Glossary

5-Year Treasury Index: A one-security index comprising the most recently issued 5-year U.S. Treasury note or bond.

10-Year Treasury Index: A one-security index comprising the most recently issued 10-year U.S. Treasury note or bond.

30-Day SEC Yield: A standardized yield computed by dividing the net investment income per share earned during the past 30-day period by the share price at the end of the period, expressed as an annual percentage rate. Subsidized yields reflect fee waivers in effect. Without such waivers, yields would be reduced. Unsubsidized yields do not reflect fee waivers in effect. The SEC yield does not include prepayment income, which could be a significant contribution to yield.

30-Year Treasury Index: A one-security index comprising the most recently issued 30-year U.S. Treasury note or bond.

Agency Commercial Mortgage-Backed Security (Agency CMBS): A type of mortgage-backed security that is secured by loans on commercial properties that are issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, or another United States federal government-sponsored enterprise (GSE) or a United States federal government agency.

Agency Mortgage-Backed Securities (Agency MBS): Securities issued or guaranteed by the U.S. government or a government-sponsored enterprise (GSE).

Agency Residential Mortgage-Backed Securities (Agency RMBS): Securities issued or guaranteed by the U.S. government or a government-sponsored enterprise (GSE), such as the Government National Mortgage Association (GNMA or Ginnie Mae), Federal National Mortgage Association (FNMA or Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). GNMA bonds are backed by the full faith and credit of the U.S. government and thus are free from default risk. While FNMA and Freddie Mac securities lack this same backing, the risk of default is negligible.

Alpha: Measures the difference between a fund’s actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure indicates the fund has performed better than its beta would predict. In contrast, a negative alpha indicates a fund has underperformed, given the expectations established by the fund’s beta.

ARM: Adjustable-rate mortgage.

Asset-Backed Securities (ABS): Securities created by buying and bundling loans–such as residential mortgage loans, commercial loans or student loans –and creating securities backed by those assets, which are then sold to investors.

Average price: The mean price of an asset or security observed over some period of time.

Basis Point (bps): One hundredth of one percent and is used to denote the percentage change in a financial instrument.

Beta: A measure of an investment’s risk of volatility compared to the overall market.

Bloomberg Global Aggregate Index: A flagship measure of global investment grade debt from twenty-eight local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

Bloomberg Short Treasury: 9-12 Months Index: Measures the performance of U.S. Treasury bills, notes, and bonds with a remaining maturity between 9-12 months.

Bloomberg Short-Term Government/Corporate Total Return Index: An unmanaged index that represents securities that have fallen out of the US Government/Corporate Index because of the standard minimum one year maturity constraint. Sectors include treasuries, agencies, industrials, utilities and financial institutions.

Bloomberg U.S. Aggregate Bond Index: An unmanaged index that measures the performance of the investment-grade universe of bonds issued in the United States. The index includes institutionally traded U.S. Treasury, government-sponsored, mortgage, and corporate securities.

Bloomberg U.S. Aggregate 3-5 Year Index: An index that tracks bonds with 3-5 year maturities within the Bloomberg U.S. Aggregate Bond Index.

Bloomberg U.S. Corporate High Yield Bond Index: An unmanaged market value-weighted index that covers the universe of fixed rate, non-investment grade debt.

Bloomberg U.S. Corporate Investment Grade Index: An index that measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.

Bloomberg U.S. Mortgage-Backed Securities Index: An unmanaged index that tracks 15- and 30-year fixed-rate agency mortgage-backed pass-through securities guaranteed by Ginnie Mae, Fannie Mae, and Freddie Mac.

Bloomberg U.S. Treasury Bill Index: An index that tracks the market for treasury bills issued by the U.S. government.

Capital Expenditures (CapEx): Payments made for goods or services that are recorded or capitalized on a company’s balance sheet instead of expensed on the income statement.

Cash Flow: Periodic coupons received by the bondholder during their holding period.

CBOE SPX Volatility Index (VIX): A key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

Collateralized Loan Obligation (CLO): A single security backed by a pool of debt.

Commercial Mortgage-Backed Securities (CMBS): Fixed-income investments backed by mortgages on commercial properties rather than residential real estate.

Comparison between Regional Finances and the IG Corporate Bond Market: The regional financials, or corporate bonds issued by regional and community banks, are unsecured corporate bonds issued at either the holding company or bank level. The bonds are backed by the full faith and credit of the company/issuer and the failure of the issuer to make a single interest or principal payment would be a default of the issuer (in this case the issuer is the regional or community bank). Most of the regional and community corporate bonds are investment grade rated by Kroll Ratings Agency and the issuance sizes tend to be smaller than typical IG corporate bonds. IG corporate bonds are unsecured bonds issued by investment grade companies.

Consumer Price Index (CPI): An index that measures the changes in the price of a certain collection of goods and services bought by consumers in an effort to measure inflation.

Core PCE Price Index: An index that is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

Correlation: A statistical measure of how two securities move in relation to another.

CRE: Commercial real estate

Credit Spread: The difference in yield between two bonds of similar maturity but different credit quality.

CRT: Credit risk transfer.

Debt/EBITDA Ratio: Measures the amount of income generated and available to cover debt before covering interest, taxes, depreciation and amortization expenses.

Debt-Service Coverage Ratio: The relationship of a property’s annual net operating income to its annual mortgage debt service (principal and interest payments).

Debt-to-GDP Ratio: The ratio of a country’s debt to its gross domestic product (GDP).

Distribution Yield: The distribution yield is calculated by annualizing actual dividends distributed for the monthly period ended on the date shown and dividing by the net asset value on the last business day for the same period. The yield does not include long-or short-term capital gains distributions.

Dow Jones Industrial Average (DJIA): An index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ.

Duration: Measures a portfolio’s sensitivity to changes in interest rates. Generally, the longer the duration, the greater the price change relative to interest rate movements.

Effective Duration: Measures a portfolio’s sensitivity to changes in interest rates. Generally, the longer the effective duration, the greater the price change relative to interest rate movements.

ESG: Environmental, social, governance.

Floating Rate: A floating-rate security is an investment with interest payments that float or adjust periodically based upon a predetermined benchmark.

FOMC: Federal Open Market Committee.

Forward Price/Earnings Ratio: A ratio that divides the current share price by the estimated future per share.

Free Cash Flow (FCF): A measure of a company’s financial performance, calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Household Debt-to-GDP: Measures the overall level of household indebtedness (commonly related to consumer loans and mortgages) as a share of GDP.

HPA: Homeowners Protection Act.

Hybrid REIT: A real estate investment trust that is effectively a combination of equity REITs, which own properties, and mortgage REITs, which invest in mortgage loans or mortgage-backed securities.

ICE BofA U.S. High Yield Homebuilders & Real Estate Index: A subset of ICE BofA U.S. High Yield Index including all securities of Real Estate Development & Management, REITs, Building & Construction and Housing Association issuers.

IG: Investment grade.

ISM Manufacturing Index: An index that is based on surveys of more than 300 manufacturing firms by the Institute for Supply Management (ISM).

J.P. Morgan BB CLO Index: An index based on BB bonds drawn from broadly syndicated U.S. CLO transactions, with selection criteria including the omission of revolvers.

Legacy: RMBS issued in 2009 or earlier.

LIBOR: A benchmark rate that some of the world’s leading banks charge each other for short-term loans. It stands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.

MOE: Merger of equals.

Mortgage-Backed Security (MBS): A type of asset-backed security which is secured by a mortgage or collection of mortgages.

M&A: Mergers & acquisitions.

NASDAQ Composite: A market capitalization-weighted index of the common stocks and similar securities listed on the NASDAQ stock exchange.

Non-Agency Commercial Mortgage-Backed Security (NA CMBS): A type of mortgage-backed security that is secured by loans on commercial properties that are not issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, or any other United States federal government-sponsored enterprise (GSE) or a United States federal government agency.

Non-Agency Residential Mortgage-Backed Securities (NA RMBS): Securities issued by private institutions such as trusts and special purpose vehicles (SPVs). These bonds are not guaranteed by the U.S. government or GSEs. They typically have a more sophisticated subordination structure, which redirects the aggregate principal and interest cash flows of the underlying collateral to the individual RMBS bonds based on a set of rules, which are designed to create tranches with specific risk, coupon, and maturity characteristics.

Nonperforming Loan (NPL): A loan in which the borrower is in default and has not made any scheduled payments of principal or interest for a certain period of time.

Non-Qualified Mortgage (Non-QM): A loan that does not meet the standards of a qualified mortgage and uses non-traditional methods of income verification to help a borrower get approved for a home loan.

OPEC: Organization of Petroleum Exporting Countries.

Pending Home Sales Index (PHS): A leading indicator of housing activity that measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops.

Price/Earnings Ratio: The ratio of a company’s stock price to the company’s earnings per share.

Price-to-Book Ratio: A financial ratio used to compare a company’s current market price to its book value.

Prime Jumbo: Prime Jumbo mortgages are non-agency loans typically because the lending amount exceeds the conforming loan limits. These tend to be high-quality mortgages with high credit scores that, for the most part, comply with agency mortgage underwriting guidelines.

Purchasing Managers’ Index (PMI): An indicator of the economic health of the manufacturing and service sectors.

P&L: Profit & loss.

QM: Qualified mortgage.

REPO: Repurchase agreement.

REIT: Real Estate Investment Trust.

Reperforming Loan (RPL): A mortgage that had become delinquent because the borrower fell behind on payments by at least 90 days but returned to “performing” status because the borrower has resumed making payments.

Residential Mortgage-Backed Securities (RMBS): Fixed income securities with cash flows that are collateralized by residential mortgages.

Sharpe Ratio: A statistical measure that uses standard deviation and excess return to determine reward per unit of risk. A higher Sharpe ratio implies a better historical risk-adjusted performance. The Sharpe ratio has been calculated since inception using the 3-month Treasury bill for the risk-free rate of return.

Single-Family Rental (SFR): Houses or apartments that are designed to be rented by a single family or individual.

Spread: The difference in yield between a U.S. Treasury bond and a debt security with the same maturity but of lesser quality.

Standard Deviation: A statistical measure of portfolio risk used to measure variability of total return around an average, over a specified period of time. The greater the standard deviation over the period, the wider the variability or range of returns and hence, the greater the fund’s volatility—calculated since inception.

S&L: Savings & loan.

S&P CoreLogic Case-Shiller 20-City Composite Home Price Index: The Index seeks to measure the value of residential real estate in 20 major U.S. metropolitan areas.

S&P 500 Total Return Index: An American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.

Tranche: A portion of debt or structured financing. Each portion, or tranche, is one of several related securities offered at the same time but with different risks, rewards, and maturities. A senior tranche is the highest tranche of a security, (i.e., the one deemed least risky). A mezzanine tranche is a small layer positioned between the senior tranche and a junior tranche (unrated, typically called equity tranche).

Weighted Average Life (WAL): Average length of time that each dollar of unpaid principal on a loan, a mortgage or an amortizing bond remains outstanding.

Yield-to-Maturity (YTM): The total rate of return that will have been earned by a bond when it makes all interest payments and repays the original principal.

Yield-to-Worst (YTW): The lowest potential yield that can be received on a bond without the issuer actually defaulting.