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Glossary of Terms

Glossary of Terms

The ADP National Employment Report is a monthly report of economic data that tracks the level of nonfarm private employment in the U.S.

Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over some period.

The Alternative Reference Rates Committee (ARRC) is a group of market participants and official-sector entities convened by the U.S. Federal Reserve Board to help ensure successful adoption of its recommended alternative, SOFR and improved IBOR fallbacks.

The Baltic Dry Index (BDI) is a shipping and trade index created by the London-based Baltic Exchange. It measures changes in the cost of transporting various raw materials, such as coal and steel.

Bank loans (or floating-rate loans) are financial instruments that pay a variable or floating interest rate. A floating rate fund invests in bonds and debt instruments whose interest payments fluctuate with an underlying interest-rate level.

Basis points, otherwise known as bps or "bips," are a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form.

BBB corporate bonds are represented by securities with a BBB credit rating in the Bloomberg U.S. Credit Index.

Beta is a measure of systematic risk with respect to a benchmark.

The Bloomberg 1–3 Year US Government/Credit Bond Index is a performance benchmark of U.S. investment-grade government and corporate bonds with maturities of one to three years.

The Bloomberg Asset-Backed Securities (ABS) Index is the ABS component of the Bloomberg Barclays U.S. Aggregate Index that measures the performance of ABS with the following collateral types: credit and charge card, auto and utility loans. All securities have an average life of at least one year.

The Bloomberg Emerging Market Index is a rules-based, market-value-weighted index engineered to measure USD fixed-rate sovereign and corporate securities issued from emerging markets.

The Bloomberg Mortgage-Backed Securities Index, is a market value-weighted index composed of agency mortgage-backed pass-through securities of the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) with a minimum $150 million par amount outstanding and a weighted-average maturity of at least 1 year.

The Bloomberg Short Treasury Total Return Index is a performance benchmark of all U.S. Treasuries that have a remaining maturity between one and twelve months.

The Bloomberg US Aggregate Bond Index (Agg) is composed of investment-grade U.S. government bonds, investment-grade corporate bonds, mortgage pass-through securities, and asset-backed securities, and is commonly used to track the performance of U.S. investment-grade bonds.

The Bloomberg US Corporate 1-3 Year Bond Index measures the investment grade, fixed-rate, taxable corporate bond market with 1-3 year maturities.

The Bloomberg US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by US and non-US industrial, utility and financial issuers.

The Bloomberg US Credit Index measures the investment grade, US dollar-denominated, fixed-rate, taxable corporate and government related bond markets. It is composed of the US Corporate Index and an on-corporate component that includes foreign agencies, sovereigns, supranationals and local authorities.

The Bloomberg US Treasury Index includes public obligations of the U.S. Treasury.

The Bloomberg US Corporate High-Yield Index measures the USD-denominated, high-yield, fixed-rate corporate bond market.

A broad-based index is designed to reflect the movement of a group of stocks or an entire market.

CapEx refers to a company’s capital expenditures.

The CBOE Volatility Index, or VIX, is an index created by CBOE Global Markets, which shows the market's expectation of 30-day volatility.

A collateralized loan obligation (CLO) is a single security backed by a pool of loans, collected into a marketable instrument via process known as securitization.

Commercial Mortgage-Backed Securities (CMBS) represent the CMBS company of the Bloomberg US Aggregate Bond Index.

Company ratings range from AAA or Aaa (the highest) to C or D, which represents a company that has already defaulted.

The Consumer Confidence Index (CCI) is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation. The CCI is based on the premise that if consumers are optimistic, they will spend more and stimulate the economy but if they are pessimistic then their spending patterns could lead to a recession.

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.

The Core PCE Price Index is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other.

Credit spread risk means the risk arising from changes in the market value of debt financial instruments due to fluctuations in their credit spread.

Credit quality is when bond ratings are grades given to bonds that indicate their credit quality as determined by private independent rating services such as Standard & Poor's, Moody's and Fitch. These firms evaluate a bond issuer's financial strength, or its ability to pay a bond's principal and interest in a timely fashion. Ratings are expressed as letters ranging from `AAA', which is the highest grade, to `D', which is the lowest grade.

The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. senior secure-credit (leveraged-loan) market.

Current yield is an investment's annual income (interest or dividends) divided by the current price of the security.

A discount margin (DM) is the average expected return of a floating-rate security (typically a bond) that's earned in addition to the index underlying, or reference rate of, the security.

The Dow Jones Industrial Average index (DJIA) tracks the share price of the top 30 large, publicly owned U.S. companies which is often used as an indicator of the overall condition of the U.S. stock market.

Downside capture ratios are calculated by taking the fund’s monthly return during the periods of negative benchmark performance and dividing it by the benchmark return.

The Drewry World Container Index (WCI) measures the bi-weekly ocean freight rate movements of 40-foot containers in seven major maritime lanes. It is expressed as an average price per 40-foot container (in U.S. dollars).

Duration is often used to measure a bond’s or fund’s sensitivity to interest rates. The longer a fund’s duration, the more sensitive it is to interest-rate risk. The shorter a fund’s duration, the less sensitive it is to interest-rate risk.

Earnings per share are a company’s profit divided by the number of outstanding shares of its common stock.

The Energy Select Sector Index provides an effective representation of the energy sector of the S&P 500 Index.

Enterprise valuation is a measurement of a company’s total value.

Fallen angels refers to investment grade bonds that are given a reduced rating to “junk bond” due to a decline in the credit rating of the issuer.

The federal funds rate is the interest rate that banks charge each other to borrow or lend excess reserves overnight.

Floating-rate loans (or bank loans) are financial instruments that pays a variable or floating interest rate. A floating rate fund invests in bonds and debt instruments whose interest payments fluctuate with an underlying interest-rate level.

FOMC refers to the Federal Reserve’s Federal Open Market Committee.

Free cash flow measures a company’s financial performance and shows the cash a company can produce after deducting operating expenses from its operating cash flow.

The FTSE World Government Bond Index is a market capitalization weighted bond index consisting of the government bond markets of the multiple countries.

The Global Financial Crisis (GFC) refers to the period of extreme stress in global financial markets and banking systems between mid-2007 and early 2009.

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

The Gross Domestic Product (GDP) growth rate compares the year-over-year (or quarterly) change in a country's economic output to measure how fast an economy is growing.

A growth stock refers to a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry.

High-yield bonds (or junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds.

The information ratio measures the risk-adjusted returns of a financial asset or portfolio relative to a certain benchmark. It is calculated by dividing the active return of a portfolio by the tracking error. The tracking error is calculated as the standard deviation of the difference between fund return and index return.

Intermediate investment-grade corporate bonds represent the Bloomberg US Intermediate Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market and includes publicly issued securities that have between 1 and up to, but not including, 10 years to maturity.

Investment grade refers to the quality of a company's credit. To be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or Moody's.

Investment-grade corporate bonds are represented by the Bloomberg US Credit Index, which measures the performance of U.S. investment-trade taxable corporate, fixed-rate, and government-related fixed-income securities.

An inverted yield curve represents a situation in which long-term debt instruments have lower yields than short-term debt instruments of the same credit quality.

The ISM Manufacturing Index is also known as the Purchasing Managers’ index (PMI) and is an indicator of the economic health of the manufacturing sector and is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

The ISM Non-Manufacturing Purchasing Managers' Index (PMI) (also known as the ISM Services PMI) report on Business, a composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector.

Job Openings and Labor Turnover Survey (JOLTS) isa monthly survey of U.S. job vacancies, hiring, and job separations released by the Bureau of Labor Statistics of the U.S. Department of Labor. 

Large-cap stocks refers to a company with a market capitalization value of more than $10 billion.

leveraged buyout (LBO) is a type of acquisition in the business world whereby the vast majority of the cost of buying a company is financed by borrowed funds.

The London Interbank Offered Rate (LIBOR) is the benchmark reference for interest rates that banks charge each other for debt instruments and loans.

Long-term high-yield bonds are represented by the Bloomberg US Long Corporate High Yield Index. This index covers performance for U.S. high-yield corporate bonds.

Long-term investment-grade bonds represent the Bloomberg US Long Credit Index. This index measures the performance of investment grade, US dollar denominated, fixed-rate, taxable corporate and government-related debt with at least ten years to maturity.

Max drawdown is the maximum observed loss from a peak to a trough of an investment and is an indicator of downside risk over a specified time period.

The Morningstar LSTA US Leveraged Loan 100 Index measures the performance of the 100 largest facilities in the US leveraged loan market.

The MSCI China Index captures large and mid-cap representation across China A shares, H shares, B shares, Redchips, P chips and foreign listings. With 709 constituents, the index covers about 85% of this China equity universe.

The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada.

The MSCI Emerging Markets Index tracks the performance of equity stocks in selected emerging foreign markets.

The MSCI World Index is a broad global equity index that represents large and mid-cap equity performance across 23 developed market countries.

Momentum is the rate of acceleration of a security's price—that is, the speed at which the price is changing. Momentum trading is a strategy that seeks to capitalize on momentum to enter a trend as it is picking up steam.

The money supply is all the currency and other liquid instruments in a country's economy on the date measured.

Mortgaged-backed securities (MBS)are bonds secured by home and other real estate loans.

The Nasdaq Composite is a stock market index that consists of the stocks that are listed on the Nasdaq stock exchange.

The Nasdaq 100 Index is a collection of the 100 largest, most actively traded companies listed on the Nasdaq stock exchange. The index includes companies from diverse industries like manufacturing, technology, healthcare, and others. The index excludes those in the financial sector, like commercial and investment banks.

Nominal Trade-Weighted Exchange Rate Index is a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners. Broad currency index includes the Euro Area, Canada, Japan, Mexico, China, United Kingdom, Taiwan, Korea, Singapore, Hong Kong, Malaysia, Brazil, Switzerland, Thailand, Philippines, Australia, Indonesia, India, Israel, Saudi Arabia, Russia, Sweden, Argentina, Venezuela, Chile and Colombia.

One basis point equals 0.01%.

Option adjusted spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return.

Out of the money or OTM is an expression used to describe an option contract that only contains extrinsic value. The intrinsic value of an option is based on the current market value of the underlying instrument but ignores the possibility of future fluctuations and the time value of money.

Par is defined as face value. A bond, preferred stock, or other debt instruments may trade at par, below par, or above par.

Payment-in-kind (PIK) is the use of a good or service as payment instead of cash.

Personal Consumption Expenditures (PCEs) refers to a measure of imputed household expenditures defined for a period of time. Personal income, PCEs, and the PCE Price Index reading are released monthly in the Bureau of Economic Analysis (BEA) Personal Income and Outlays report.

Price return typically captures the capital gain or loss without coupons or dividends.

Price-to-earnings (P/E) ratio relates a company’s share price to its earnings per share.

The Producer Price Index (PPI) published by the Bureau of Labor Statistics (BLS), is a group of indexes that calculates and represents the average movement in selling prices from domestic production over time.

The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector, and is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

A put option (or “put”) is a contract giving the option buyer the right, but not the obligation, to sell—or sell short—a specified amount of an underlying security at a predetermined price within a specified time frame.

Quantitative tightening (QT) (or quantitative hiking) is a contractionary monetary policy applied by a central bank to decrease the amount of liquidity within the economy.

Return on capital (ROC) is a measure of the profitability and value-creating potential of companies relative to the amount of capital invested by shareholders and other debt holders.

Rising star refers to a bond that is rated as a "junk bond" but could become investment grade because of improvements in the issuing company's credit quality.

A risk asset is any asset that carries a degree of risk.

Risk-on market is an investment setting in which price behavior responds to and is driven by changes in investor risk tolerance.

R-squared (R2) measures how closely the performance of an asset can be attributed to the performance of a selected benchmark index and is measured on a scale between 0 and 100; the higher the R-squared number, the more correlated the asset is to its benchmark.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-value ratios and higher forecasted growth values.

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

The Russell 2000 Index measures the performance of the 2,000 smaller companies that are included in the Russell 3000 Index, which itself is made up of nearly all U.S. stocks. The Russell 2000 is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.

The Russell 2000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell1000 companies with lower price-to-book ratios and lower expected growth values.

The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 96% of the investable U.S. equity market.

Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

The Sharpe ratio adjusts a portfolio's past performance—or expected future performance—for the excess risk that was taken by the investor.

Short covering is the buying in of stocks or other securities or commodities that have been sold short, typically to avoid loss when prices move upward.

Short-term high-yield bonds represent the Bloomberg 1-3 Year US Corporate High Yield Index.

Short-term investment grade corporate bonds represent the Bloomberg US 1-3 Credit Index. This index includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities between 1 and 3 years and are publicly issued.

A short-duration strategy is one where a fixed-income or bond investor is focused on buying bonds with a small duration.

Single A corporate bonds are represented by securities with a single A credit rating in the Bloomberg U.S. Credit Index.

A small-cap is a public company whose total market value, or market capitalization, is about $300 million to $2 billion.

SOX (PHLX Semiconductor Sector Index) is a modified market capitalization-weighted index composed of companies primarily involved in the design, distribution, manufacture, and sale of semiconductors.

S&P 500 Index is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States.

The S&P GSCI Industrial Metals Index provides investors with a reliable and publicly available benchmark for investment performance in the industrial metals market.

The S&P/LSTA Leveraged Loan Index is designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads, and interest payments.

The S&P 500 Equal Weight Index is the equal-weight version of the widely used S&P 500 Index, which is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States.

Spread is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, represented by treasury bonds. Spread income refers to the additional income from this difference.

Spread-to-worst is the difference between the yield-to-worst of a bond and yield-to-worst of a U.S. Treasury security with a similar duration.

Standard Deviation is a statistical measure representing the volatility or risk in an instrument. It represents the degree of spread or deviation of a set of values from their mean or average.

Style refers to the investment approach or objective that a fund manager uses.

Tax-loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax owed from selling profitable assets.

The Three-Year Rolling Return, also known as "rolling period return" or "rolling time period," are annualized average returns for a 3-year period.

Total return captures both the capital gains and the income generated from coupons and dividends.

Treasury Inflation-Protected Securities (TIPS) area type of Treasury security issued by the U.S. government. TIPS are indexed to inflation in order to protect investors from a decline in the purchasing power of their money.

U.S. Treasuries represent the Bloomberg US Treasury Index, which is made up of U.S. government bonds of various durations.

USD stands for U.S. dollars.

Upside capture ratios for funds are calculated by taking the fund’s monthly return during months when the benchmark had a positive return and dividing it by the benchmark return during that same month.

A value stock refers to shares of a company that appears to trade at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it appealing to value investors.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security.

A yield curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity.

Yield to maturity is the total rate of return that will have been earned by a bond when it makes all interest payments and repays the original principal.

Yield to worst is the lowest potential yield that can be received on a bond without the issuer defaulting.

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