Key Terminoligies and Defiintions of Financial Insturments

Investment Objective: The investment objective is the broad thought process for the Strategy and is a subset of the investment approach specified in the Disclosure Document.

Standard Deviation: Standard deviation of strategy’s return measures how much a strategy´s total returns have fluctuated in the past. The more the strategy’s returns fluctuate, the riskier the strategy is likely to be. Strategies that have been more volatile in the past tend to be more volatile in the future as well.

Upside Deviation: This measures only deviations above a specified benchmark.

Downside Deviation: Calculated much like standard deviation, downside deviation focuses on the variation of returns below a specific threshold. It ignores upside variation because it adds value to the overall return and investors shouldn’t be concerned about it. 

Alpha: It is the amount by which a strategy has out-performed its benchmark, taking into account the strategy´s exposure to market risk (as measured by Beta). Alpha is also known as the residual return. 

Beta: A measure of a strategy’s sensitivity to market movements. The beta of the market is 1.00 by definition. A beta of 1.10 shows that the strategy has performed 10% better than its benchmark index in up markets and 10% worse in down markets, assuming all other factors remain constant.

Sharpe Ratio: This is a measure of risk-adjusted return calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the strategy´s historical risk-adjusted performance.

Sortino Ratio: The Sortino Ratio is similar to Sharpe Ratio except it uses downside risk (Downside Deviation) in the denominator. Since upside variability is not necessarily a bad thing, Sortino ratio is sometimes more preferable than Sharpe ratio.

P/E Ratio: It compares how the market values a company to the company’s earnings. It can be either historic earnings or projected earnings. It is calculated as current share price divided by earnings. A higher P/E typically indicates that investors expect to see strong growth in the company.

P/B Ratio: It compares how the market values a company to the value on the company’s books. It is calculated as current share price divided by book value per share.A company trading at several times its book value tends to indicate a growth stock where investors believe the book value will rise in the future.

P/S Ratio: This is an indicator of the value placed on company’s sales/revenue. It is calculated either by dividing the company’s market capitalization by its total sales over a 12-month period, or on a per-share basis by dividing the stock price by sales per share for a 12-month period.

ROE: Return on Equity is the percentage a company earns on its shareholders' equity in a given year. 

Upside Capture Ratio: It measures a manager's performance in up markets relative to the market (benchmark) itself.

Downside Capture Ratio: It measures manager's performance in down markets. A down-market is defined as those periods (months or quarters) in which market return is less than 0.

Information Ratio: Information ratio is a risk-adjusted performance measure. The information ratio is a special version of the Sharpe Ratio in that the benchmark doesn't have to be the risk-free rate.