Growth of 10,000
The Growth of $10,000 graph shows a stock's performance based on how $10,000 invested in the stock would have grown over time. The growth of $10,000 begins on the date of the stock's IPO, or the first year listed on the graph, whichever is appropriate. Located alongside the stock's graph line is a line that represents the growth of $10,000 for the S&P 500 index. The third line represents the stock’s industry. These lines allow investors to compare the performance of the stock with the performance of the S&P 500 index and the stock’s industry. Both lines are plotted on a logarithmic scale, so that identical percentage changes in the value of an investment have the same vertical distance on the graph.
For example, the vertical distance between $10,000 and $20,000 is the same as the distance between $20,000 and $40,000 because both represent a 100% increase in investment value. This provides a more accurate representation of performance than would a simple arithmetic graph. The graphs are scaled so that the full length of the vertical axis represents a tenfold increase in investment value. For securities with returns that have exhibited greater than a tenfold increase over the period shown in the graph, the vertical axis has been compressed accordingly.
Performance History
Total Return
Morningstar collects gross and net returns (monthly and quarterly) for separate accounts and commingled pools from the asset management firm running that product.
Total returns for periods longer than one year are expressed in terms of compounded average annual returns (also known as geometric total returns), affording a more meaningful picture of separate account performance than non-annualized figures.
Morningstar calculates total returns, using the raw data (gross and net monthly and quarterly returns) collected from separate account companies.
+/- Category, +/- Index
These benchmarks give the investor a point of reference for evaluating a stock's performance. The +/- (Calendar Year) figure indicates the amount by which a stock over- or underperformed it's benchmark during a given calendar year.
% Rank in Category
This is the separate account’s total-return percentile rank relative to all separate accounts that have the same Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing separate account in a category will always receive a rank of 1.
Percentile ranks within Categories are most useful in those categories that have a large number of separate accounts. For small universes, separate accounts will be ranked at the highest percentage possible. For instance, if there are only two international hybrid separate accounts with 10-year average total returns, Morningstar will assign a percentile rank of 1 to the top-performing separate account, and the second separate account will earn a percentile rank of 51 (indicating the separate account underperformed 50% of the sample).
Std Deviation of Account
A statistical measurement of dispersion about an average, which, for a separate account, depicts how widely the returns varied over a certain period of time. Investors use the standard deviation of historical performance to try to predict the range of returns that are most likely for a given separate account. When a separate account has a high standard deviation, the predicted range of performance is wide, implying greater volatility.
Standard deviation is most appropriate for measuring risk if it is for a fund that is an investor’s only holding. The figure can not be combined for more than one fund because the standard deviation for a portfolio of multiple separate accounts is a function of not only the individual standard deviations, but also of the degree of correlation among the separate accounts' returns.
If a separate account’s returns follow a normal distribution, then approximately 68 percent of the time they will fall within one standard deviation of the mean return for the fund, and 95 percent of the time within two standard deviations. For example, for a separate account with a mean annual return of 10 percent and a standard deviation of 2 percent, you would expect the return to be between 8 and 12 percent about 68 percent of the time, and between 6 and 14 percent about 95 percent of the time.
Morningstar computes standard deviation using the trailing monthly total returns for the appropriate time period. All of the monthly standard deviations are then annualized. Standard deviation is also a component in the Sharpe Ratio, which assesses risk-adjusted performance.
Product Assets $mil
The product assets of the separate account, recorded in millions of dollars. Product-asset figures are useful in gauging a separate account’s size, agility, and popularity. They can help determine whether a separate account product focusing on small-company stocks, for example, can remain in its investment-objective category if its asset base reaches an ungainly size.
Trailing Total Returns
3-month, Year To Date, 1 Year, 3-, 5-, 10-, year annualized
Morningstar collects gross and net returns (monthly and quarterly) for separate accounts and commingled pools from the asset management firm running that product.
Total returns for periods longer than one year are expressed in terms of compounded average annual returns (also known as geometric total returns), affording a more meaningful picture of separate account performance than non-annualized figures.
Morningstar calculates total returns, using the raw data (gross and net monthly and quarterly returns) collected from separate account companies.
Historical Quarterly Returns
Quarterly returns break out separate account performance over successive quarters of the calendar year. This can be useful in examining how volatile a fund has been over fairly short time periods.
Note: Adding up a separate account's quarterly returns over the course of a year will not necessarily give you a number that equates with the account's calendar-year return for that year. This is because of the effects of compounding returns over the course of a year.
Operations
Inception Date
The date on which the separate account began its operations. The inception year is followed by the month. A separate account with an inception date of February 1986, for example, would be listed as 1986-02. Separate accounts with long track records offer more history by which investors can assess overall separate account performance. However, another important factor to consider is the separate account manager and his or her tenure with the separate account. Often times a change in separate account performance can indicate a change in management. (Note: Even if a separate account's inception date is earlier, Workstation data only go back as far as 1976).
The commencement date indicates when a separate account began investing in the market. Many investors prefer separate accounts with longer operating histories. Separate accounts with longer histories have longer track records and can thereby provide investors with a more long-standing picture of their performance. Because of the explosion in the separate account industry over the past decade, the separate account universe now consists of thousands of investment offerings. Many of these new contenders have very little history by which an investor can hope to gauge their possible performance in various market climates.
This information is taken directly from the separate account’s annual report.
Separate accounts with long track records offer more history by which investors can assess overall separate account performance. However, another important factor to consider is the separate account manager and his or her tenure with the separate account. Often times a change in separate account performance can indicate a change in management.
Product Type
The product type explains the structure of the investment vehicle. The separate accounts database provides a choice of either a separate account composite or a commingled pool (CP).
Product Focus
The asset management firm managing the separate account product determines the separate account’s market focus—Retail (R)or Institutional (I).
Retail Minimum
The minimum amount of assets needed to invest in a retail separate account in this product, as provided to Morningstar by the asset management firm running the separate account.
Institutional Minimum
The minimum amount of assets needed to invest in an institutional separate account in this product, as provided to Morningstar by the asset management firm running the separate account.
Customization Minimum
The minimum amount of assets needed to customize the underlying holdings in a separate account in this product, as provided to Morningstar by the asset management firm running the separate account.
% Port Customized
The percent of accounts within a product where some degree of customization has occurred. A high number should not necessarily be interpreted such that the money manager is providing a relatively higher amount of customized services; in fact, many account holders may have chosen to not have any particular customization added on to their own account.
% Port Tax-Managed
The percent of accounts within a product where some degree of tax-management has occurred. A high number should not necessarily be interpreted such that the money manager is providing a relatively higher amount of tax-management services; in fact, many account holders may have chosen to not have any particular tax treatment for their own account.
Customization Features
This list outlines the available customizations and tax strategies available in a given separate account. The abbreviations listed beside each option include R- by Request, P- Proactive and N- No.
Wrap Program Information
Account Size Breakdown
Number of total accounts run by the asset manager in this product, broken down by account size. This information is provided to Morningstar by the asset management firm running the separate account.
The Levels:
Less than $250,000
$250,000 - $1 million
$1 million - $10 million
More than $10 million
Platform Availability
This shows availability of a separate account product through third-party distribution platforms. This information is provided to Morningstar by the asset management firm running a separate account.
Portfolio Managers
This section displays the name of the individual or individuals who are employed by the advisor or subadvisor who are directly responsible for managing the fund’s portfolio, as taken directly from the managing firm.
Risk Analysis
Alpha
A measure of the difference between a separate account’s actual returns and its expected performance, given its level of risk as measured by beta. A positive alpha figure indicates the separate account has performed better than its beta would predict. In contrast, a negative alpha indicates the separate account’s underperformance, given the expectations established by the separate account’s beta. All MPT statistics (alpha, beta, and R-squared) are based on a least-squared regression of the separate account’s return over Treasury bills (called excess return) and the excess returns of the separate account’s benchmark index.
Alpha can be used to directly measure the value added or subtracted by a separate account’s manager. Alpha depends on two factors: 1) the assumption that market risk, as measured by beta, is the only risk measure necessary and 2) the strength of the linear relationship between the separate account and the index, as it has been measured by R-squared.
Beta
A measure of a separate account’s sensitivity to market movements. The beta of the market is 1.00 by definition. Morningstar calculates beta by comparing a separate account’s excess return over Treasury bills to the market's excess return over Treasury bills, so a beta of 1.10 shows that the separate account has performed 10% better than its benchmark index in up markets and 10% worse in down markets, assuming all other factors remain constant. Conversely, a beta of 0.85 indicates that the separate account’s excess return is expected to perform 15% worse than the market’s excess return during up markets and 15% better during down markets.
Beta can be a useful tool when at least some of a separate account’s performance history can be explained by the market as a whole. Beta is particularly appropriate when used to measure the risk of a combined portfolio of separate accounts.
R-Squared
Reflects the percentage of a separate account’s movements that can be explained by movements in its benchmark index. An R-squared of 100 indicates that all movements of a separate account can be explained by movements in the index. Thus, index separate accounts that invest only in S&P 500 stocks will have an R-squared very close to 100. Conversely, a low R-squared indicates that very few of the separate account’s movements can be explained by movements in its benchmark index. An R-squared measure of 35, for example, means that only 35% of the separate account’s movements can be explained by movements in the benchmark index.
R-squared can be used to ascertain the significance of a particular beta. Generally, a higher R-squared will indicate a more reliable beta figure. If the R-squared is lower, then the beta is less relevant to the separate account’s performance.
Standard Deviation
A statistical measurement of dispersion about an average, which, for a separate account, depicts how widely the returns varied over a certain period of time. Investors use the standard deviation of historical performance to try to predict the range of returns that are most likely for a given separate account. When a separate account has a high standard deviation, the predicted range of performance is wide, implying greater volatility.
Standard deviation is most appropriate for measuring risk if it is for a fund that is an investor’s only holding. The figure can not be combined for more than one fund because the standard deviation for a portfolio of multiple separate accounts is a function of not only the individual standard deviations, but also of the degree of correlation among the separate accounts' returns.
If a separate account’s returns follow a normal distribution, then approximately 68 percent of the time they will fall within one standard deviation of the mean return for the fund, and 95 percent of the time within two standard deviations. For example, for a separate account with a mean annual return of 10 percent and a standard deviation of 2 percent, you would expect the return to be between 8 and 12 percent about 68 percent of the time, and between 6 and 14 percent about 95 percent of the time.
Mean
The mean represents the annualized average monthly return from which the standard deviation is calculated. The mean will not be exactly the same as the annualized trailing, three-year return figure for the same year. (Technically, the mean is an annualized arithmetic average while the total return figure is an annualized geometric average.)
Sharpe Ratio
Our Sharpe ratio is based on a risk-adjusted measure developed by Nobel Laureate William Sharpe. It is calculated using standard deviation and excess return to determine reward per unit of risk. First, the average monthly return of the 90-day Treasury bill (over a 36-month period) is subtracted from the fund's average monthly return. The difference in total return represents the fund's excess return beyond that of the 90-day Treasury bill, a risk-free investment. An arithmetic annualized excess return is then calculated by multiplying this monthly return by 12. To show a relationship between excess return and risk, this number is then divided by the standard deviation of the fund's annualized excess returns. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance.
Up and Down Quarters
This information reflects the number of positive and negative quarters for the separate account.
Equity Investment Style
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.
Ownership 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 Ownership 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 Ownership 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.
Price/Prospective Earnings: The prospective earnings yield for a fund is the asset-weighted average of the prospective earnings yields of all the domestic stocks in the fund's portfolio as of the date of the portfolio. It is calculated by dividing the company's estimated earnings per share for the current fiscal year by the company's month-end share price as of the portfolio date. In computing the fund's average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents. As a result, larger positions have proportionately greater influence on the fund's aggregate earnings yield.
Price/Book: The book value yield for a fund is the asset-weighted average of the prospective book value yields of all the domestic stocks in the fund's portfolio as of the date of the portfolio. It is calculated by dividing the company's estimated shareholders' equity per share for the current fiscal year by the company's month-end stock price as of the portfolio date. In computing the fund's average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents. As a result, larger positions have proportionately greater influence on the fund's aggregate book value yield.
Price/Sales: The sales yield for a fund is the asset-weighted average of the prospective sales yields of all the domestic stocks in the fund's portfolio as of the date of the portfolio. It is calculated by dividing the estimated sales per share for the current fiscal year by the company's month-end stock price as of the portfolio date. In computing the fund's average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents. As a result, larger positions have proportionately greater influence on the fund's aggregate sales yield.
Price/Cash Flow: The cash flow yield for a fund is the asset-weighted average of the prospective cash flow yields of all the domestic stocks in the fund's portfolio as of the date of the portfolio. It is calculated by dividing estimated cash flow per share for operations for the current fiscal year by the company's month-end stock price as of the portfolio date. In computing the fund's average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents. As a result, larger positions have proportionately greater influence on the fund's aggregate cash flow yield.
Dividend Yield %: The dividend yield for a fund is the asset-weighted average of the prospective dividend yields of all the domestic stocks in the fund's portfolio as of the date of the portfolio. A stock's prospective dividend yield is calculated by dividing estimated annual regular dividends per share for the current fiscal year by the company's month-end stock price as of the portfolio date. In computing the fund's average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents, so that larger positions have proportionately greater influence on the fund's dividend yield.
Long-Term Earnings Growth %: The long-term prospective earnings growth rate for a fund is the asset-weighted average of the long-term prospective earnings growth rates of all the domestic stocks in the fund's portfolio as of the date of the portfolio. In computing the fund's average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents, so that larger positions have proportionately greater influence on the fund's aggregate long-term earnings growth rate. A third-party stock data vendor provides long-term prospective earnings growth rates for stocks.
Historical Earnings Growth %: The historical earnings growth rate for a fund measures the share-weighted cumulative earnings growth for all domestic stocks in the fund's current portfolio. This is more accurate than (and not necessarily the same as) the asset-weighted average EPS growth for the individual stocks in the fund's current portfolio.
The share-weighted cumulative EPS for each fiscal year is calculated by multiplying the EPS for each stock for that fiscal year by the current number of shares in the portfolio and adding up the results for all stocks in the fund's portfolio. Then, the growth of the share-weighted cumulative EPS is measured from each historical fiscal year to the last fiscal year. If the projected EPS is available for the current year, growth rates are calculated up to that point in time. The fund's historical earnings growth rate is an average of these annualized growth rates for each time period.
Book/Value Growth%: This datapoint measures the share-weighted cumulative book value growth for all domestic stocks in the fund's current portfolio. This is more accurate than (and not necessarily the same as) the asset-weighted average book value growth for the individual stocks in the fund's current portfolio. The share-weighted cumulative book value per share for each fiscal year is calculated by multiplying the book value per share for each stock for that fiscal year by the current number of shares in the portfolio and adding up the results for all stocks in the fund's portfolio. Then, the growth of the share-weighted cumulative book value is measured from each historical fiscal year to the last fiscal year. The fund's historical book value growth rate is an average of these annualized growth rates for each time period.
Sales Growth%: This measures the share-weighted cumulative revenue growth for all domestic stocks in the fund's current portfolio; this is more accurate than (and not necessarily the same as) the asset-weighted average revenue growth for the individual stocks in the fund's current portfolio.
The share-weighted cumulative revenues per share for each fiscal year is calculated by multiplying the sales per share for each stock for that fiscal year by the current number of shares in the portfolio and adding up the results for all stocks in the fund's portfolio. Then, the growth of the share-weighted cumulative sales is measured from each historical fiscal year to the last fiscal year. The fund's historical sales growth rate is an average of these annualized growth rates for each time period.
Cash Flow Growth%: This measures the growth of the share-weighted cumulative cash flow per share for all domestic stocks in the fund's current portfolio; this is more accurate than (and not necessarily the same as) the asset-weighted average cash flow growth for individual stocks in the fund's portfolio.
The share-weighted cumulative cash flow per share for each fiscal year is calculated by multiplying the cash flow per share from operations for each stock for that fiscal year by the current number of shares in the portfolio and adding up the results for all stocks in the fund's portfolio. Then, the growth of the share-weighted cumulative cash flow is measured from each historical fiscal year to the last fiscal year. The fund's historical cash flow growth rate is an average of these annualized growth rates for each time period.
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
Basic Materials: Companies that manufacture chemicals, building materials and paper products. This sector also includes companies engaged in commodities exploration and processing. Companies in this sector include ArcelorMittal, BHP Billiton and Rio Tinto.
Consumer Cyclical: This sector includes retail stores, auto and auto parts manufacturers, companies engaged in residential construction, lodging facilities, restaurants and entertainment companies. Companies in this sector include Ford Motor Company, McDonald’s and News Corporation.
Financial Services: Companies that provide financial services which includes banks, savings and loans, asset management companies, credit services, investment brokerage firms, and insurance companies. Companies in this sector include Allianz, J.P. Morgan Chase and Legg Mason.
Real Estate: This sector includes mortgage companies, property management companies and REITs. Companies in this sector include Kimco Realty Corporation, Vornado Realty Trust and Westfield Group.
Sensitive
Communication Services: Companies that provide communication services using fixed-line networks or those that provide wireless access and services. This sector also includes companies that provide internet services such as access, navigation and internet related software and services. Companies in this sector include AT&T, France Telecom and Verizon Communications.
Energy: Companies that produce or refine oil and gas, oil field services and equipment companies, and pipeline operators. This sector also includes companies engaged in the mining of coal. Companies in this sector include BP, ExxonMobil and Royal Dutch Shell.
Industrials: Companies that manufacture machinery, hand-held tools and industrial products. This sector also includes aerospace and defense firms as well as companies engaged in transportations and logistic services. Companies in this sector include 3M, Boeing and Siemens.
Technology: Companies engaged in the design, development, and support of computer operating systems and applications. This sector also includes companies that provide computer technology consulting services. Also includes companies engaged in the manufacturing of computer equipment, data storage products, networking products, semi¬conductors, and components. Companies in this sector include Apple, Google and Microsoft.
Defensive
Consumer Defensive: Companies engaged in the manufacturing of food, beverages, household and personal products, packaging, or tobacco. Also includes companies that provide services such as education & training services. Companies in this sector include Philip Morris International, Procter & Gamble and Wal-Mart Stores.
Healthcare: This sector includes biotechnology, pharmaceuticals, research services, home healthcare, hospitals, long-term care facilities, and medical equipment and supplies. Companies in this sector include Astra Zeneca, Pfizer and Roche Holding.
Utilities: Electric, gas, and water utilities. Companies in this sector include Electricité de France, Exelon and PG&E Corporation.
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.
Sector: Sector for the stock holding.
P/E: Price/Earnings ratio for the stock holding.
YTD Return %: YTD return for the stock holding, updated daily.
% Net Assets: The Percent Net Assets column indicates what percentage of the portfolio's net assets a given security constitutes. Morningstar calculates the percentage of net assets figure by dividing the market value of the security by the separate account's total net assets. If a given security makes up a large percentage of the separate account's net assets, the separate account uses a concentrated portfolio strategy, at least with respect to the security in question. If, however, the percentage figures are low, then the manager is either maintaining per-issue diversification or is simply not willing to bet heavily on a particular security.
Use the Percent of Net Assets column to see how concentrated or diversified a separate account is in terms of a particular security. When used in conjunction with the Total Number of Holdings column, this data point can be particularly useful.
% Assets in Top 10 Holdings: The aggregate assets, expressed as a percentage, of the separate account's top 10 representative holdings. This figure is meant to be a measure of portfolio risk. Specifically, the higher the percentage, the more concentrated the separate account is in a few companies or issues, and the more the separate account is susceptible to the market fluctuations in these few holdings. The figure is calculated from the most recent available separate account holdings.
The Percent Assets in Top 10 Holdings figure provides insight into the degree to which a portfolio is diversified. Used in combination with the total number of holdings, it can indicate how concentrated a separate account is.