# Glossary

## A

## Active Share

The active share measures the extent to which the holdings of an equity portfolio differ from the benchmark. The ratio can take values between 0 and 1, where 0 is a complete match between the portfolio and the benchmark and 1 where is no overlap between the portfolio and the benchmark. The higher the Active Share, the more active the fund manager.

## B

## Beta

The beta measures the volatility of a fund in relation to the benchmark. A beta of 0 means that there is no dependency. If the beta fluctuates between 0 and 1, the price change of the share is on average less than that of the benchmark. A beta greater than 1 indicates that the price change of the security is on average higher than that of the benchmark.

## C

## Correlation

The correlation measures the linear relationship between two series of figures (e.g. the performance of a fund and the benchmark index). By definition, the correlation is between +1 and -1.

## I

## Information Ratio

The information ratio expresses the ratio of additional returns generated to the extra risk involved. The over or underperformance of the fund relative to its performance comparison index is divided by the tracking error.

## J

## Jensen's Alpha

Jensen’s alpha is a risk adjusted measure of a fund's performance relative to its performance comparison benchmark. Beta: A measure of the volatility of a fund relative to its performance comparison index, i.e. how sensitive the fund is to movements.

## S

## Sharpe Ratio

Sharpe ratio is the measure of risk-adjusted return of an investment. It is the return achieved of the fund above the risk-free interest rate divided by the volatility of the returns.

## T

## Tracking Error

A measure of how much a fund’s returns deviate from those of its performance comparison index. The lower the number the closer the fund’s historic performance has followed that of its performance comparison index.

## V

## Volatility

Volatility is the degree of variation of a security price or index around its mean over a fixed period of time. A security is referred to as volatile when its price fluctuates sharply.