Appendix. Formal Definitions and Procedures


Our portfolio selection is mostly based on an analysis of return data. Each fund has a style blend described by a portfolio of passive indexes obtained by a quadratic fit of return data. As a result we are able to compare the fund with its style blend. We summarize this comparison with a difference in risk-adjusted returns called the Desired Target Return™-alpha (DTR™-α). * The DTR-α is a measure of added value and is key to our final selection process; however, before making this calculation possible, funds are carefully screened. One part of the screening process is based on an analysis of risk and return statistics defined in terms of a DTR. The purpose of this Appendix is to give formal definitions ...

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