GLOSSARY

Absolute return - The return that an asset achieves over a certain period of time. Absolute return differs from relative return because it is concerned with the return of a particular asset and does not compare it to any other measure or benchmark. In general, a mutual fund seeks to produce returns that are better than its peers, its fund category, and/or the market as a whole. This type of fund management is referred to as a relative return approach to fund investing. By contrast, absolute return funds seek to produce positive performance regardless of market direction. As an investment vehicle, an absolute return fund seeks to make positive returns by employing investment management techniques that differ from traditional mutual funds.

Beta - A measure of the manager's systematic risk (i.e. - market risk). It compares the return volatility of the manager to the volatility of returns for a comparable market index. The index has a beta of 1 by definition. A beta of 1.20 would imply a volatility level 20% higher than the overall market, and a beta of 0.80 would indicate a volatility 20% lower than the market.

Correlation - In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management. Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random.

Down Capture - This ratio is the direct opposite of the up-market capture ratio, gauging performance of the manager relative to the index in down markets. A ratio value of 80 would indicate the manager has declined only 80% as much as the declining overall market, indicating relative outperformance.

Exchange Traded Funds - A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund.

Long bias - A condition in which an investor has more long positions than short positions in a given asset, market, portfolio or trading strategy. Investors who are net long will benefit when the price of the asset increases. A position that is net long is the opposite of a position that is net short.

R-squared - A measure of how closely the manager's returns match the returns of the market index against which it is compared. This serves to indicate what percentage of a portfolio's performance had to do with what the market did. For example, an R-squared of 90% indicates that the manager correlates with the style or benchmark index by a factor 90% over time. An R-squared of 40% would indicate very little correlation with the chosen benchmark.

Standard Deviation - A statistical measure of the historical volatility of a portfolio's returns. More generally, a measure of the extent to which numbers are spread around their average.

Short selling - The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. Selling short is the opposite of going long. That is, short sellers make money if the stock goes down in price.

Up Capture - The up-market capture ratio is a measure of a manager's performance in up markets relative to the index during the same period. A ratio value of 115 indicates that the manager has outperformed the market index by 15% in periods when the index has risen.

Volatility - The relative rate at which the price of a security moves up and down. Volatility is found by calculating the annualized standard deviation of daily change in price. If the price of a stock or portfolio moves up and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility.

Source: www.investopedia.com (a Forbes media company)