Separate Accounts: Data Definitions: Portfolio

 Equity Investment Style

Style Zone

Traditionally, Morningstar has used the Equity Style Box to classify funds based on their underlying holdings. However, to offer a more complete picture of how the fund’s holdings are distributed, Morningstar has developed Ownership Zones.

Style Zones are the shaded area of the Style Box, intended to be a visual measure of a fund's style scope - that is, the primary area of ownership on the Style Box. Some key points to remember are that it encompasses 75% of the stock holdings in the fund, and that it is centered around a centroid, using an asset-weighted calculation.

Observing where the Style Zone falls within the Equity Style box is useful because many funds which appear similar in size and style may actually include quite different security types. For example, it’s expected that a fund holding mainly large-cap growth stocks would behave differently than one containing both large-and mid-cap value stocks, yet both funds might be classified as large-cap growth.

Over a period of time, the shape and location of a fund’s ownership zone varies. This movement is a good indicator of how consistent a fund’s style is.

The fund centroid, appearing in the center of the Style Zone, represents the weighted average of all the fund’s holdings. The centroid’s position is used to assign a fund to one of the nine Style Box categories.

Calculating the Centroid

A fund's size (its y or vertical placement) is determined by calculating the asset-weighted size score of the size scores. Likewise, a fund's style (x or vertical placement) is determined by calculating the asset-weighted average of the stocks’ net value/growth scores determines a fund’s horizontal placement—value, growth, or blend.

The plot of the resulting style and size score on the Style Box grid is called the centroid. Here's the calculation for x and y (same for both):

y = sum(yi*wi)

Where:

yi= size score for ith stock

wi = style score for ith stock.

Morningstar Style Box Overview

The Equity Style Box is a nine-box matrix that displays the weighted portfolio stock and mutual fund investment methodology and the size of the companies in which they invest. Combining these two variables offers a broad view of a portfolio's equity holdings and risk. For a complete explanation of how we calculate the Equity Style Box for stocks and stock funds, see the Morningstar Style Box topic.

Valuations

The following are the five value factors used to calculate the Morningstar Style Box.

Growth Rates

The following are the five growth factors used to calculate the Morningstar Style Box. For portfolios, these figures are share-weighted averages of all the stocks in the current portfolio, because the share-weighted average is more accurate than an asset-weighted average for these types of calculations.

Geometric Average Capitalization ($Mil)

Morningstar defines the overall "size" of a stock fund's portfolio as the geometric mean of the market capitalization for all of the stocks it owns. It's calculated by raising the market capitalization of each stock to a power equal to that stock's stake in the portfolio. The resulting numbers are multiplied together to produce the geometric mean of the market caps of the stocks in the portfolio, which is reported as geometric average cap.

This number is different from the fund's median market cap—the capitalization of the median stock in its portfolio. The geometric average cap better identifies the portfolio's "center of gravity." That is, it provides more accurate insight into how market trends (as defined by capitalization) might affect the portfolio.

 

 Asset Allocation

% Cash

This data point identifies the percentage of the fund’s net assets held in cash. Cash encompasses both actual cash and cash equivalents (fixed-income securities with a maturity of one year or less) held by the portfolio plus receivables minus payables. Negative percentages of cash indicate that the portfolio is leveraged, meaning it has borrowed against its own assets to buy more securities or that it has used other techniques to gain more than 100% exposure to the market.

% Stocks

The percentage listed under the heading Stocks incorporates only the portfolio’s straight common stock holdings.

% Bonds

This data point identifies the percentage of the fund’s net assets held in bonds. Bonds include everything from government notes to high-yield corporate bonds.

% Other

Other includes preferred stocks (equity securities that pay dividends at a specific rate) as well as convertible bonds and convertible preferreds, which are corporate securities that are exchangeable for a set amount of another form of security (usually common shares) at a prestated price. Other also may denote holdings in not-so-neatly-categorized securities, such as warrants and options.

% Foreign

When listed, this data point reflects only the percentage of a portfolio's stock holdings that are held in foreign stocks and is calculated from the fund's most recent portfolio. Foreign stocks includes bonds that are convertible into equity, as well as convertible preferreds.

 

 Sector Weightings

Sector Weightings

Morningstar divides the economy into three super sectors and 11 sub-sectors. Read the global equity classification methodology.  

Cyclical

Sensitive

Defensive

 Top 25 Holdings

Turnover

This is a measure of the separate account’s trading activity which is computed by taking the lesser of purchases or sales (excluding all securities with maturities of less than one year) and dividing by average monthly net assets. A turnover ratio of 100% or more does not necessarily suggest that all securities in the portfolio have been traded. In practical terms, the resulting percentage loosely represents the percentage of the portfolio’s holdings that have changed over the past year.

Top 25 Holdings

The  top 25 holdings in the subaccount's portfolio are ranked by the % Net Assets.