Factor Definitions

FX Sensitivity

calculated by calculating the R2 of asset returns (trailing 24 months, compounded weekly) versus the returns of a blended composite of the 4 major currencies (deemed by Factset):  the U.S. dollar, the Euro, the British Pound, and the Japanese Yen.  If a portfolio has a basket of securities with a higher R2, it will have a greater exchange sensitivity exposure.  If a portfolio has a basket of securities with a lower R2, it will have a lower exchange sensitivity exposure.

Beta

calculated by calculating the beta of the portfolio, which is the measure of an asset’s volatility relative to a stated benchmark, using 12 month trailing daily returns.  The benchmark used in this measurement is the local benchmark, given the geography and market focus of the portfolio, according to Axioma’s risk model.  If a portfolio has a basket of securities with a beta of 1, it will have a greater exposure to market sensitivity.  If a portfolio has a basket of securities that deviates from a beta of 1, it will have a lower exposure to market sensitivity.

Liquidity

calculated by dividing the trailing 60-day average daily volume (in notional value, not shares) by its trailing 20-day average market capitalization.  This calculation determines how liquid an asset is relative to its capitalization.  If a portfolio has a basket of securities with a higher ratio, it will have a greater exposure to liquidity.  If a portfolio has a basket of securities with a lower the ratio, it will have a lower exposure to liquidity.

Momentum

calculated by taking an asset’s cumulative return over the last 250 trading days minus the most recent 20 trading days and the first 10 trading days.  If a portfolio has a basket of securities with a greater return in that span, it will have a greater exposure to medium-term momentum.  If a portfolio has a basket of securities with a lower return in that span, it will have a lower exposure to medium-term momentum.

Size

calculated by the difference between large and small cap stocks, based on their 30 day average market capitalization.  If a portfolio has a basket of securities with a smaller capitalization, it will have a lower exposure to size.  If a portfolio has a basket of securities with a larger capitalization, it will have a greater exposure to size.

Mid-Cap

this captures the systematic component of returns associated with mid cap assets that have been classified as such over the trailing 60-day trading period.  Axioma defines large-cap assets as the top 13 percent of assets in their equity universe, mid-cap as the next 20 percent, and small cap as the remaining portion.  If a portfolio has a basket of securities that fall into that asset class, it will have a greater mid-cap exposure to mid-cap.  If a portfolio has a basket of securities that falls outside that band, it will have a lower exposure to mid-cap.

Volatility

calculated by taking the ratio of the square root 60-day absolute return versus the volatility of the general market over that time frame.  If a portfolio has a basket of securities with a higher ratio, it will have a greater exposure to volatility.  If a portfolio has a basket of securities with a lower ratio, it will have a lower exposure to volatility.

Value

calculated based on a book-to-price ratio, using the most recently reported book value of the company versus the 30-day average market price.  If a portfolio has a basket of securities with a higher book-to-price ratio, it will have a greater exposure to value.  If a portfolio has a basket of securities with a lower book-to-price ratio, it will have a lower exposure to value.

EPS Yield

calculated by equal parts of the trailing 12 months earnings versus the average 30-day market price and the 12-month forward forecasted earnings versus the average 30-day market price.  If a portfolio has a basket of securities with a higher resulting yield from that combined calculation, it will have a greater exposure to earnings yield.  If a portfolio has a basket of securities with a lower resulting yield from that combined calculation, it will have a lower exposure to earnings yield.

Leverage

calculated by equal parts of a company’s debt-to-assets ratio a debt-to-equity ratio.  Debt is measured both the long term and short-term debt liabilities on the most recent quarterly balance sheet, Assets are measured by the total assets on the balance sheet as of the most recently reported quarter and equity is measured by the average common equity over the previous 4 quarters.  If a portfolio has a basket of securities with a higher debt-to-asset and debt-to-equity ratio, it will have a higher exposure to leverage.  If a portfolio has a basket of securities with a lower debt-ot-asset and debt-to-equity ratio, it will have a lower exposure to leverage.

Growth

calculated by equal parts earnings growth and sales growth.  This is seasonally adjusted by taking the trailing 12-month sales and earnings numbers as of the most recent reported.  The earnings growth rate is figured by measuring the regression slope coefficient over the most recent 5 years of earnings plus up to 1 year of analyst forecasted earnings.  That coefficient is then divided into the average absolute earnings yield to determine the earnings growth rate.  The sales growth rate is figured by measuring the regression slope coefficient over the most recent 5 years of sales plus up to 1 year of analyst forecasted sales.  That coefficient is then divided into the average absolute sales yield to determine the sales growth rate.  If a portfolio has a basket of securities with a higher earnings and sales growth rate, it will have a higher exposure to growth.  If a portfolio has a basket of securities with a lower earnings and sales growth rate, it will have a lower exposure to growth.

Yield

calculated as the total dividend payments over the last 12 months divided by the average market capitalization of the security over the last 30 calendar days.  If a portfolio has a basket of securities with a higher dividend yield, it will have a greater exposure to the dividend yield factor.  If a portfolio has a basket of securities with a lower dividend yield, it will have a lower exposure to the dividend yield factor.

Profitability

calculated by equal parts of return-on-equity, return-on-assets, cash-flow-to-assets, cash-flow-to-income, gross margin, and sales-to-assets.  Return on equity is calculated by taking the four most recently reports earnings divided by the average common equity over the same period.  Return-on-assets is calculated by taking the four most recently reported total assets on the balance sheet divided by the average common equity over the same period.  Cash-flow-to-assets is calculated by the most recent annually reported operating cash flow divided by the average total assets at the beginning of that period and the end of that period.  Gross margin is calculated as net sales (total sales net of cost of goods sold) divided by the total sales.  These figures are as of the four most recently quarterly reported reports.  Sales-to-assets are calculated by taking the four most recently reported quarterly sale-se figures divided by the average total assets over that same period.  If a portfolio has a basket of securities with a higher return-on-equity, return-on-assets, cash-flow-to-assets, cash-flow-to-income, gross margin, and sales-to-assets; it will have a greater exposure to profitability.  If a portfolio has a basket of securities with a lower return-on-equity, return-on-assets, cash-flow-to-assets, cash-flow-to-income, gross margin, and sales-to-assets; it will have a lower exposure to profitability.