Program rules

HighWater markThe manager will only receive performance fees, on that particular pool of invested money, when its value is greater than its previous greatest value. Should the investment drop in value then the manager must bring it back above the previous greatest value before they can receive performance fees again.
Investor preset drawdownA pre-determined amount reflected as a percentage, that the investor chooses as their risk threshold

Fee structure

Incentive FeeCompensation paid to money manager based solely on their performance.
Management FeePeriodic payment that is paid by investors to the investment advisor.

Performance metrics

Absolute returnA measure of the total gain/loss expressed as a percentage of invested capital.
AlphaA measure of risk adjusted performance relative to a benchmark. A fund that produced the expected return for the level of risk assumed has an Alpha of zero. A positive Alpha shows that the manager produced a return greater than expected for the risk taken while a negative Alpha indicates the converse. Essentially a proxy for the fund managers skill.
BenchmarkA standard against which an investment is measured. (The BTopFX Index data from Barclay Hedge is used here for comparison purposes.)
BetaA measure of an investments’ volatility relative to the benchmark. It is a measure of risk. A beta of 1 means that the investment is as volatile as the benchmark while betas’ greater than 1 or lesser than 1 reflect volatilities higher than or lower than the benchmark respectively.
CAGRThe year over year growth rate of an investment over a specified period of time. It is a notional number that depicts the rate at which an investment would have grown if it grew at a steady rate.
Downside DeviationA measure of downside risk that focuses on returns that fall below a minimum threshold. Used to calculate the Sortino Ratio.
Kurtosisis the degree to which exceptional values, much larger or smaller than the mean, occur more frequently (high kurtosis) or less frequently (low kurtosis) than in a normal distribution. It measures the tail-heaviness of the distribution.
MAR Ratiocalculated by dividing the compound annual growth rate (CAGR) of a fund since inception by its biggest draw-down. The higher the ratio, the better the risk-adjusted returns.
MAX DrawdownThe maximum decline from peak to trough before a new high is achieved.
Modified Sharpe ratioA measure of the mean return per unit of risk for investments exhibiting asymmetric distributions. Calculated by dividing the excess returns by the modified value at risk (mVaR)
Modified Value at Risk (mVaR)quantifies the risk of an investment with a given confidence level for return distributions that are asymmetric (non Gaussian).
“PIP” definitionPrice Interest Point. It is the smallest price change that a given exchange rate can make (e.g. If the EUR/USD moves from 1.4050 to 1.4051 then that means that exchange rate went up 0.0001 or 1 pip).
Skewness(** Normal Distribution Skewness = 0 **) A measure of symmetry – or lack of symmetry. Skewness can be either negative or positive. Data points skewed to the left of the mean are negatively skewed while those to the right are positively skewed.
Sortino ratioA variation of the Sharpe ratio which differentiates harmful volatility (volatility caused by negative returns) from volatility in general.
Standard DeviationA representation of the risk associated with a given investment. A statistical measure of the variability of the returns.
VAMIAn index that tracks the monthly performance of a hypothetical $1000 investment.