Accumulation shares do not pay a dividend, but reinvest the income from coupons or dividends. The investor receives the possible gain in the form of a capital gain when he sells the shares of the fund.
Alpha is the outperformance attained beyond what might be expected according to a given investment model or relative to a benchmark. A positive alpha indicates that a fund did better than might be expected based on the given beta. Likewise, a negative alpha indicates that a fund recorded an underperformance given the expectations pertaining to the beta of the fund in question.
The alpha is calculated by a regression analysis of a fund’s monthly returns versus the monthly returns of an index: the alpha is equal to the value on the Y-axis where the value on the X-axis is zero.
Asset allocation consists of judiciously spreading the assets of a portfolio or a fund over various asset classes or investment categories: equities, bonds, cash, real estate and other asset classes. The spread can be done with or without currency risk.
Asset test (%)
Test to determine whether a fund (or sub-fund) invests directly or indirectly more than 25% of assets in debt securities mentioned in Article 19bis CIR92. If that is the case, the investor will be subject to the withholding tax (précompte mobilier) of 30% on gains derived from the performance of the fund’s underlying debt securities and realized upon the redemption or disposal for valuable consideration of shares in the fund or upon the total or partial distribution of the assets of the sicav or sub-fund.
Average remaining maturity of all underlying bonds weighted according to the amount invested in each bond. For subordinated bonds, the first call date is always used to calculate the maturity and yield to maturity. There are nonetheless a few exceptions to this rule. For a bond whose current valuation makes it likely that the chance of the call not being executed would be significant, we use the final maturity date instead of the first call date.
Beta is a measure of a fund’s sensitivity to movements in an underlying financial (sub) market or index and is also a measure of risk. A beta of 1.10 means that a fund does on average 10% better than the index when the market rises, and scores on average 10% worse when the market falls. Here all other factors are assumed to remain the same. When a fund’s beta is 0.85, it means that, during a market rise, it incorporates 85% of the market’s rise or, put another way, it does on average 15% less well than the index, and scores on average 15% better than market average in falling markets. The beta is calculated by a regression analysis of a fund versus an index: the beta corresponds with the gradient of the graph.
The duration (see below) is an indicator for the interest rate sensitiveness of a bond or bond portfolio. For inflation-linked bonds, one can calculate a duration and a beta-adjusted duration. The duration measures the sensitiveness of an inflation-linked bond to fluctuations in real yields, whereas the betaadjusted duration measures the sensitiveness to fluctuations in nominal yields.
The break-even level is a specific term used for inflation-linked bonds or sub-funds invested in inflation-linked bonds. The break-even level reflects the yield difference between an inflation-linked bond and a nominal bond issued by the same country and with the same maturity. The break-even level is an indicator of market expectations in terms of inflation.
The correlation is illustrated by reference to the correlation coefficient, which measures the strength of the relationship between the returns of a fund and the returns of an index. The correlation coefficient corresponds with a number between +1 (perfect correlation between returns of fund and index) and -1 (perfect negative correlation between returns of fund and index).
Time by which an application for subscription in or redemption from a fund must be submitted, so that the subscription or repayment will be performed at the next net asset value.
Goods and services whose consumption is influenced by the economic cycle. Their consumption increases when economic growth strengthens. Examples include cars and tourism.
The downside deviation corresponds to the annualized standard deviation of the monthly returns below a certain level. On the website and in our fact sheets, we use the risk-free interest rate for calculating downside deviation. In other words, the downside deviation does not take into account the fund’s volatility in upside markets. Our rationale is that investors are more sensitive to the volatility of their investment in a downside market.
The duration is expressed in years and is equal to the weighted average maturity of a bond or bond portfolio. It is an indicator of the sensitivity of a bond or bond portfolio to interest-rate fluctuations. If rates rise, bond prices on the secondary market drop and consequently the net asset value of a bond fund drops. The negative impact is bigger for funds with longer durations. The opposite is also true. When rates decline, bond prices increase and the net asset value of a bond fund increases as well. The positive impact is bigger for funds with longer durations. The duration is the result of a complex calculation made according to the Macaulay method which takes into account, amongst other factors, the current bond price, rates, coupons and maturity.
Floating Rate Notes (FRN)
Fixed-income securities whose coupon is regularly, for example every 3 months, adapted to market conditions.
A fund is an Undertaking for Collective Investment which can be organized, in terms of legal structure, as a Sicav (société d'investissement à capital variable or open-ended collective investment company), a mutual fund or a sub-fund of a Sicav.
Debt securities with lower ratings, more precisely from BB+ to D with Standard & Poor's and Moody's and from Ba1 to C with Moody’s, are considered “high yield” or “speculative grade”. They are also called “junk bonds”. Their default risk is higher and consequently, they offer a higher coupon than investment grade bonds.
Income shares pay out their possible earnings (coming from dividends, coupons or capital gains) in the form of a dividend.
The information ratio is equal to a fund’s average annual excess return versus a reference index divided by the tracking error. The information ratio indicates the extent to which a fund performed better compared to an index while taking risk into account.
Investment funds or abbreviated funds are open-ended collective investment schemes, with different legal structures, such as sicavs under Belgian law, sicavs under Luxembourg law, mutual funds or unit trusts.
Debt securities with a rating ranging from AAA to BBB- with Standard & Poor's and Moody's and from Aaa to Baa3 with Fitch are considered “investment grade”.
Investment policy of the sub-fund
The sub-fund’s investment policy as mentioned on this website and the factsheets summarizes the investment policy mentioned in the prospectus and the KIID.
The maximum drawdown is an indicator of the risk and corresponds with the return over the worst possible investment period. In other words, the maximum drawdown is the maximum loss that an investor could have incurred if he had bought the fund at the highest valuation of the observation period and sold it at the lowest valuation of the observation period. This indicator is based on past observations and offers no indication whatsoever for the future. The calculations are based on monthly performance.
The modified duration is expressed as a percentage and indicates by what percentage the value of a bond or bond fund will change if the interest rate varies by 1%.
Morningstar Fund Ratings
Morningstar ranks mutual funds and sub-funds on a scale ranging from 1 to 5 stars. Rankings are based on risk-adjusted performance relative to comparable funds, taking relevant fees related to commercialization into account. Ranking levels are determined on the basis of fund positioning relative to the other funds belonging to the same Morningstar category: 5 stars for funds in the top 10%; 4 stars for funds in the next 22.5%; 3 stars for funds in the next 35%; 2 stars for funds in the next 22.5%; and 1 star for funds in the bottom 10%. The Morningstar rating indicated on the factsheets has been calculated for a 3-year period. Sub-funds with less than 3 years of existence are not rated. A high rating is not sufficient as an indicator to make any investment decision. Additional information is available on http://www.morningstar.be/be/glossary/98989/morningstar-rating.aspx.
Goods and services whose consumption is not influenced by the economic cycle. In other words, goods and services that meet essential needs, such as food.
Performance YTD is equal to the sub-fund’s performance since the beginning of the running year.
The number of months expressed as a percentage relative to the total number of months in the period that a fund was achieving a higher return than the risk-free interest rate.
R-squared (R2 )
R-squared or R2 measures the quality of the correlation between the returns of a fund and the returns of an index and, among other things, gives an indication of the dependability of the calculation of the alpha and the beta. A highly diversified portfolio, which correlates with the market perfectly, will have an R-squared equal to 100%. An R-squared equal to 75% means that 75% of the fluctuation in the return of the fund can be explained by the fluctuation in the index. The R-squared is equal to the square of the correlation between a fund and an index.
Ratings, bond issuer ratings
A rating indicates the credit worthiness of a bond issuer. Ratings are awarded by specialized research units such as Standard & Poor's, Moody's or Fitch. More information about the ratings is available on the following websites: www.standardandpoors.com, www.moodys.com and www.fitchratings.com or at the financial service. You can find the rating breakdown of a fixed income portfolio in the factsheets and on this website. For each security in the portfolio, we use the average rating of the issuer based on ratings awarded by S&P's, Fitch and/or Moody's. The overall rating breakdown of the portfolio follows S&P's rating scale.
The risk-free rate corresponds to the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. The risk-free rate is used in the calculation of ratios such as Sharpe ratio, downside deviation and percentage of positive months. In these calculations, DPAM uses the 3-month rate as indicator of the risk-free rate.
De Sharpe Ratio indicates the return beyond the risk-free return per unit of risk. When calculating the Sharpe ratio, we use volatility as the risk indicator. The higher the ratio, the greater the outperformance for a given risk.
The calculation of the Sortino Ratio bears great similarity to that of the Sharpe ratio, except that downside deviation, instead of volatility, is used as the unit of risk.
Standard deviation measures to what extent the periodic returns of a fund deviate from its average returns over a given period. Standard deviation is an indicator of a fund’s volatility and risk level.
from Senior to Tier One
Senior bonds: this paper has priority over all others in terms of interest payments and ranks first when it comes to claiming any money remaining after a bankruptcy.
Lower Tier Two: the coupon payment cannot be deferred and not paying a coupon is seen as defaulting. This paper has a fixed maturity date.
Upper Tier Two: this paper has no maturity date. The interest payments can be deferred, but the coupon is cumulative. This means that it must be paid at a later time. This paper comes with a call date specifying when the issuer can repay. If the issuer does not repay, the coupon is raised (step-up).
Tier One: In case of bankruptcy, this paper has priority over equities, but is subordinated to all other debt paper. If a coupon is not paid, then it is lost (not cumulative). The bond can also be used to absorb losses, which reduces the principal. Tier Ones have a perpetual maturity, but a call date is provided.
Swing pricing allows the various funds to settle the transaction fees arising from the subscriptions and redemptions of entering and exiting investors. With swing pricing, existing investors should, in principle, no longer indirectly incur the transaction fees. How does this work? Swing pricing is only triggered off when a pre-defined threshold value is reached. This threshold value is expressed as a percentage of the total net assets of the fund. The NAV will be adjusted only when the threshold value is reached. In the case of a net inflow of capital, a determined percentage of the NAV, that is, the swing factor linked to subscriptions, will be added to the NAV. For net redemptions, a determined percentage of the NAV, that is, the swing factor linked to redemptions, will be deducted from the NAV.
The Total Expense Ratio or percentage of total fees, is a measure of the costs that an investment fund charges its shareholders. The TER consists of the annual management fee (possibly increased by a performance fee) and operational costs (e.g. for administration, marketing, custody of securities, accounting and supervision). However, transaction costs are not included in the TER. The TER is calculated at the end of each financial year.
The Taxable Income per Share is the part of the net asset value of an Undertaking for Collective Investment that corresponds to taxable income within the framework of European Savings Directive 2003/48/CE.
Tracking volatility or Tracking Error
Annualised standard deviation of a fund’s monthly differences in return versus an index.
The Treynor Ratio corresponds to a fund’s annual average outperformance compared to the risk-free rate, divided by the beta of the fund. As is the case with the Sharpe Ratio, the Treynor Ratio provides the return above the risk-free return per unit of risk, but the beta is used as the unit of risk.
The term volatility indicates the variation in a security’s price. High volatility means that the price of an investment instrument rises and falls sharply in a relatively short period. Volatility is also an indicator of the risk that an investor faces with a particular investment instrument. The website and the factsheets indicate volatility based on standard deviation, specifically the annualized standard deviation of monthly returns over the last 5 years or since the sub-fund’s launch.