Glossary of Terms

The total market value of the entire portfolio as of the beginning of the period indicated.

Managers who focus on finding companies and securities that are attractive investments based on the fundamental characteristics of each company and its business.

A numeric tool used to measure and indicate the activity and movement of the overall market or a large market sector.

Measure of an issuer's equity market value. Calculated by multiplying the total common shares outstanding by the market price of common stock.

A measure of the average change in prices over time; determined by the cost for a fixed basket of goods and services at various points in time.

Portfolio generally limited to less than 15 securities.

Invests in both growth and value securities; seeks to add value through stock selection.

More reliance upon industrials, finance companies, utilities and other non-government/agency issues to enhance returns. Exposure may vary from time to time depending upon yield spread relationships between corporates and government/agencies.

Statistical measure of the degree to which the movements of two variables are related. For investment returns, it measures the sensitivity of movement of one set of returns in relation to the movement of another set of returns. Correlation values lie between -1.00 and 1.00. A coefficient of 1.00 means both series move together perfectly; a coefficient of -1.00 means both series move together perfectly, but in opposite directions; a coefficient of 0 implies that the series have no statistical relationship to each other. Correlation is not necessarily a measure of causality; rather it indicates the strength of the relationship between two series that may or may not have a causal relationship. See also R2 .

The total return achieved over a period of time. This return is not annualized.

Indication of a firm's leverage.

The company earnings that are distributed to shareholders usually in the form of cash or stock, expressed as a percentage of the stock price.

Fixed income strategies which focus on controlling the maturity and/or duration of the portfolio benchmarked to either a fixed income market index or to a selected maturity range. Other approaches simply restrict maturities to a specific range such as 1-3 year maturities.

Describes that portion of total variability that is below the goal and measures the probability-weighted squared deviations below the goal. Known also as downside risk or target semi-deviation, downside risk distinguishes between 'good' and 'bad' returns by assigning risk only to those returns below the goal, or missing the predetermined target. Downside risk can be partitioned into two sub-components, downside frequency and average downside deviation, which measure the frequency and average magnitude of failure, respectively.

A measure in the change of a company's earnings over time.

The ending portfolio value represents the total market value of the entire portfolio as of the end of the period indicated.

The Employee Retirement Income Security Act (1974). Federal law regulating private sector pension and retirement plans.

Expected value or mean of all the likely returns of investments contained in a portfolio.

Risk, or uncertainty, as measured by the standard deviation of the expected return.

A measure of the anticipated annual trading activity of a portfolio. Whenever an owned security is sold, it is 'turned over.' Thus, a portfolio with a 50% turnover rate can be expected to sell (and possibly replace) half of its holdings within the coming year.

A fiduciary is someone in a position to exercise authority over a pool of assets and is obliged to make decisions in a manner which serves the interests of the beneficiaries of those assets and not his or her own personal interest. In the case of a pension plan, for example, whether or not an individual is specifically named as a fiduciary, that person is a plan fiduciary to the extent he or she can or does exercise discretion over the administration of the plan's benefits and assets.

'Growth At a Reasonable Price.' Used to define the style of a manager who seeks attractively priced growth-oriented securities.

Emphasis on government-backed securities including agency issues and mortgage-backed securities guaranteed by federal agencies.

The gross-of-fees rate of return doesn't include the deduction of advisory fees and most transaction costs, which are included in one fee for wrap accounts.

Managers who focus on the outlook for a company's earnings rather than the current price of its shares. Growth managers attempt to invest in the shares of companies whose sales and earnings are likely to grow more rapidly than other companies. They believe the companies above average growth will be reflected in a higher price for its shares. Growth managers can be further classified on the basis of the capitalization of the securities in which they invest.

An indication of how 'expensive' or 'cheap' a stock has been by comparing its price relative to the company's historical earnings per share.

Statistical measure of a group of stocks such as the S&P 500. The indices can be broad based (which cover a wide range of companies and mirror the 'market' as a whole) or narrow based (which consist of securities from a particular industry).

1) Attempts to replicate sector weightings on a market capitalization basis, but utilizes computer screens and models to 'enhance' stock selection through a particular emphasis on market sectors or individual issues. Generally involves heavy utilization of quantitative models and little active decision-making by a portfolio manager. 2) Fixed income portfolios may be constructed to replicate a specific fixed income index, which are then enhanced through semi-active portfolio management. Portfolios are typically managed utilizing quantitative models. Hedging and slight maturity and sector shifts are utilized to generate overall returns in an attempt to exceed the selected index or benchmark.

Measure for all consumers, the change in the prices of goods and services purchased by all urban consumers. See Consumer Price Index.

The information ratio is an efficiency measure calculated by dividing the Excess Rate of Return by the Standard Deviation of the Excess Rate of Return stream (Tracking Error). Please refer to the definition of Excess Rate of Return or Tracking Error for further details.

The invested capital is the beginning value of the portfolio at inception plus contributions and/or less withdrawals over time.

The investment goals as stated in an investment policy statement are provided as a basis for comparison with total portfolio performance in order to evaluate achievement of the stated investment objectives.

A formal, written document that outlines the objectives, restrictions and guidelines for a separate account portfolio.

An investment service offered by a portfolio manager that is defined by specified portfolio management objectives, e.g. by asset class(es), style, types of securities, level of risk, or strategy of implementation. The product may be offered to all clients or designed for a particular customer.

The method an investment manager uses to analyze, purchase and sell securities. The style indicates how individual securities are selected and/or the types of instruments purchased. Examples include: Large Cap Value and Large Cap Growth.

The LBGC Index is composed of approximately 5,000 publicly issued corporate and U.S. government debt rated Baa or better, with at least one year to maturity and at least $1 million par outstanding. The index is weighted by the market value of the issues included in the index.

The LBIGC is composed of 5,000 publicly issued corporate and U.S. government debt issues rated Baa or better, with at least one year to maturity and at least $1 million par outstanding. The index is weighted by the market value of the issues included in the index. Lehman Brothers Intermediate Government Corporate Bond Index has a duration of a little over 3 years and a maturity equal to slightly more than 4 years.

The LBMBI is a total return performance benchmark for the tax-exempt market. Returns and attributes for the Index are calculated semi-monthly using over 8,000 municipal bonds. Bonds included in the Index are selected to be representative of the market and are classified into four main sectors: General Obligations (state and local), Revenues, Insured Bonds, and Pre-refunded/Escrowed bonds. Index weightings are based on the estimated market value capitalization of the various sectors in the Index.

Composed of securities from LBGC Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index.

The market index provides a comparison of the portfolio's performance to market benchmarks based upon the account's actual monthly asset mix of equities, bond, and cash equivalents. The asset mix of the account is captured on a monthly basis, and the market index represents the average asset mix over the full review period.

A measure of central tendency for a set of values. The most common types of mean are arithmetic mean and geometric mean. The mean is more affected by extreme values than the median or the mode because it takes into account the difference among all values, not merely the rank order (as does median) or their frequency (as does mode). For a symmetrical distribution or normal distribution, the mean, mode, and median are always identical.

The middle return in a distribution of returns that are ranked from highest to lowest. Half of the returns lie above the median, and half lie below it. For a symmetrical distribution or normal distribution, the mean, mode, and median are always identical.

The value occurring most frequently in a set of data.

A market value-weighted average of the performance of over 900 securities from Europe, Australia, and the Far East.

A market value-weighted of the performance of over 1,460 securities listed on the stock exchange of a number of representative countries from around the world, including the U.S.

Maintains a research staff and portfolio managers who are capable of evaluating and managing portfolios for high net worth individuals or will purchase tax-exempt municipal bonds on an opportunistic basis when yield spreads are advantageous relative to governments and agencies.

The net-of-fees rate of return does include the deduction of advisory fees and transaction costs, which are included in one fee for most wrap accounts.

A definition of future expectations or goals for the client's investment portfolio which helps guide the formulation of present portfolio policies and current operations.

The aggregation of performance for two or more portfolios selected by the investment manager in accordance with a prespecified common set of standards.

The measurement of investment results. These results are typically measured in both absolute and relative terms, and it is important to select appropriate yardsticks or benchmarks to measure those relative results. It is also important to choose an appropriate time horizon.

A popular way to compare stocks selling at various price levels. The PE ratio is the price of a share of stock divided by earnings per share for a twelve-month period. For example, a stock selling for $50 per share and earning $5 per share is said to be selling at a price-earning ratio of 10.

A measure of the inherent value of a company, by determining the market's perception (price) relative to the company's net worth (book value of assets).

Over the last 150 years, U.S. courts have generally not ruled on the appropriateness of specific investments and actions; rather they have developed the doctrine of 'The Prudent Man.' Thus, in many cases appropriateness is based on an assessment of how a prudent person would have responded in a specific situation. However in recent years, the courts have supplanted the concept of the prudent man with that of the Prudent Expert. For example, Section 404(a) of ERISA notes that a trustee will not be able to plead his lack of experience or knowledge as to the standards of pension plan money management.

Investment decisions derived from statistical and quantitative models that observe market behavior.

There are four quartiles within each floating bar, and each is broken into a 25% tier, totaling 100%. The upper or first quartile indicates the top 25% of the managers in your universe with the second quartile representing the next 25%, and so on.

A statistical measure of how well a portfolio tracks its benchmark. A 100% R² indicates that the portfolio tracks its benchmark perfectly. A 0% R² indicates there is no relationship between the portfolio and the benchmark.

The change in value of an investment usually expressed as a percentage.

A return adjusted for inflation.

The uncertainty of future outcomes considered in conjunction with the possibility of their effects being adverse. Risk is usually measured as the standard deviation of returns.

A benchmark that is thought to carry little or no risk because its return is typically guaranteed. The U.S. 3-month Treasury Bill is considered a riskless investment because it is a direct obligation of the U.S. Government and its term is short enough to minimize the impact of inflation and market interest rate changes.

Investment risk measured as one of the following two methods: downside risk and its associated measures and standard deviation and its associated measures.

That portion of a rate of return in excess of the riskless rate that rewards investors for the additional risk assumed in owning securities other than those that are risk-free. The return for U.S. Treasury Bills is typically used as a proxy for the riskless rate.

Measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As of the latest reconstitution, the average market capitalization was approximately $5.1 billion; the median market capitalization was approximately $791.1 million. The index had a total market capitalization range of approximately $520 billion to $178 million.

Measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $14.1 billion; the median market capitalization was approximately $4.1 billion. The smallest company in the index had an approximate market capitalization of $1.6 billion.

Measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

Covers 500 industrial, utility, transportation, and financial companies of the US markets. The index represents about 75% of the NYSE market capitalization and 30% of the NYSE issues. It is a capitalization-weighted index as calculated by Russell on a total return basis with dividends reinvested.

The S&P BARRA Growth Index contains those S&P 500 Index securities with high price-to-book ratios, low dividend yields and high P/E ratios. Consumer Non-durables and Capital Goods, including Technology, have the most representation in the Growth Index. It is a market-weighted index, with each stock affecting the Index in proportion to its market value.

The S&P BARRA Value Index contains those S&P 500 Index securities with low price-to-book ratios, high dividend yields and low P/E ratios. Financials, Utilities and Energy are the largest sectors in the Value Index. It is a market-weighted index, with each stock affecting the Index in proportion to its market value.

A tool for determining the value that a manager is providing relative to the risk taken, outside of the risk-free rate. The Sharpe Ratio unitizes the total risk (standard deviation) adjusted return for each extra unit of risk.

Either negative (excluding certain investments) or positive (including certain investments), the non-financial criteria used for investing in various companies such as their environmental record, affirmative action policies, etc.

The standard Post-Modern Portfolio Theory measure of risk-adjusted returns. Measures how many units of return in excess of the goal are provided per unit of downside deviation risk.

It is a statistical measure of risk reflecting the extent to which rates of return for an asset or portfolio may vary from period to period. It also gauges the dispersion of returns around the average return. The larger the standard deviation, the greater the range of possible returns and, therefore, the more unpredictable the portfolio's return.

Also known as market risk, it is the inherent risk of being in the market or being exposed to market conditions.

Quantitative goals for a portfolio's return. The relative 'achievability' of a target return is measured by the probability that the portfolios expected return will meet or exceed the target.

The time period over which current judgements are expected to be relevant and investment results are to be measured.

Managers who try to anticipate broad trends that will affect the market and who use these trends to guide the selection of specific investments. They begin by focusing on macro issues, including the economic and political outlook, and after formulating their viewpoint, they make portfolio decisions following 3 steps: 1. Allocate assets among equities and other asset classes, 2. Allocate equity assets to chosen sectors and industries, 3. Select specific stocks within those industries. Since top-down managers strive to take advantage of market trends, the attributes of their portfolios usually change frequently. Market timing, asset allocating, and sector rotating are a few types of top-down management styles.

Like the Sharpe Ratio, it is a tool for determining the value that a manager is providing relative to the risk taken. The Treynor ratio unitizes the market risk (as measured by beta) adjusted return for each extra unit of risk.

A group of managed portfolios that meet certain predetermined criteria. For example, the Equity Separate Account Universe contains only Separate Account money managers that are invested in stocks.

Risk of a stock specific to the company's financial condition or industry group.

Managers who analyze a universe of stocks and seek to identify those that may be significantly undervalued relative to a variety of fundamental and/or technical criteria. For example, some value managers find undervalued stocks using such attributes as cash flow, yields, or price/earnings ratios. Value managers can be further categorized according to the capitalization of these securities they purchase. Some limit their investments to large cap stocks, while some focus on small cap stocks, and some invest across the size spectrum.

The square of standard deviation. It can also be used as a relative measure of risk (volatility). The higher the portfolio variance is when compared to a benchmark's variance, the more risky, or volatile it is considered to be.

The standard deviation of the stock's return over a specified period of time.The measure of total risk.(Also known as variance and standard risk)

A sale of securities at a loss with the subsequent disallowance of the loss by the IRS. If an individual sells a security at a loss and, within 30 days, repurchases substantially the same security, the IRS will consider it a wash sale and will disallow the loss.

Observation of yield curve to exploit irregularities between areas of curve.