Annualized Performance | Annualized returns express a fund’s rate of return on an annual basis, or a return per year, over a given time period. This is calculated as a geometric mean of the reported monthly returns (M) for the given time period in the following manner: ((1 + M1) x (1 + M2) x ... (1 + Mn) ^ 12/n) - 1. The annualized performance represents the rate of return that, if compounded each year, would produce the cumulative return for the same period. It is a measure that describes the change in a fund’s net asset value as if it grew or declined at the same rate each year during the period. The annualized performance is typically measured over trailing periods greater than 12 months, such as three years, five years or 10 years. It is also commonly measured for the entire period since a fund’s inception. |
Asset Flows | The net of all cash inflows and outflows at either industry, strategy, region, or fund level. |
Average Month | The average (mean) of a fund’s individual monthly returns. The average positive month provides an average of all months in which a return of zero or greater has been recorded. The average negative month is an average of all months in which a loss has been recorded. |
Best Month/Worst Month | The best month represents the highest net return achieved by the fund in a single month. The worst month represents the lowest net return achieved by the fund in a single month. |
Constituent Funds | A list of all the funds that contribute to the benchmark return. To avoid benchmarks being weighted by a single fund, only one share class per fund appears in any one benchmark, and only one fund or share class per master-feeder structure can appear in any one benchmark. Consequently, constituent fund lists are smaller than the number of funds for which returns are available for a particular period. Contributing funds and share classes are chosen based on set criteria, with those with the longest track record prioritized. |
Cumulative Performance | The aggregate percentage increase or decrease in a fund’s net asset value over a given period of time. This is calculated by geometrically linking the reported monthly returns (M) for the given time period in the following manner: (1 + M1) x (1 + M2) x ... (1 + Mn) - 1
The cumulative performance is typically measured over trailing periods such as the past three months, one year, three years or five years. It is also commonly measured for individual years, the current calendar year (year to date), and the entire period since a fund’s inception. |
Distribution of Monthly Returns | An overview of the frequency of distribution of a fund’s monthly returns. This provides an insight into the number of a fund’s monthly returns that are close to the average return and the number that are extreme values (outliers). |
Downside Deviation | Unlike standard deviation, this risk measure only takes account of returns that fall below a defined minimum acceptable return (MAR). The excess returns for each month (or other period) are calculated and those that are positive are taken as zero values. The sum of the squares of the negative excess returns is taken. The downside deviation is then the square root of the mean (sum of squares divided by number of returns). |
Drawdown Length | The number of months between a fund’s highest net asset value and its lowest net asset value (before recovering to its previous peak level). |
Drawdown Period | A drawdown period represents the period of time when the fund net asset value has declined from a previous peak. The period ends when the fund’s net asset value reaches its lowest point (before recovering to its previous peak). The lowest net asset value, and therefore the drawdown period, can only be determined once the fund has fully recovered to its previous peak net asset value. |
Drawdown Size | The percentage loss that a fund incurs from its peak net asset value to its lowest net asset value (before recovering to its previous peak level). |
Emerging Manager | A fund manager with a track record of less than two years. |
Excess Return | Provides an indication of the degree to which the fund has been successful at adding value or meeting a hurdle rate. Calculated by subtracting a predetermined rate of return (such as a risk-free rate, minimum acceptable return, or benchmark return) from the net return of a fund over a specified period. It is used in the calculation of statistics such as the Sharpe and Sortino ratios. |
Investment Growth/Value Added Monthly Index (VAMI) | The growth of a hypothetical $1,000 investment in a fund. VAMI is calculated as follows:
Previous VAMI x (1 + current return). It can be taken as a proxy for a fund’s net asset value to calculate other statistics, such as a fund’s drawdowns. |
Kurtosis | A measure of how peaked or flat a fund’s return distribution is, relative to a normal distribution. Positive kurtosis indicates a peaked distribution, with returns close to the mean and a higher frequency of outliers (in the shape of very high returns or significant losses). Negative kurtosis indicates a flatter distribution, with frequent and moderate deviations from the mean. The kurtosis measure used is adjusted to give excess kurtosis, which represents the level of kurtosis in relation to a normal distribution. A normal distribution is an important assumption of statistics such as the Sharpe ratio. |
Market Benchmarks | Benchmark returns comprise unweighted averages of constituent fund returns and provide an indication of industry and sub-sector performance in individual months and over longer periods. Funds are grouped based on their type, key strategy, sub-strategies, geographic scope, and currency denomination. |
Minimum Acceptable Return (MAR) | Used in the calculation of the excess return in the Sortino ratio, and in the calculation of downside and upside deviation. It is typically set according to the individual investor’s goals and can reflect the risk-free rate, the return of another benchmark, zero, or some other target. |
Monthly Returns (Net, %) | The percentage change in the fund’s month-end net asset value from the previous month-end net asset value, after fees have been deducted. Net-of-fees returns are used to provide an indication of fund performance from the perspective of investors. |
NAV per Unit | The net asset value per share of a fund. Represents the market value of a fund’s total net assets (total assets minus liabilities) divided by the number of shares outstanding. In many, but not all, cases this is the unit price or share price for new and existing investors in a fund. |
Performance Date/As At Date | The date to which the performance statistic is measured. This reflects the last, or most recent, monthly return used in the calculation. |
Recovery Length | The number of months between a fund’s lowest net asset value and its new peak (or recovery of its previous peak) net asset value. |
Risk-Free Rate (RFR) | The theoretical return of an investment with no risk. This is subtracted from a fund’s actual returns to generate the excess return. It is factored into statistics such as the Sharpe ratio to account for the assumption that any investment with a degree of risk attached should deliver greater returns than the risk-free rate. |
Sharpe Ratio | Provides an indication of a fund’s returns relative to its level of risk. Calculated by subtracting a predetermined risk-free rate from the annualized period return to generate the fund’s excess return, then divided by the fund’s volatility over the same period. In general, the higher the Sharpe ratio, the better the risk/reward characteristics of a fund and volatile returns are not necessarily bad, provided they are accompanied by a proportionally higher return. The exception to this is a negative Sharpe ratio as a negative excess return will mean higher amount of risk will have a positive influence on the ratio. It should be enough to know that a Sharpe ratio is negative, without knowing its magnitude, as this indicates the fund has not generated additional returns by taking on extra risk. |
Skew | A measure of the asymmetry of a distribution about the mean return. A positively skewed distribution is characterized by many low returns or losses and a few large returns. It is said to have a long right tail. A negatively skewed distribution is characterized by many high returns and a few low returns or losses. It is said to have a long left tail. A normal distribution is an important assumption of statistics such as the Sharpe ratio. |
Sortino Ratio | Provides an indication of a fund’s returns relative to its level of downside risk. It is similar to the Sharpe ratio but the Sharpe ratio can be negatively affected by volatility on the upside, as well as on the downside. In contrast, the Sortino ratio assumes that investors are tolerant of volatile returns if gains are being made. A fund’s excess return (annualized return minus a pre-determined minimum acceptable return) is divided by its downside deviation below the minimum acceptable return. |
Volatility | Measured by the annualized standard deviation of monthly returns during the specified period. An annualized figure is approximated by multiplying the standard deviation of monthly returns by the square root of 12 (for the number of periods in a year). |
Year to Date | The cumulative return of a fund during the calendar year. |
