[vc_row full_width=”stretch_row” css_animation=”fadeInUp” el_id=”wwd” el_class=”row-1″][vc_column width=”1/6″][/vc_column][vc_column width=”2/3″][bsf-info-box icon_size=”32″ icon_animation=”fadeIn” title_font=”font_family:Lato|font_call:Lato|variant:regular” title_font_style=”font-weight:normal;font-style:normal;” desc_font=”font_family:Lato|font_call:Lato|variant:300″ desc_font_style=”font-weight:300;” desc_font_size=”desktop:20px;” css_info_box=”.vc_custom_1664078529180{padding-top: 25px !important;}”]The methodology used to rank iCore accounts is similar to how mutual funds and ETF’s are ranked.

Ranking Criterion

iCore accounts are not mutual funds or ETFs; rather, they are individual sub-accounts that investors or your investment manager can include in your overall investment portfolio. There are significant advantages to using sub accounts rather than mutual funds or ETFs. Among them are lower fees, less portfolio turnover (which can potentially result in lower annual capital gains taxes), and a better understanding of exactly which securities (stocks, bonds, etc.) your money is invested. In addition, mutual funds often have multiple different classes (A shares, B shares, C shares, etc.) making it confession for investors. iCore accounts have one, easy-to-understand classification.

Alpha: “Alpha” (the Greek letter α) is a term used in investing to describe a strategy’s ability to beat the market, or it’s “edge.” Alpha is thus also often referred to as “excess return” or “abnormal rate of return,” which refers to the idea that markets are efficient, and so there is no way to systematically earn returns that exceed the broad market as a whole. Alpha is often used in conjunction with beta (the Greek letter β) , which measures the broad market’s overall volatility or risk, known as systematic market risk.

CAGR: Compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment’s lifespan.

Sortino Ratio: The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset’s standard deviation of negative portfolio returns, called downside deviation, instead of the total standard deviation of portfolio returns.

Sharpe Ratio: The Sharpe ratio was developed by Nobel laureate William F. Sharpe and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.

Treynor Ratio: a risk-adjusted measurement of return based on systematic risk that indicates how much return an investment, such as a portfolio of stocks, a mutual fund, or exchange-traded fund, earned for the amount of risk the investment assumed. A higher Treynor ratio is desirable because it indicates that a given portfolio is likely a more suitable investment. Since the Treynor ratio is based on historical data, however, it’s important to note this does not necessarily indicate future performance.

Standard Deviation: Standard deviation is a statistical measurement in finance that, when applied to the annual rate of return of an investment, sheds light on the historical volatility of that investment. The greater the standard deviation of securities, the greater the variance between each price and the mean, which shows a larger price range. For example, a volatile stock has a high standard deviation, while the deviation of a stable blue-chip stock is usually rather low.

iCore

For research purposes, we compare our accounts to ETFs or mutual funds with the most assets under management at the time the comparison report was generated. All reports are inflation-adjusted, and when available, include income streams. Our goal is to include at least 10 years of data, however, there may be times when we report less than 10 years worth of data.[/bsf-info-box][vc_column_text]The Compound Annualized Growth Rate (CAGR) is the annualized geometric mean return of the portfolio. It is calculated from the portfolio to start and end balance and is thus impacted by any cashflows.

The time-weighted rate of return (TWRR) is a measure of the compound rate of growth in a portfolio. This is calculated from the holding period returns (e.g. monthly returns), and TWRR will thus not be impacted by cashflows. If there are no external cashflows, TWRR will equal CAGR.

The money-weighted rate of return (MWRR) is the internal rate of return (IRR) taking into account cashflows. This is the discount rate at which the present value of cash inflows equals the present value of cash outflows.

The total return is the combined return in income and capital appreciation from investment in an asset. Yield measures the current cash income received from investment in an asset. Bonds provide yield in the form of interest payments and stocks through dividends.

Standard deviation (Stdev) is used to measure the dispersion of returns around the mean and is often used as a measure of risk. A higher standard deviation implies greater dispersion of data points around the mean.

Sharpe Ratio is a measure of the risk-adjusted performance of the portfolio, and it is calculated by dividing the mean monthly excess return of the portfolio over the risk-free rate by the standard deviation of excess return, and the displayed value is annualized.

Sortino Ratio is a measure of risk-adjusted return which is a modification of the Sharpe Ratio. While the latter is the ratio of average returns in excess of a risk-free rate divided by the standard deviation of those excess returns, the Sortino Ratio has the same denominator divided by the standard deviation of returns below the risk-free rate.

Treynor Ratio is a measure of the risk-adjusted performance of the portfolio. It is similar to the Sharpe Ratio, but it uses portfolio beta (systematic risk) as the risk metric in the denominator.

Calmar Ratio is a measure of the risk-adjusted performance of the portfolio. It is calculated as the annualized return over the past 36 months divided by the maximum drawdown over the past 36 months based on monthly returns.

Risk-free returns are calculated based on the Federal Reserve 3-Month Treasury Bill (secondary market) rates.

Downside deviation measures the downside volatility of the portfolio returns unlike standard deviation, which includes both upside and downside deviations. Downside deviation is calculated based on negative returns that hurt the portfolio performance.

Correlation measures to what degree the returns of the two assets move in relation to each other. The correlation coefficient is a numerical value between -1 and +1. If one variable goes up by a certain amount, the correlation coefficient indicates which way the other variable moves and by how much. Asset correlations are calculated based on monthly returns.

Skewness is a measure of the asymmetry of the probability distribution or returns from a normal Gaussian distribution shape about its mean. Negative skewness is associated with the left (typically negative returns) tail of the distribution extending further than the right tail; positive skewness is associated with the right (typically positive returns) tail of the distribution extending further than the left tail.

Excess kurtosis is a measure of whether a data distribution is peaked or flat relative to a normal distribution. Distributions with high kurtosis tend to have a distinct peak near the mean, decline rather rapidly, and have heavy or fat tails.

A drawdown refers to the decline in the value of a single investment or an investment portfolio from a relative peak value to a relative trough. A maximum drawdown (Max Drawdown) is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained.

Drawdown values are calculated based on monthly returns.

Value at Risk (VaR) measures the scale of loss at a given confidence level. For example, if the 5% VaR is -3% the portfolio return is expected to be greater than -3% 95% of the time and less than -3% 5% of the time. Value at Risk can be calculated directly based on historical returns based on a given percentile or analytically based on the mean and standard deviation of the returns.

Conditional Value at Risk (CVaR) measures the scale of the expected loss once the specific Value at Risk (VaR) breakpoint has been breached, i.e., it calculates the average tail loss by taking a weighted average between the value at risk and losses exceeding the value at risk.

Beta is a measure of systematic risk and measures the volatility of a particular investment relative to the market or its benchmark.

Alpha measures the active return of the investment compared to the market benchmark return.

R-squared is the percentage of a portfolio’s movements that can be explained by movements in the selected benchmark index.

Active return is the investment return minus the return of its benchmark. For periods longer than 12 months this is displayed as annualized value, i.e., annualized investment return minus annualized benchmark return.

Tracking error, also known as active risk, is the standard deviation of active return. This is displayed as annualized value based on the standard deviation of monthly active returns.

The information ratio is the active return divided by the tracking error. It measures whether the investment outperformed its benchmark consistently.

The Gain/Loss ratio is a measure of downside risk, and it is calculated as the average positive return in up periods divided by the average negative return in down periods.

Upside Capture Ratio measures how well the fund performed relative to the benchmark when the market was up, and the Downside Capture Ratio measures how well the fund performed relative to the benchmark when the market was down. An upside capture ratio greater than 100 would indicate that the fund outperformed its benchmark when the market was up, and a downside capture ratio below 100 would indicate that the fund lost less than its benchmark when the market was down. To calculate the upside capture ratio a new series from the portfolio returns is constructed by dropping all time periods where the benchmark return is less than equal to zero. The up capture is then the quotient of the annualized return of the resulting manager series, divided by the annualized return of the resulting benchmark series. The downside capture ratio is calculated analogously.

All risk measures for the portfolio and portfolio assets are calculated based on monthly returns unless otherwise noted.

The gross expense ratio reflects the total annual operating expenses paid by each fund. The net expense ratio reflects what investors were charged after waivers, reductions, and reimbursements.

The price-to-earnings (P/E) ratio of a stock is calculated by dividing the current price of the stock by its trailing 12 months’ earnings per share. For funds, the price-to-earnings ratio is computed as the weighted average of fund holdings.

Drawdown analysis is calculated based on monthly returns excluding cashflows and management fees.

ANALYSIS
Market capitalization refers to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. Large cap refers to a company with a market capitalization value of more than $10 billion, mid-cap refers to a company with a market capitalization value between $2 and $10 billion, and small cap refers to a company with a market capitalization value below $2 billion. For funds and portfolios, the equity market capitalization is calculated based on the long position of the equity holdings.

BONDS and FIXED INCOME
Credit quality measures the ability of a bond issuer to repay a bond’s interest and principal in a timely manner. Rating agencies research the financial health of each bond issuer and assign ratings to the bonds being offered. Lower-rated bonds generally offer higher yields to compensate investors for the additional risk. AAA is the highest possible rating that may be assigned to an issuer’s bonds by any of the major credit rating agencies. Bonds rated AAA to AA are known as high-grade bonds, bonds rated A to BBB are known as medium-grade bonds, and bonds rated BB to C are known as non-investment grade bonds. An issuer will receive a rating of D if it is already in default on some of its debt.

For funds and portfolios, the fixed income credit quality breakdown is calculated based on the long position of the fixed income holdings. A fixed income maturity date refers to the specific date on which the investor’s principal will be repaid.

Duration measures a bond’s or fixed income portfolio’s price sensitivity to interest rate changes. For example, if a bond’s duration is 5 years, and interest rates increase by 1%, the bond’s price will decline by approximately 5%. Conversely, if a bond has a duration of 5 years and interest rates fall by 1%, the bond’s price will increase by approximately 5%. A fixed income portfolio’s duration is computed as the weighted average of individual bond durations held in the portfolio.
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