1 TWIN Capital Management Inc. (“TWIN”) is an independent registered investment adviser founded in 1990. Registration of an Investment Adviser does not imply any level of skill or training. TWIN claims compliance with the Global Investment Performance Standards (GIPS®). A fully compliant GIPS presentation, a complete list and description of all composites, or additional information is available by calling 724-942-2000.
TWIN’s ADV Part II can be found by clicking here.
The TWIN Prime, Enhanced Equity, Enhanced 50, Dividend Select, and Small Cap strategy composites include all discretionary accounts managed within the defined investment strategy during the periods presented. Composite and Index returns are expressed in US dollars, and reflect the reinvestment of all capital gains, dividends and interest, if any. Investing involves risk; clients may experience a profit or a loss. Past performance is not necessarily indicative of future results.
The S&P 500® Index is a representative measure of 500 leading companies from leading industries; the index is a benchmark for the large-cap segment of U.S. equity market. Company weights in the index are proportional to firms’ available market capitalization (price times available shares outstanding). A Committee at Standard and Poor’s maintains the index with a focus on liquidity and investability. FTSE Russell produces and maintains a family of U.S. equity indexes. In the determination of index membership, Russell calculates capitalization and style category breakpoint values based on ranks of U.S. common stocks at each annual reconstitution period using market value of freely-available outstanding shares as of the a specific ranking day each year. Stocks exceeding the breakpoint established for the largest 3,000 stocks become constituents in the Russell 3000® Index (with some adjustments to the constituent list to reduce category changes). Similarly, the largest approximately 1,000 stocks become the Russell 1000® Index. Benchmarks should be used for purposes of comparison only, and the comparison should not be understood to mean that there will necessarily be a correlation between TCM’s returns and the benchmark’s returns. Furthermore, the volatility of the benchmark may be materially different from TCM’s actual portfolio. It is not possible to invest directly in an index.
TWIN’s strategies invest in equity securities; therefore they are expected to experience significantly greater volatility in monthly and annual returns than would likely occur if they invested solely in cash-like investments, and may lose value. Because the portfolios invest in equities, they are subject to additional risks such as stock market risk, investment style risk, and manager risk. Stock market risk is the chance that stock prices overall will decline over short or even long periods. Stock markets tend to move in cycles, with periods of rising prices and falling prices. Investment style risk refers to the chance that returns from the types of stocks in which the strategies invest will trail returns from the overall stock market. As a group, mid- and large- cap stocks tend to go through cycles of doing better or worse than the stock market in general. The periods have, in the past, lasted for as long as several years. Manager risk refers to the chance that the adviser will do a poor job of selecting the securities in which the strategies invest.
2 Strategy holdings and characteristics are for a representative account, do not represent all of the securities purchased, sold or recommended for client accounts, and are subject to change. The reader should not assume that an investment in the securities was or will be profitable.
2,4 Supplemental information to the GIPS compliant composite presentation.
4 Annualized Returns: Calculated as the compound geometric average of monthly returns. The geometric average is the monthly average return that assumes the same rate of return every period to arrive at the equivalent compound growth rate reflected in the actual return data. The results are annualized by raising the sum of one plus the compound geometric average monthly return to the twelfth power and then subtracting one.
Standard Deviation: Measures the dispersion of uncertainty in a random variable (in this case, investment returns). The higher the volatility of investment returns, the higher the standard deviation will be in any given case. For this reason, standard deviation is often used as a measure of investment risk. Values are calculated by applying the traditional sample deviation formula to monthly return data, and then annualized by multiplying the result by the square root of twelve.
Value-Added (i.e., “Alpha”): The difference between a manager’s annualized return and a benchmark’s (e.g., S&P 500®) annualized return.
Annualized Risk: The variation of a portfolio’s returns around its average return over an annual basis (measured by standard deviation).
Beta: Captures the tendency of a stock’s returns to respond to changes in a market index or benchmark over time; it is a statistical measure of a variability. For a specific period, an individual stock’s beta is the covariance of the return of the stock with the return of a market index, divided by the variance of the return of the index for the period. The beta of the market index is 1.0. A stock with a beta above 1.0 tends to swing more than the market over time, while a stock with a beta less than 1.0 typically swings less than changes in the market index.
Tracking Error: The annualized standard deviation of value-added, it measures the variation of a portfolio’s returns relative to the benchmark. Managers with larger bets relative to benchmark tend to have return streams exhibiting higher tracking error. A manager with a 5% tracking error can be expected to produce positive & negative value-added in excess of 5% in 1 out of every 3 years.
Information Ratio: The ratio of annualized value-added to tracking error. Higher Information Ratios tell us that a manager is adding more value per unit of active risk. This is a very useful metric to determine whether a manager is skillful or not.
Upside capture: Measures the percentage of benchmark gains captured by a manager when benchmark returns are positive (up).
Downside capture: Measures the percentage of benchmark losses endured by a manager when benchmark returns are negative (down).
Sharpe ratio: Calculated as the excess return (i.e., return above a risk-free rate) of an asset class, index or investment strategy divided by the standard deviation of the excess returns over a like horizon. As such, it is a measure of reward per unit of risk.