a product that is managed with a combination of value and growth styles.
 
 
  Calendar Return
In MMR, the term "calendar return " means "on a per-year compounded basis, for the years ended with the last calendar year." For example, if you log on in August 1999: A manager's 1-year calendar return is the return achieved in 1998. The manager's 5-year calendar risk is the compound annual standard deviation achieved over 1994 - 1998. Note that "calendar" and "annualized" are not the same.
  Capitalization / Cap size
See market capitalization.
  Composite performance figures
Composite numbers should show the average historical performance of all actual, fee-paying, discretionary portfolios for a given product. Composite returns are typically calculated on a dollar-weighted basis. They may be audited or unaudited, See also reporting methods.
 
 
  Disclosure
Generally speaking, disclosure is any information that a client or prospective client should know. Federal and state securities laws require investment advisers to disclose important information in a two-part Form ADV. This must be filed with the appropriate regulatory agencies and sent to all prospective clients and other interested parties. For more information, visit the Securities & Exchange Commission's Web site. The AIMR Performance Presentation Standards also include a definition of disclosure. To qualify as AIMR compliant, a manager must meet the AIMR requirements. MMR prompts all tracked managers to present performance disclosure text. However, this information is self-reported and its accuracy cannot be guaranteed. Before committing funds with any manager, investors should always perform a careful background check. For more information, see our Terms Of Service.
  Dollar-weighted
When a product's composite performance is dollar-weighted, larger portfolios within that product have more of an effect on the performance calculation. That is, the more dollars in a given client's portfolio, the more that client's portfolio is reflected in the dollar-weighted composite performance figure. See also equal-weighted.
  Due diligence
Due diligence is the process of establishing a manager's reliability and suitability. It may include checking Form ADV statements and verifying performance figures. Brokers and consultants can often perform due diligence for investors.
 
 
  Efficiency Ratio
See Return/Risk Ratio.
  Equal-weighted
When a product's composite performance is equal-weighted, it reflects the average performance of all portfolios in that product. Every client's portfolio has an equal impact on the performance calculation, even though some clients may have $100,000 while others have $10,000,000. See also dollar-weighted.
  Equity
An equity product incorporates stock shares (and possibly other equity instruments), each of which conveys an ownership stake in a publicly traded company.
 
 
  Fixed-Income
A fixed-income product incorporates bonds (and possibly other debt securities) each of which represents an IOU from the bond issuer. Bonds are purchased in exchange for the promise of repayment on a specified date and the payment of interest income at a set (fixed) rate.
  Form 13-F

If an investment advisor manages $100 million or more in equities, SEC regulations require that a quarterly 13-F statement be filed, listing the equity positions and number of shares held.

 
 
  GIPS Compliance
Association for Investment Management and Research promotes Performance Presentation Standards. These put forth a standardized format for the calculation and presentation of performance composites. MMR asks all tracked managers to indicate whether their performance is reported in compliance with Global Investment Performance Standards (GIPS), and if so, to specify the level of compliance. Investors should take care independently to verify any claims of GIPS compliance. To obtain a copy of the standards, write The GIPS at P.O. Box 3668, Charlottesville, VA, 22903, or call (804) 980-3647. Also see AIMR above.
  Gross of Fees
If a manager is reporting performance gross of fees, the reported results do not reflect the deduction of any management fees.
  Growth
This investment style focuses on identifying and purchasing stocks that are expected to achieve accelerated growth, whether because of increased earnings, dominant market position, or other factors.
 
 
  Large-Cap
A publicly traded company with a large market capitalization.
 
 
  Market capitalization
Market cap is the value, in dollars, that the stock market has assigned to a publicly traded company at any particular moment. It is calculated as follows:
Market cap in $ = (Share price) x (No. of shares outstanding)
Managers may offer portfolios that concentrate on a particular cap size.
  Medium-Cap
Another term for mid-cap.
  Mid-Cap
A publicly traded company with a medium-range market capitalization.
 
 
  Net of Fees
If a manager is reporting performance NET of fees, the reported results include the deduction of management fees.
 
 
  Overall Performance
See Performance Overview rankings.
 
 
  Percentiles
See Performance Overview Rankings.
  Performance Overview Rankings
MMR's Performance Overview ranks managers with three yardsticks: returns, risk, and efficiency. Every quarter, these three indicators are calculated over various time frames for each manager and averaged together to yield a percentile score. A manager in the 99th percentile has outperformed 99% of comparable managers.
  Product
A type of management style offered by a money manager.
  Pro Forma performance reporting
If performance is labeled Pro Forma, the manager has chosen to provide a hypothetical historical performance drawing on other than actual managed portfolios. See reporting methods.
 
 
  Quartiles
Quartile charts show how a manager has performed relative to its peers (i.e. other equity, balanced, or global/international managers). In the sample quartile chart below, the floating blue bars represent performance spreads for all equity managers over different time frames. The red diamonds indicate where a given manager fits within the pack. For example, the left bar tells you that over the past year, MMR's tracked equity managers achieved between 3% and 21%. The manager you are researching posted 19% - at the high end of the spectrum. Each bar is divided into four segments, or quartiles. Each quartile represents the performance of one-fourth of the tracked managers. Quartile ranges begin at 5% and end at 95%. Managers performing in the top and bottom 5% are graphed outside their quartile ranges. Quartiles may be skewed due to several factors, including the possibility that poorly-performing managers may not report.
 
 
  Representative performance figures
Representative reporting reflects what the manager believes to be a fair representation of an average discretionary account. See reporting methods.
  Returns
Returns are inclusive of dividend income and current through the most recent quarter.
  Return/Risk Ratio
The Return/Risk Ratio (or Efficiency Ratio) tells you how much return "bang" a manager is getting per unit of risk "buck". The ratio is calculated by dividing a manager's annualized rates of return by the corresponding standard deviations for a specified time frame. The higher the ratio, the more efficiently the manager is "spending" the risk. If the ratio is less than 1, the manager has expended considerable risk to achieve each point of returns. Investors who seek maximum returns with minimum risk should concentrate on finding managers with higher Return/Risk Ratios.
  Reporting Methods
A manager's reporting methods is classified as either Audited Composite, unaudited Composite, Representative, or Pro Forma. Audited means that the manager's reported performance for all discretionary accounts has been verified by a third party. Unaudited indicates that the manager has self-reported the performance for all discretionary accounts. Representative reporting reflects what the manager believes to be a fair representation of an average discretionary account. A Pro Forma label indicates that the manager has chosen to provide a hypothetical historical performance drawing on other than actual managed portfolios.
  Risk
See standard deviation.
 
 
  Small-Cap
A publicly traded company with a relatively small market capitalization.
  Standard Deviation
Standard deviation is used to measure risk, or volatility. It is a number indicating the variability of a set of numerical values about their arithmetic average. For example, a $1 million portfolio with a quarterly standard deviation of 5% will fluctuate $50,000 (5% of $1 million) or less per quarter two-thirds of the time. In MMR, standard deviation measures quarterly changes over a specified period of years. The lower the manager's standard deviation, the more stable the portfolio's performance. High standard deviation suggests a portfolio with more fluctuation and volatility.
 
 
  Turnover
The frequency with which securities in a portfolio are replaced during a given time frame, usually a year. It is expressed as the percentage of original portfolio constituents that have been replaced. Thus, a portfolio with 40% annual turnover has sold 40% of its holdings over the past year and replaced them with new selections. In a portfolio with 200% turnover, every holding has been sold and replaced twice.
 
 
  Unaudited
If a manager's performance is unaudited, the figures may or may not be composite, but they have not been verified by a third party. (In MMR, "audited" refers to a AIMR Compliance Level II verification audit, rather than a GAAP audit.) See also reporting methods.
 
 
  Value
This investment style focuses on identifying and purchasing stocks that are currently undervalued by the market. Value may be measured by price-to-book ratios, price-to-earnings ratios, discounted cash flow models, or other means.
  Volatility
This is another term for risk, or standard deviation.
 
 
 
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