A table that illustrates the relationship between two funds, based on their daily price changes over the last three years.

A graph that shows the daily price change of fund(s) during a selected period.

A pie chart that shows the proportion of a portfolio invested in different types of assets.

A scatter chart that shows the relationship between the risk and return of fund(s) during a selected period.

The price at which the holder of a mutual fund can sell their units. This is a fund's net asset value plus a redemption fee, if any.

Payments made to mutual fund investors, usually twice a year. These distributions reflect the income a fund has received from share holdings and interest-bearing securities, or they could come from trading profits. Investors may choose to receive these distributions or have them reinvested. 

The market value of a unit in a mutual fund, estimated as the value of the fund's underlying assets minus its liabilities divided by the number of shares outstanding. Usually, the NAV is calculated at the end of each business day.

The price at which mutual fund units are bought. This price usually reflects the preliminary or 'front-end' fee.

It is Jensen's alpha, which is a measure of fund performance adjusted for the risk associated with a benchmark over a given period. Jensen’s alpha is the average return on the fund portfolio over and above that predicted by the Capital Asset Pricing Model (CAPM), given the fund portfolio’s beta and the average market return. Jensen’s alpha is usually used to evaluate the contribution to performance by active management. Higher Jensen’s alpha means better fund performance after adjusting for the risk associated with the benchmark. Confidence in alpha must be qualified by an R-squared that approaches one. Jensen’s alpha is based on excess log returns and is presented on an annualized basis. The sub-period is measured in trade days which the number of trade days per year is 252.

Formulas:

• Alpha = Fund Average Excess Return − (Beta × Benchmark Average Excess Return)
• Annualized Alpha = (Number of Time Units Per Year/Number of Time Units Per Sub Period) X Alpha

Average Return is a measure of investment performance. It is calculated as the simple average of sub-period returns over a given period. Higher average return means better performance. Average return is based on simple returns and is presented on an annualized basis. The sub-period is measured in trade days, which the number of trade days, per year is 252.

Formulas:

• Average Return = ΣNumber of Sub Periods/Sub Period Return
• Annualized Average Return = Number of Time Units Per Year/Number of Time Units Per Sub Period X Average Return

Information ratio is a risk-adjusted measure of fund performance relative to benchmark performance. The information ratio is given by the ratio of the investment manager’s active return to the active risk. Active return is the return the investment manager earns, if ex post, or expects to earn, if ex ante, in excess of the benchmark. Active risk, or tracking risk, refers to the volatility of the investment manager’s active return. An investment manager holding exclusively the benchmark portfolio, therefore not taking any active position, will earn no active return and bear no active risk. Higher information ratio means better fund performance relative to benchmark performance on a risk-adjusted basis. Information ratio is based on simple returns and is presented on an annualized basis. The sub-period is measured in trade days which the number of trade days per year is 252.

Formulas:

• Information Ratio = Average Relative Return/Tracking Error
• Annualized Information Ratio = SQRT (Number of Time Units Per Year/Number of Time Units Per Sub Period) X Information Ratio

Return to risk is a measure of risk-adjusted performance. It is calculated as the average return divided by the standard deviation of sub-period returns over a given period. Return-to-risk is based on simple returns and is presented on an annualized basis. The sub-period is measured in trade days which the number of trade days is 252.

Formulas:

• Return to Risk = Average Return/Standard Deviation
• Annualized Return to Risk = SQRT (Number of Time Units Per Year/Number of Time Units Per Sub Period) X Return to Risk
  

Sharpe ratio is a risk-adjusted measure of performance developed by William F. Sharpe, also known as the reward-to-volatility ratio. The Sharpe ratio is the slope of the Capital Allocation Line, which is the line tangent to the efficient frontier of risky asset and defines the combination of the tangency risk portfolio and the risk-free asset. It is calculated as the average sub-period excess return divided by the standard deviation of sub-period excess returns over a given period. Sub-period excess return is the difference between the investment return and the risk-free return for a sub-period. Higher Sharpe ratio means better fund performance relative to the risk-free rate on a risk-adjusted basis. Sharpe ratio is used in performance analysis when two alternative portfolios (or investment funds) represent the entire invested assets. Sharpe ratio is a special form of information ratio where the risk-free rate is the benchmark. Sharpe ratio is based on log returns and can be presented on an annualized basis. The sub-period is measured in trade days which the number of trade days is 252.

Formulas:

• Sharpe Ratio = (Average Sub Period Excess Return/Standard Deviation of Sub Period Excess Returns)
• Annualized Sharpe Ratio = SQRT (Number of Time Units Per Year/Number of Time Units Per Sub Period) X Sharpe Ratio

Standard deviation is a measure of investment risk or volatility in sub-period returns. It is calculated as the square root of variance, which is the average of sub-period squared deviations over a given period. Higher standard deviation means higher risk. Standard deviation is based on simple returns and can be presented on an annualized basis. The sub-period is measured in trade days, which the number of trade days is 252.

Formulas:

• Variance = Σ(Sub Period Returns - Average Return)²/ (No of Sub Periods -1)
• Standard Deviation = SQRT(Variance)
• Annualized Standard Deviation = SQRT(Number of Time Units Per Year/Number of Time Units Per Sub Period) X Standard Deviation

Beta is a measure of sensitivity of fund performance relative to changes in benchmark performance. A fund with a beta of 1.0 has tended to experience up and down movements of roughly the same magnitude as the benchmark and a beta of 1.2 suggest that the movement of the fund is 1.2 times that of the benchmark. Higher beta means higher risk associated with the benchmark. Confidence in beta must be qualified by an R-squared that approaches 1. Beta is based on excess log returns. The sub-period can be measured in trade days which number of trade days per year is 252.

Formulas:

• FR = Fund sub-period excess returns
• BR = Benchmark sub-period excess returns
• FAR = Fund average excess return
• BAR = Benchmark average excess
• Covariance = Σ(FR-FAR) X (BR-BAR)/ Number of Sub Periods
• Benchmark Variance = Σ(BR-BAR)²/ Number of Sub Periods
• Beta = Covariance / Benchmark Variance

The Lipper Rating for Consistent Return identifies a fund that has provided relatively superior consistency and risk-adjusted returns when compared to a group of similar funds. Funds which achieve high ratings for Consistent Return may be the best fit for investors who value a fund's year-to-year consistency relative to other funds in a particular peer group.

Investors are cautioned that some peer groups are inherently more volatile than others, and even Lipper Leaders for Consistent Return in the most volatile groups may not be well suited to shorter-term goals or less risk-tolerant investors.

Correlation is a measure of the strength of the linear relationship between fund performance and benchmark performance. The correlation coefficient has the same sign of the covariance but is always between –1 and +1, thus being unaffected by any scaling of the variables (or series of returns). A positive correlation indicates that fund returns and benchmark returns move in the same directions on average while a negative correlation indicates the opposite. Correlation ranges from -1 (perfect negative correlation) to 1 (perfect positive correlation.) A value of 0 means that no linear relationship exists. Correlation is based on excess log returns. The sub-period can be measured in trade days.                                                         

Formulas:

• FR = Fund sub-period excess returns
• BR = Benchmark sub-period excess returns
• FAR = Fund average excess return
• BAR = Benchmark average excess return
• Covariance = Σ(FR-FAR) X (BR-BAR)/ Number of Sub Periods
• Correlation = Covariance/(Fund Standard Deviation X Benchmark Standard Deviation)

The Lipper Rating for Expense identifies a fund that has successfully managed to keep its expenses low relative to its peers and within its load structure.

The Lipper Rating for Expense may be the best fit for investors who want to minimize their total costs. It can be used in conjunction with Total Return or Consistent Return to identify funds with above-average performance and lower-than-average cost.

The Lipper Rating for Preservation is a fund that has demonstrates a superior ability to preserve capital in a variety of markets when compared with other funds in its asset class.

Choosing a Lipper Rating for Preservation may help to minimize downside risk relative to other fund choices in the same asset class. Investors are cautioned that equity funds have historically been more volatile than mixed-equity or fixed-income funds, and that even the Lipper Rating for Preservation in more volatile asset classes may not be well suited to shorter-term goals or less risk-tolerant investors.

The Lipper Rating for Total Return denotes a fund that has provided superior total returns (income from dividends and interest as well as capital appreciation) when compared to a group of similar funds.

The Lipper Rating for Total Return may be the best fit for investors who want the best historical return, without looking at risk. This measure alone may not be suitable for investors who want to avoid downside risk. For more risk-averse investors, the Total Return ratings can be used with Preservation and/or Consistent Return ratings to make an appropriate selection that balances risk and return.