Glossary

Definitions

Active Share measures the amount of overlap between a fund’s holdings and those of its benchmark.

Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index.  The excess return of the fund relative to the return of the benchmark index is a fund’s alpha, and higher is better.

Bank Revolver is a credit card consumer who carries a balance from month to month.

Basis Point is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.

Beta is a measure of volatility of systemic risk of a security or a portfolio in comparison to the market as a whole. It is calculated using regression analysis and attempts to measure the tendency of the security or portfolio to respond to swings in the market.  A beta of 1 indicates that the security’s price movements tend to be closely correlated with those of the market in direction and magnitude.  A beta less than 1 indicates less volatility than the market index, while a beta greater than 1 indicates more volatility than the index.

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.

Book Value is the value of a security or asset as entered in a company’s books.

Bookings are funds that are expected to be received from customers in the near future based on accepted orders or contracts. Cancellations, amendments and extensions can have a positive or negative impact on bookings. Bookings differ from sales, where money has been received for services or products provided. Bookings Growth would be the change in Bookings for an annual and quarterly basis.

Capital Expenditure (CAPEX) is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year.

Cash Flow measures the cash generating capability of a company by adding non-cash charges and interest to pretax income.

Correlation is the extent to which the values of different types of investments move in tandem with one another in response to changing economic and market conditions.

Covenants are requirements put in place to protect lenders from borrowers defaulting on their obligations due to actions that are detrimental to themselves or the business.  They most often take the form of financial ratios that must be maintained, such as a maximum debt-to-assets ratio or minimum interest coverage ratio.  Covenants can be classified as affirmative (requiring the borrower to perform specific actions) or negative (prohibiting the borrower from taking specific actions).

Covenant quality refers to the overall level of protection, whether weak or strong, afforded to lenders by the covenants included in a debt issuer’s indenture documents.

Credit Facility is a type of loan made in a business or corporate finance context, involving revolving credit, term loans, committed facilities, letters of credit and most retail credit accounts.

Cryptocurrencies are digital assets designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.

Debt-to-EBITDA is a measurement of leverage, calculated as a company’s interest-bearing liabilities minus cash or cash equivalents, divided by its EBITDA.

Diluted EPS is the performance metric used to gauge the quality of a company’s earnings per share (EPS) if all convertible securities were exercised.

Dividend Yield is calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stock.

Duration is an approximate measure of the price sensitivity of a fixed-income investment to a change in interest rates, expressed as a number of years.

E&P (Exploration and Production) is a type of company in the oil and gas industry focused on discovering and extracting crude oil and natural gas from underground reserves.

Earnings Per Share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock.

EBITDA is a measure of a company’s operating performance and refers to Earnings before Interest, Tax, Depreciation and Amortization.

Enterprise Value equals market capitalization plus debt minus cash. EV/EBITDA equals the company’s Enterprise Value (EV) divided by Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

Estimated Forward EBIT refers to the multiple applied to a company’s next twelve months of Earnings Before Interest and Taxes.

EV/EBIT equals the company’s Enterprise Value (EV) divided by Earnings Before Interest and Taxes (EBIT).

EV/EBITDA equals the company’s Enterprise Value (EV) divided by Earnings Befoe Interest, Taxes, Depreciation, and Amortization (EBITDA).

Forward P/E Ratio is calculated by dividing the current price of the stock by the company’s expected earnings per share.

 Free Cash Flow measures the cash generating capability of a company by subtracting capital expenditures from cash flow from operations.

Free Cash Flow Yield is calculated by taking the free cash flow per share dividend by the share price.

GAAP (Generally Accepted Accounting Principles) refers to the common set of accounting principles, standards and procedures that companies use to compile their financial statements.

Goodwill is an intangible asset that arises as a result of the acquisition of one company by another for a premium value.

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

Initial Public Offering (IPO) is the first sale of stock by a private company to the public.

Investment Grade (IG) is a bond with credit rating of BBB or higher by Standard & Poor’s or Baa3 or higher by Moody’s.

Junk Bonds are bonds referring to high-yield or noninvestment-grade bonds.  They are fixed-income instruments that carry a credit rating of BB or lower by Standard & Poor’s,  or Ba or below by Moody’s.

Loss Adjustment Expenses (LAE) are the expenses associated with investigating and settling insurance claims.

M&A refers to Mergers and Acquisitions.

Market Capitalization is the total dollar market value of a company’s outstanding shares and is often referred to as “market cap.”

Max Drawdown is the peak-to-trough decline during a specific record period of an investment, fund, or commodity.  A drawdown is usually quoted as the percentage between the peak and the trough.

Median is the value at the middle of a frequency distribution of observed values, such that there is an equal probability of falling above or below it.

Net Operating Profit After Taxes (NOPAT) is a measure of profit that excludes the costs and tax benefits of debt financing.

Net Tangible Assets, or Net Asset Value, is calculated as a company’s total assets, minus intangible assets (goodwill, patents, trademarks, etc.) and all liabilities.

Non-GAAP refers to earnings or accounting measures that are not reported according to Generally Accepted Accounting Principles.  Common non-GAAP measures include earnings before interest, taxes, depreciation and amortization (EBITDA), cash earnings, adjusted earnings per share, and pro forma earnings.

Normalized Operating Profit is the profit earned from a firm’s normal core business operations.

Operating Margin is the ratio of operating income divided by net sales.

Out of The Money is used to describe a put option with a strike price that is lower than the market price of the underlying asset. Put Option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specific time. EV/EBIT equals the company’s Enterprise Value (EV) divided by Earnings Before Interest and Taxes (EBIT).

Price to Tangible Book Value is calculated dividing a company’s tangible book value by its share price.

Price-to-Book (P/B) Ratio compares a stock’s market value to the value of total assets less total liabilities.

Price-to-Earnings (P/E) Ratio is calculated by dividing the current price of the stock by the company’s trailing 12 months’ earnings per share.

Put Option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specific time.

Quantitative Easing (QE) is a monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.

Return of Capital is a payment received from an investment that is not considered a taxable event and is not taxed as income. Instead, return of capital occurs when an investor receives a portion of his original investment, and these payments are not considered income or capital gains from the investment.

Return on Equity is the amount of net income returned as a percentage of shareholders equity.

Return on Invested Capital (ROIC) measures the return that an investment generates for those who have provided capital.

Return on Tangible Capital (ROTC) refers to the measure of return on Invested Capital minus Intangibles, including Goodwill and Other Tangible Assets.

Safe-haven is an investment that is expected to retain its value or even increase in value in times of market turbulence.

Sharpe Ratio is a measure that indicates the average return minus the risk-free return divided by the standard deviation of return on an investment.

Standard Deviation is a statistical measure of portfolio risk used to measure variability of total return around an average, over a specified time. The greater the standard deviation over the period, the wider the variability or range of returns and hence, the greater the fund’s volatility.

Stream(ing) is the term often used when a funder makes an agreement with a mining company to purchase all or part of their precious metals production at a low, fixd, predetermined price to which both parties agree.

Streaming Partner refers to two or more parties involved in financing arrangements customized to fit the specific needs of a particular mining company, a particular project and the related financing requirements.

Tangible Book Value is the total net asset value of a company (book value) minus intangible assets and goodwill.

Windfall Profits Tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry.

Yield is the income return on an investment. It refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.

Yield Spread is the difference between yields on differing debt instruments of varying maturities, credit ratings and risk, calculated by deducting the yield of one instrument from another.

Yield to Maturity is the total return anticipated on a bond if the bond is held until the end of its lifetime.

Yield-to-Worst is the lowest yield an investor can expect when investing in a callable bond.

Indexes

Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark representing about 8,200 fixed income securities that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency).  To be included in the index, bonds must be rated investment grade by Moody’s and S&P.

 Bloomberg Barclays US Government/Credit Bond Index is a broad-based flagship benchmark that measures the non-securitized component of the US Aggregate Index. It includes investment grade, US dollar-denominated, fixed-rate Treasuries, government-related and corporate securities.

CBOE Volatility Index (VIX) reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide range of strikes. It is used to gauge the market’s anxiety level.

Chicago Board Options Exchange Volatility Index (VIX) is a widely used measure of market risk used to gauge the market’s anxiety level.

China CSI Smallcap 500 selects 500 middle and small capitalization stocks of good liquidity and representatives of Shanghai and Shenzhen security market by a scientific and objective method.

Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.

Dow Jones Transportation Average is a U.S. stock market index from S&P Dow Jones Indices of the transportation sector, comprising a running average of the stock prices of twenty transportation corporations.

ICE Bank of America Merrill Lynch (BAML) U.S. Corporate Index (Corporate) is an unmanaged index of U.S. dollar denominated investment grade corporate debt securities publicly issued in the U.S. domestic market with at least one year remaining term to final maturity.

ICE Bank of America Merrill Lynch (BAML) 1-5 Year BB-B Cash Pay High Yield Index is a subset of the BofA Merrill Lynch US Cash Pay High Yield Index including all securities with a remaining term to final maturity less than 5 years and rated BB1 through B3, inclusive.

ICE Bank of America Merrill Lynch (BAML) BB High Yield Index consists of securities which are rated at least BB in credit quality.

ICE Bank of America Merrill Lynch (BAML) BB US High Yield Index  is a subset of the BAML HY Master II Index including all securities rated BB1 through BB3, inclusive.

ICE Bank of America Merrill Lynch (BAML) US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $250 million.

KBW Bank Index consists of the stocks of 24 banking companies, representing major banks and money centers in the United States.

Morningstar Small Cap Index tracks the performance of U.S. small-cap stocks that fall between 90th and 97th percentile in market capitalization of the investable universe.

MSCI EAFE Hedged Index represents a close estimation of the performance that can be achieved by hedging the currency exposures of its parent index, the MSCI EAFE Index, to the USD, the “home” currency for the hedged index. The index is 100% hedged to the USD by selling each foreign currency forward at the one-month forward weight.

MSCI EAFE Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance.

MSCI EAFE Small Cap Index is an equity index which captures small cap representation across Developed Markets countries around the world, excluding the US and Canada.

MSCI World Developed Small Cap Index captures small cap representation across 23 Developed Markets countries. With 4,261 constituents, the index covers approximately 14% of the free float-adjusted market capitalization in each country.

MVIS Global Junior Gold Miners Index is a modified market cap-weighted index that tracks the performance of the most liquid junior companies in the global gold and silver mining industry. You cannot invest directly in an index.

Nasdaq Stock Market is the world’s oldest and largest electronic stock market and is now a national securities exchange and an independent self-regulatory organization (SRO).

NASDAQ-100 Index is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ. No security can have more than a 24% weighting. The index was developed with a base value of 125 as of February 1, 1985.  Prior to December 21,1998 the Nasdaq 100 was a cap-weighted index.

 NASDAQ 100 Equal Weighted Index is the equal-weighted version of the NASDAQ 100 Index.  It contains the same securities as is in the NASDAQ 100 Index, but each security is set at a weight of 1.00% of the index on a quarterly basis.

OE Morningstar Moderate Allocation benchmark is a group of funds in a similar category given by Morningstar to help investors compare funds.

 Russell 1000 Index consists of the largest 1,000 companies in the Russell 3000 Index.

Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price/book ratios and higher forecasted growth values.

Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price/book ratios and lower forecasted growth values.

Russell 2000 Biotechnology Index is a sector of the Russell 2000 Index.

Russell 2000 Index consists of the smallest 2,000 companies in a group of 3,000 U.S. companies in the Russell 3000 Index, as ranked by market capitalization.

Russell 3000 Index is an index representing the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

S&P 500 Index is a broad-based, unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general.

S&P MidCap 400 Index seeks to track the performance of mid-cap U.S. equities, representing more than 7% of available U.S. market cap. You cannot invest directly in an index.

S&P SmallCap 600 Index measures the small-cap segment of the U.S. equity market.

STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and accounts for about 90% of the market cap for developed Europe, which includes 18 countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

TOPIX Small Index is a capitalization weighted index designed to measure the performance of the stocks listed on the First Section of the Tokyo Stock Exchange, excluding the TOPIX 500 stocks and non-eligible stocks.

U.S. Dollar Index is an index (or measure) of the value of the United States dollar relative to the majority of its most significant trading partners (foreign currencies).