A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
       
  A    
  Annualised Return:   To convert the rate of return from a period of less or more than one year to an annual (yearly) basis. For example an investment that returns 1% per month will return 12% on an annualised basis.
     
  Arbitrage:  

For example, the simultaneous purchase and selling of a security in order to profit from a differential in the price, usually on different exchanges or marketplaces. Known as a "riskless profit". An example of this is when an arbitrageur buys a stock on a foreign exchange that hasn't adjusted for the constantly changing exchange rate. So the arbitrageur will purchase the undervalued stock and short sell the overvalued stock, thus profiting from the difference. Other arbitrage opportunities occur with:

  • Convertible securities
  • Mergers
  • Yield/Curve changes
  • Cash/Futures differentials
  • Volatility changes
       
  Average Positive Monthly Return:   Historic positive average return on an asset or portfolio over a specific period of time.
     
  Average Negative Monthly Return:   Historic negative average return on an asset or portfolio over a specific period of time.
     
  B  
Bonds:   Fixed income instruments issued by governments or corporations which provide a pre-stated annual yield until maturity.
     
  Bear Market:   A Bear market is when there are extended periods of falling stock prices due to overvaluation, recession, high unemployment, currency depreciation, growing national deficits, and/or relatively high inflation. Bear markets make it difficult for investors to pick profitable stocks. One solution to this is to make money when stocks are falling using a technique called short selling (see Selling Short). Another approach is to invest in uncorrelated markets, asset classes and securities. Still another strategy is to wait on the sidelines until you feel that the bear market is nearing its end and start buying in anticipation of a bull market; a market in which prices of a certain group of securities are rising or are expected to rise. Exploiting only one market phase such as the Bear or the Bull can bring unfortunate results. One way of winning in rising and falling markets is with the right combination of Managers utilizing very different strategies.
       
  Bull Market:   A Bear market, as described above, is a market in which prices of a certain group of securities are fairly consistently falling over a period of months or years or are expected to fall, and figures can vary, such as a downturn of 15% or more in more than one index (Dow & S&P 500). The opposite, a Bull market, is when stocks are rising, people are finding jobs, GDP is growing, everything looks just plain rosy. Picking stocks during a Bull market is sometimes just too easy. Everything is going up. Bull markets cannot last forever though, and sometimes lead to dangerous conditions if stocks become excessively overvalued. As mentioned above, exploiting only Bull Markets can result in tragic consequences. Combining Managers of different styles permits the exploitation of both Bull and Bear Markets.
     
  C  
Call:   An option contract giving the owner the right to buy a specified amount of an underlying security at a specified price within a specified time. The term sometimes refers to the act of exercising a call option. A Call option refers to long investment positions.
       
  Cash:   While "cash" can be the money we hold in our pocket or chequing account, cash also refers to an asset that is highly liquid (i.e. easily bought or sold) and has virtually no risk (you can be sure you will get a certain return). Money market funds are considered "cash" because you can easily buy or sell shares of money market funds and because the return is as good as guaranteed.
     
  Combinations:   Combining two superior Managers or more improves the risk/return attributes of your investment, such as, ensuring both offensive and defensive characteristics. It can also reduce the variability in the returns. The drawdowns are minimised both in degree and duration. By properly combining Managers with different methodologies, you can expect to make gains in rising and falling markets.
     
  Compounding:   It is making returns on returns, earned on your investment. Add the monthly returns and get the simple return on the investment. Take the total away from the cumulative return. The difference is the additional yield due to compounding. When your returns are reinvested and then provide you with more returns in subsequent years, you are benefiting from compounding. Thanks to efficient compounding, your investment will grow considerably more. It is the key to wealth.
       
  Convertible Bond:   Bonds that can be converted into a predetermined amount of the company's equity at certain times during its life.
     
  Cumulative Unit Value Growth of $100:   It describes the growth of your investment of $100.00.
     
  D  
(Manager)
Diversification:
  Spreading your portfolio in optimum allocations over a combination of managers with diverse strengths to avoid excessive exposure to any one source of risk.
     
  Drawdowns:  

They reflects a drop in the value of the investment. Significant points, which are measured are:

  • The depth of the drawdown which is the lowest value reached during the drawdown from a major peak
  • The duration of the drawdown, which is the amount of time it takes to reach the bottom of the trough
  • Length of time it takes to recover to the previous level/peak.

This is the span of time that you are losing money, and you want to minimise the length and duration of the drawdowns. With the right combination of managers this can be achieved.

       
E    
       
F    
       
G    
       
  H    
Hedge Funds:   True hedging refers to reducing risk, but Hedge funds often use options, short selling and any other strategy to increase leverage and get a maximum rate of return without regard to the implied risk averse commitment.
     
  Hedge Ratio:   A ratio comparing the amount you are hedging with the size of the position being hedged against. For example: A 33% hedge ratio means you have 1/3 of a portfolio with a neutral bias.
     
  I  
Index Fund:   A mutual fund whose objective is to match the returns of a particular index, such as the S&P 500, a group of large US companies.
     
  Inflation:   Increases in the price of goods and services over time, thus reducing the purchasing power of a currency.
     
  Inflation Risk:   If the rate of inflation is higher than the rate of return on your investments, the money you invested will buy less several years from now than it would buy today.
       
J    
       
K    
     
  L  
Large Cap:   Stocks with a market capitalization of above $5 billion (For example).
       
  Levered Option:   Where an investment is exposed to a multiple of the value of the amount invested.
     
  Liquidity:   An asset that can be easily bought or sold is considered liquid. Money market funds are perhaps the most liquid. The most liquid stocks are those which exhibit highest trading volume.
       
  Long Position:   This refers to an entity owning a security. An owner of shares in McDonald's Corp. is said to be "long McDonald's" or "has a long position in McDonald's". If you are long you want the stock price to go up.
     
  Long/Short Weighting:   The ratio of long vs. short positions in a portfolio.
     
  M  
Manager's
12-month Rolling Return:
  Each point on the graph represents the growth from the same month in the previous 12 months for an individual manager or market.
     
  Manager Combinations
1 Year Rolling Average Return:
  Each point on the graph represents the growth from the same time in the previous year for a combination of managers.
     
  Market Neutral:   A strategy taken by an investor or fund by attempting to profit from the current direction of the market. The investor will take both long and short positions at the same time in order to exploit any momentum in the market, regardless of direction. Owning a market neutral mutual fund is a productive addition to any portfolio because it reduces or eliminates, or exploits the all powerful market risk.
       
  Market Timer:   A Manager who seeks to profit from short or long-term market shifts.
     
  Mutual Fund:   A mutual fund is simply a group of people who lump their money together and give it to a management company to invest it for them. A mutual fund manager proceeds to invest in a number of securities from one or more markets and industries. Depending on the amount you invested, the investor's portion of the overall fund is determined.
       
N    
     
  O  
Options:  

Options are a privilege sold by one party to another that offers the buyer the right to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date. There are two basic types of options, calls and puts:

A call gives the holder the right to buy an asset (usually stocks) at a certain price within a specific period of time. Calls are very similar to having a long position on a stock. Buyers of calls hope that the stock will increase in value substantially before the option expires, so that they can then buy and quickly resell the amount of stock specified in the contract, or merely be paid the difference in the stock price, when they go to exercise the option.

A put gives the holder the right to sell an asset (usually stocks) at a certain price within a specific period of time. Puts are very similar to having a short position on a stock. Buyers of puts are betting that the price of the stock will fall before the option expires, thus enabling them to sell it at a price higher than its current market value and reap an instant profit.

The exercise or strike price of the option is what the stock price must exceed (for calls) or go below (for puts) before they can be exercised for a profit. All of this must occur before the maturity date, also known as expiration date. It should be noted that an option gives the holder the right to do something. You are not required to exercise if you do not want to, or if the expiry price is not favourable.

       
  P    
Put:  

A put gives the holder the right to sell an asset (usually stocks) at a certain price within a specific period of time. Puts are very similar to having a short position on a stock. Buyers of puts are betting that the price of the stock will fall before the option expires, thus enabling them to sell it at a price higher than its current market value and reap an instant profit.

The exercise or strike price of the option is what the stock price must exceed (for calls) or go below (for puts) before they can be exercised for a profit. All of this must occur before the maturity date, also known as expiration date. It should be noted that an option gives the holder the right to do something. One is not required to exercise if the terms are not favourable.

       
Q    
     
R  
  Return Volatility:   See Standard Deviation
       
  Risk Adjusted Returns:   The returns you are getting for the risk you are taking. It is a measurement of how much of a "bang for our buck " we are getting. This is also known as the Sharpe Measure or Sharpe Ratio, developed by Nobel Laureate William Sharpe. The higher the risk adjusted return the better, and it implies that the manager or combination is achieving acceptable returns for each unit of risk. The objective is to achieve risk adjusted returns in excess of the related market benchmark. The measure is calculated by dividing the returns by the standard deviation after subtracting the risk free rate (such as T-Bills).
       
  Risk:   The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. There are a number of measures of risk using historical returns. While higher risks are normally associated with higher returns, the Performex® methodology is able to identify combinations which have above market returns at below market risk levels.
     
  S  
     
Selling Short:   If a stock is purchased in hope that it will rise, it is called a "long". But if one anticipates a decrease in share price an unheld sell order is given which is referred to as a "short sale".

For example, you tell your stockbroker that you wish to short 100 shares of stock XYZ. When an investor "sells short" a security, a broker either lends him the security or borrows it from another customer or brokerage firm in order to make delivery to a buyer. A short seller owes the lender of the securities any dividends or rights declared on the stock during the course of the stock loan. Your hope is that the stock plummets and you can replace the 100 shares at a much cheaper price. You profit from the difference between the two transactions by virtue of a lower price sometime in the future. It may sound a little confusing at first but it is actually a simple concept. And while shorting is not necessarily for rookie investors, short selling offers a great opportunity to profit from a bear market, declining stock price or to hedge against uncertain or falling markets.
       
  Sharpe Measure:   See Risk Adjusted Returns
     
  Short Manager:   Sells shares before purchasing them. This constitutes a form of insurance in a bear market, since if the market goes down the strategy should generate profits rather than losses.
     
  Short Term Market Timer:   A Manager who buys and sells stocks or indices based on a short-term view of the market.
     
  Small Cap:   Stocks with a market capitalization of under $1billion (For example).
     
  Standard Deviation:   Also known as return volatility, it is the degree to which a set of returns vary from their average returns. It represents the variability of the value of a security or group of securities. Each investment has a different level of risk or return volatility. A short-term deposit at the bank will represent no variability in value. With the right combination of managers there is reduced standard deviation on an investment due to their complimentary investment strategies.
       
  T    
T-Bills:   A U.S. Government debt security with a maturity that is less than one year. Treasury bills are issued through a competitive bidding process at a discount from par. Thus there are no fixed interest payments.
       
U    
       
V    
     
  W  
Warrant:   A security that gives the holder the right to purchase securities from the issuer of the warrant at a specific price. Warrants are usually considered long-term instruments. Expiration dates are typically years in the future. Warrants are similar to call options in concept. But the lifetime of a warrant is often measured in years, while the lifetime of a call option is usually months. Furthermore, warrants are issued and guaranteed by the company whereas options are exchange instruments and not issued by the company.
       
X    
       
Y    
       
Z