glossary

Alaska Community Property Trust: Allows married couples who live in separate property states, (and even more restrictive community property states) to get a double step-up in basis on selected assets on the death of first spouse. This can provide significant income tax advantage.
Alpha: Measures nonsystematic return, or the return that cannot be attributed to the market. Thus, it can be thought of as how the manager performed if the market has had no gain or loss. In contrast, beta measures the return that is attributable to the market and is a measure of the portfolio's overall volatility.
Asset Protection Trust (Alaska Asset Preservation Trust): Maximizes protection of assets from potential creditors while retaining benefits and control, using Alaska jurisdiction.
Batting Average: A measure of a manager's ability to beat the market consistently. It is calculated by dividing the number of quarters (or months) in which the manager beat or matched an index by the total number of quarters (or months) in the period.
Beneficiary: The person or entity to receive benefits, proceeds or assets in a trust.
Beta: Measures the risk level of the manager. Beta measures the systematic risk, or the return that is attributable to market movements.
Charitable Remainder Trust: Maximizes the use of appreciated assets, provides income to you or other family members, and then gifts assets to charity to receive a current income tax charitable deduction.
Charitable Lead Trust: Provides income to charity and ultimately can be used to transfer trust assets to children or grandchildren at a greatly reduced gift and estate tax cost.
Core: A type of equity management that invests in diversified portfolios, typically using a broad index such as the S&P 500 Index as their benchmark. Usually these managers are expected to achieve returns that are comparable to general market performance, at the least.
Credit Shelter Trust or Bypass Trust: Provides for maximum use of unified credit in the estates of both spouses.
Defective Grantor Trusts: Used to increase gifted assets to younger generation without additional gift taxes.
Down-Market Capture Ratio: A measure of managers' performance in down markets relative to the market itself.
Generation-Skipping Trust: Leaves assets to your grandchildren (and more remote descendants) while taking advantage of the $1 million exemption ($2 million for married couples) from the generation skipping tax.
Grantor: Person or entity who grants or conveys interests to a trust.
Grantor Retained Annuity Trust (GRAT): Can be used to transfer assets at reduced estate and gift tax cost. A grantor will transfer property to a trust that provides a fixed annuity for a specified time period. After the term of the trust the remainder is transferred to the beneficiaries.
Information Ratio: In index relative style calculations, the information ratio is a measure of value added by the manager. It is the ratio of (annualized) excess return above the benchmark to (annualized) tracking error.
Irrevocable Life Insurance Trust (ILIT): Leave insurance proceeds to beneficiaries gift and estate tax free.
Irrevocable Living Trust: Helps to avoid probate, however requires the relinquishment of control of certain assets to reduce your taxable estate, and provide creditor protection.
LBGC: The Lehman Brothers Govt/Credit Index is a fixed income index includes all bonds that are in the Lehman Brothers Government and Lehman Brothers Credit Bond Indices. As of 1996, the adjusted duration was 5.10 years, the average YTM6.44% and the average coupon was 7.12%.
Minor Trusts (2503c Trust) (Extra-Crummey Trust):, Allows gifts to qualify for the $12,000 ($24,000 for married couples) annual gift tax exclusion.
Perpetual Trust (Millennium Trust): Provides for a long-term trust that saves estate and gift taxes while increasing the family wealth, using Alaska jurisdiction.
Qualified Personal Residence Trust (QPRT): Can be used to transfer a residence (or values of) at reduced estate and gift tax cost.
Qualified Terminable Interest Trust (QTIP): Provides income from trust assets to your spouse for life and qualify for the marital deduction, but upon the spouse’s death, the income is regained for yourself and you retain control over who receives the assets.
R1000: The Russell 1000 consists of the 1000 largest companies in the Russell 3000 index, based on market capitalization.
R1000G: The Russell 1000 Growth Index represents a segment of the Russell 1000 with a greater than average growth orientation.
R1000V: The Russell 1000 Value Index represents a segment of Russell 1000 with a less than average growth orientation.
R2000: The Russell 2000 Index consists of the 2000 smallest companies in the Russell 3000 Index, representing approximately 11% of the Russell 3000 total market capitalization.
R2000G: The Russell 2000 Growth Index represents a segment of the Russell 2000 Index with greater than average growth orientation.
R2000V: The Russell 2000 Value Index represents a segment of the Russell 2000 Index with a less than average growth orientation.
R3000: The Russell 3000 Index consists of the 3000 largest U.S. companies ranked by market capitalization.
R-Squared Statistic: A statistic that measures the reliability of alpha and beta in explaining the return of a manager as a linear function of the market. It is produced by regression analysis.
Revocable Living Trust: Helps avoid probate, and allows you to retain control of the assets during your life. It also protects your assets and yourself if you become disabled.
Risk: The uncertainty of future returns. There are many ways to measure risk; common measures include the standard deviation of return and beta.
S & P 500: A broad based measurement in the changes of stock market conditions based on the average performance of 500 widely held common stocks. The index consists of approximately 380 industrial, 40 utility, 10 transportation, and 70 financial companies listed on U.S. market exchanges.
Scatter Plot: A graph showing the return and risk of selected manager(s) against a background universe and an index. Each manager is represented by a point.
Sharpe Ratio: One of two alternative, yet similar, methods of measuring excess return per unit of risk. (The other method is the Treynor Ratio.) In the case of the Sharpe Ratio, risk is measured using the standard deviation of the returns in the portfolio. The Sharpe Ratio relates the difference between the portfolio return and the risk-free rate to the standard deviation of that difference for given time period.
Special Needs Trust: The SNT is a form of discretionary, spendthrift trust designed to preserve government benefits for a disabled or aged beneficiary. Distributions from the trust are intended to supplement public benefits, not supplant them.
Standard Deviation: A gauge of risk which measures the spread of the difference of returns from their average. The more a portfolio's returns vary from its average, the higher the standard deviation. It is important to note that higher than average returns affect the standard deviation just as lower than average returns. Thus, it is not a measure of downside risk. Since it measures total variation of return, standard deviation is a measure of total risk, unlike beta, which measures market risk.
Tracking Error: A measure of how closely a manager's returns track the returns of a benchmark. The benchmark may be either a single index or the optimal blend of indexes (in style analysis). The tracking error is the annualized standard deviation of the differences between the manager's and the benchmark's quarterly returns.
Treynor Ratio: One of two alternative, yet similar methods of measuring return per unit of risk. (The other method is the Sharpe Ratio.) In the case of the Treynor Ratio, risk is measured using Beta, which is an index dependent measure. The Treynor Ratio relates the difference between the portfolio return and the risk-free rate to the portfolio beta for a given time period.
Trustee: Individual or institution who has the responsibility to carry out the terms of the trust in an impartial manner.
Universe: A universe is a pool of managers with similar investment styles that are grouped together for comparison purposes. Universes enable you to evaluate a manager's performance relative to that of other managers that exhibit similar styles. When you compare a manger to a universe, you examine how well that manager performed relative to a group of his peers. This is unlike a comparison to the performance of an index, which just represents a single set of data points.
Up-Market Capture Ratio: Up-market capture ratio is a measure of mangers' performance in up markets relative to the market itself.
Worst Case: The smallest return an investor would have experienced with a particular style manager during a specified period. This is the worst a portfolio would have performed during any sub-period of the entire period.
Worst Four Quarters: The smallest return experienced over any four consecutive quarters. The four consecutive quarters do not necessarily correspond with calendar years.