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Private Banking - USA

 
 

Glossary of Statistical Terms

The Managed Accounts Manager Selection Team has provided for your convenience statistical definitions that may be helpful to you when utilizing some of our informational pieces. Please contact your Relationship Manager if you would like to receive a hard copy of these definitions.

Active Share

A statistical estimate of how actively managed a portfolio is versus its benchmark. It is calculated by summing the absolute value of weight differences between each portfolio's holding versus each index holding and dividing by two. A higher value indicates a higher level of active management (max = 100, Index =0).

Alpha

A measure of risk- (beta-) adjusted return.  It measures the nonsystematic risk (non-market risk, i.e., risk that can be eliminated by diversification). The formula is the Mean of the excess return of the manager, over beta times the benchmark. Higher values indicate a manager's added value over the benchmark, and are therefore desirable.

Benchmark

The Managed Accounts Manager Selection Team determines appropriate indices by performing an in-depth review of a Portfolio Manager's strategy. Various information is taken into consideration which includes: the manager's research process, investment approach and stated benchmark as well as returns- and holdings-based analysis. For the definitions of the benchmark indexes referenced herein, please click here. Please contact your Relationship Manager if you would like to receive a hard copy of such disclosure. 

Beta

A measure of systematic risk (i.e., risk that affects the entire economy and cannot be eliminated through diversification).  It reflects the sensitivity of a manager’s portfolio to movements in the benchmark. A beta of one indicates that the volatility of the manager's portfolio is equal to that of the corresponding benchmark. A beta of greater than one indicates that the portfolio is more volatile than the benchmark, while a beta of less than one indicates that the portfolio is less volatile than the market benchmark. A beta of negative one indicates that the portfolio moves opposite the benchmark (i.e. if the benchmark is down 1 percent the portfolio is up 1 percent). Beta is estimated by the slope of the best-fit line based on the ordinary least-squares regression, using the market's quarterly return less the risk-free rate as the independent variable and the manager's quarterly return less the risk-free rate as the dependent variable.

Convexity

A measure of the curvature in the relationship between bond prices and bond yields that calculates how the duration of a bond changes as interest rates change. Convexity is used to measure and manage the market risk to which a portfolio of bonds is exposed. This is a mathematical calculation and actual results could differ from various other factors and assumptions. 

Coupon

The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate" or "coupon percent rate". For example, if you hold a $1,000 nominal of a  bond with a coupon of 8% will pay $80 a year (typically in two installments of $40 each-a semiannual payment).

Current Yield

Annual income of a security (interest or dividends) divided by the current price of the security. This measure looks at the current price of a bond instead of its par value and represents the return an investor would expect if he or she purchased the bond and held it for a year. 

Dividend Yield

The ratio of the annual dividend payout to the market price of the stock. This statistic is based off the weighted average of the portfolio holdings.

Downside Capture Ratio

Annualized return of the portfolio during negative benchmark months divided by the annualized return of the benchmark during the negative months.

Downside Risk

A gauge of risk which measures the volatility of the portion of a portfolio's returns that fall below the average return.  The greater the downside volatility of the returns, the higher the downside risk. It is a measure of semi-standard deviation. 

Growth/Value

A holding-based portfolio level analytic that uses a proprietary blend of relative valuation ratios to determine if a stock is growth or value driven. The stock universe covers 36,000 securities.  A growth stock is a stock of a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry. Value stocks typically aappear undervalued by some form(s) of fundamental analysis.

Information Ratio

Measures incremental assumed return per unit of risk focusing on active return relative to active risk.  It is return minus the benchmark return, divided by the standard deviation of the active return. Higher values are desirable. 

Investments

Investments means:

1. Securities (as defined by section 2(a)(1) of the Securities Act of 1933, other than securities of an issuer that controls, is controlled by, or is under common control with, the Prospective Qualified Purchaser that owns such securities, unless the issuer of such securities is:

  • An Investment Vehicle;
  • A Public Company; or
  • A company with shareholders' equity of not less than $50 million (determined in accordance with generally accepted accounting principles) as reflected on the company's most recent financial statements, provided that such financial statements present the information as of a date within 16 months preceding the date on which the Prospective Qualified Purchaser invests in the Strategy;

2. Real estate held for investment purposes;

3. Commodity Interests held for investment purposes;

4. Physical Commodities held for investment purposes;

5. To the extent not securities, financial contracts (as such term is defined in section 3(c)(2)(B)(ii) of the Investment Company Act of 1940 entered into for investment purposes;

6. In the case of a Prospective Qualified Purchaser that is an investment company, exempt from registration under Section 3(c)(7) or section 3(c)(1) of the Investment Company Act of 1940, or a commodity pool, any amounts payable to such Prospective Qualified Purchaser pursuant to a firm agreement or similar binding commitment pursuant to which a person has agreed to acquire an interest in, or make capital contributions to, the Prospective Qualified Purchaser upon the demand of the Prospective Qualified Purchaser; and

7. Cash and cash equivalents (including foreign currencies) held for investment purposes. For purposes of this section, cash and cash equivalents include:

  • Bank deposits, certificates of deposit, bankers acceptances and similar bank instruments held for investment purposes; and
  • The net cash surrender value of an insurance policy.

Market Capitalization

The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share.

Maturity

The length of time until the principal amount of a bond must be repaid.

Modified Duration

A calculation to measure the change in the value of a security in response to a change in interest rates. This is a mathematical calculation and actual results could differ from various other factors and assumptions. 

Price-to-Book Value Ratio

The ratio of the market price of a company's stock to its book value. This ratio helps equity managers determine if a stock is overvalued. This statistic is based off the weighted average of the portfolio holdings.

Price-to-Cash Flow Ratio

The ratio of the market price of a company's stock to its cash flow. This ratio helps equity managers determine if a stock is overvalued. This statistic is based off the weighted average of the portfolio holdings.

Price-to-Earnings (“P/E”) Ratio

A company's stock price divided by its earnings per share; also known as the price-earnings multiple. The P/E ratio helps equity managers determine if a stock is overvalued compared to its earnings, as well as other stocks in the sector and wider market. The P/E ratio can be calculated using the previous year's reported earnings or using a forecast of future earnings. 

Price-to-Sales Ratio

The ratio of the market price of a company's stock to its sales. This ratio helps equity managers determine if a stock is overvalued. This statistic is based off the weighted average of the portfolio holdings.

Qualified Purchaser

Qualified purchaser, as defined under Section 2(a)(51) of the Investment Company Act of 1940, means: 

1. any natural person (including any person who holds a joint, community property, or other similar shared ownership interest in an issuer that is excepted under Section 3(c)(7) with that person's qualified purchaser spouse) who owns not less than $5,000,000 in Investments;

2. any company that owns not less than $5,000,000 in Investments, and that is owned directly or indirectly by or for 2 or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations, or trusts established by or for the benefits of such persons;

3. any trust that is not covered by clause (ii) and that was not formed for the specific purpose of acquiring the securities offered, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a person described in clause (i), (ii), or (iv); or 

4. any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in Investments.

Return on Equity (“ROE”)

Reveals how much profit a company generates with the money shareholders have invested in it. The formula is Net Income divided by Average Shareholder's Equity for a given period of time. This statistic is based off the weighted harmonic average of the portfolio holdings.

Standard & Poors (“S&P”) Rank

A computerized Standard & Poor's scoring system (A+ being the highest, C the lowest) to compute basic scores for earnings and dividends, then adjusts the scores by predetermined modifiers for growth, stability within long-term trend, and cyclicality. Adjusted scores are combined to yield a final score which is measured against a scoring matrix determined by analyzing the scores of a large representative sample of stocks. This statistic is based off the weighted average of the portfolio holdings.

Sharpe Ratio

Measures incremental assumed return per unit of risk (standard deviation). The formula is return minus the risk-free rate (cash), divided by the standard deviation. Higher values of the Sharpe ratio are desirable. 

Sortino Ratio

Measures incremental assumed return per unit of risk using downside risk (semi-standard deviation) as the measure of risk. The formula is return minus the risk-free rate (cash), divided by the semi-standard deviation. Higher values of the Sortino ratio are desirable.

Standard Deviation

A gauge of risk measuring the volatility of a portfolio's returns around its expected return (also called mean, or average return). The greater the volatility of the returns, the higher the standard deviation. It is not a measure of downside risk, but a measure of the total variation or spread of the return. In statistical terms, standard deviation is the square root of the variance, which is a measure of return dispersion.

Tax Efficiency

Tax Efficiency: Measures the portfolio manager's relative effectiveness in preserving pre-tax returns. The three year ranking is based on the prior three calendar years performance of an account that CSSU or the portfolio manager deems to be generally representative of a standard account. It is calculated using a proprietary methodology that takes into account long-term and short-term realized gains and losses and unrealized gains and losses, qualified dividend income versus interest income, after-tax returns and before-tax returns and portfolio turnover. Maximum U.S. federal long-term, short-term and ordinary tax rates are applied to the corresponding categories of income. A tax efficiency rank is calculated for each calendar year. The three year rank is calculated by taking the average rank of the last three calendar years.

Tracking Error

A measurement of deviation comparing the historical performance differential of two portfolios where a lower number signifies a lower deviation. This is typically used to measure the divergence of performance between an actively managed portfolio and an index.

Treynor Ratio

Measures incremental assumed return per unit of risk using beta as the measure of risk. The formula for Treynor ratio is return minus the risk-free rate (cash), divided by the beta of the portfolio. Higher values of the Treynor ratio are desirable.  

Turnover

The number of shares traded for a period as a percentage of the total shares in a portfolio or of an exchange. In a portfolio, typically a lower turnover is desired because higher levels of turnover could result in higher capital gains taxes imposed on the portfolio. Consult each portfolio manager individually to determine their reasoning for their portfolio's level of turnover.

Universe

Universes are compiled by Credit Suisse using both quantitative (e.g. Return based analysis) and qualitative criteria (e.g. strategy type, stated investment goals, strategy name). All Universe returns are gross of fees.

Upside Capture Ratio

Annualized return of the portfolio during positive benchmark months divided by the annualized return of the benchmark during the positive months.

Yield to Maturity/Call (“YTM”)

YTM is the rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Yield to Call is the rate of return anticipated on a bond if it is held until a call date and is expressed as an annual rate.  This is a mathematical calculation and actual results could differ based on various factors and assumptions. 

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