3-year Average Payout Ratio: The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage.
7-Day Distribution Yield: Reflects actual distributions made to shareholders. It is calculated by taking an average of the past seven days daily yield at NAV.
7-Day Net Yield: Based on the average net income per share for the seven days ended on the date of calculation, Daily Dividend Factor and the offering price on that date.
7-Day Effective Yield: Based on the 7-day net yield and is then compounded and annualized.
7-Day Unsubsidized Net Yield: Represents what the yield would have been in the absence of temporary expense waivers or reimbursements.
12-month Yield: The sum of a fund’s total trailing 12-month interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed over the same period.
30-day Distribution Yield: The 30-day distribution yield is calculated by taking an average of the past 30 days' daily yields.
30-day Yield: Also known as "SEC Yield". Calculated by dividing the net investment income per share for the 30 days ended on the date of calculation by the offering price per share (for mutual funds) or net asset value (for exchange-traded funds) on that date. The figure is compounded and annualized. For funds with a sales charge, the 30-day yield at NAV is calculated similarly to the "SEC yield" but the calculation does not reflect the sales charge. For exchange-traded funds, the 30-day yield at market price is calculated similarly to the "SEC yield" but is based on market price rather than NAV.
30-day Fully Tax Equivalent Yield: Calculated similar to the Standard Tax Equivalent Yield except that, in addition, it assumes that 100% of the dividend income from the stocks held in the fund's portfolio qualifies for the 15% tax rate. This after tax equity income is then divided by the applicable tax (1-appplicable tax rate).
30-day Standard Tax Equivalent Yield: Calculated by dividing the municipal income portion of the 30-day yield by the applicable tax rate (1-applicable tax rate). The equity income portion of the 30-day yield does not reflect a tax adjustment.
Active Return: Equals the fund's gross total return minus the benchmark's total return.
Advisor: A professional who provides financial guidance and assistance to clients to help inform decisions about investing, saving, budgeting and other money management issues.
Alternate Minimum Tax: A special income tax for high net worth individuals with tax-exempt investments.
Amortized Cost: A money market fund method of valuation where the fund values its portfolio securities by reference to their acquisition-cost as adjusted for amortization of premium or accretion of discount.
Annual and Semiannual Reports: Summaries that a mutual fund sends to its shareholders which review the fund's performance over a defined period and identify the securities currently in the fund's portfolio.
Asked Price: The price at which a security share can be purchased. The asked price (also referred to as "offering price") means the price per share plus any sales charge.
Asset Allocation: A strategy that investors use to distribute and diversify their assets among multiple investment products.
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF): A lending facility that provides funding to U.S. depository institutions and bank holding companies to finance their purchases of high quality asset-backed commercial paper (ABCP) from money market mutual funds under certain conditions. The program is intended to assist money funds that hold such paper in meeting demands for redemptions by investors and to foster liquidity in the ABCP market and money markets more generally.
Asset-Backed Commercial Paper: Short-term debt that is backed by physical assets, such as cash flows from receivables. Asset-backed commercial paper is issued by a financial institution and typically has a maturity of three to six months.
Assets: The investment holdings and cash owned by a mutual fund.
Auction Rate Security (ARS): A debt security in which the interest rate is reset through a Dutch auction. The ARS is sold at an interest rate that will clear the market at the lowest yield possible. This ensures that all bidders on an ARS receive the same yield on the debit issue.
Basis Point: One one-hundredths of a percentage point. This term is often used in describing changes in interest rates. For example, if a bond yield increases from 7.50% to 7.88%, it has moved up 38 basis points.
Bear Market: A period when the prices of stock and bond securities are falling.
Beta: Analyzes the market risk of a fund by showing how responsive the fund is to the market. The beta of the market is 1.00. Accordingly, a fund with a 1.10 beta is expected to perform 10% better than the market in up markets and 10% worse in down markets. Usually the higher betas represent riskier investments.
Beta Positioning: Reflects the impact of the fund’s net exposure to the equity market.
Bid Price: The price at which a mutual fund's shares are redeemed, or bought back, by the fund. The price a buyer is willing to pay for a security.
Blue Chip: A stock with outstanding prospects for long-term growth and a history for paying dividends
Bond: A debt security issued by a company, municipality or government agency. The bond issuer promises to pay the bond holder a stated rate of interest up to the date of maturity, when the issuer promises to repay the principal.
Bond Terms: A short-term bond matures in less than two years; an intermediate-term bond matures in 2-10 years; a long-term bond matures in more than 10 years.
Breaking a Buck: A money market fund is said to "break the buck" when its NAV falls below $1.00 per share.
Broker/Dealer: A firm which buys and sells securities, including mutual funds. The broker/dealer's clients range from small individual investors to large institutional investors.
Callable: An option that allows a bond issuer to recall a bond before its maturity date.
Capital Gain: Money earned by a mutual fund when it sells holdings in its portfolio at a price greater than the price it originally paid. An increase in the market value of a mutual fund's securities, as reflected in the NAV of the fund's shares.
Capital Gain Distribution: Payments to mutual fund shareholders of net gains realized on the sale of the fund's portfolio securities. Long-term gains are earned on securities held in the portfolio more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes.
Capital Growth: An increase in the market value of a fund's securities which is reflected in the value of the fund's shares. This is a specific long-term objective of many mutual funds.
Cash Management System: Method of managing cash that allows it to be invested and income-producing until the day it is actually needed. Cash management oriented mutual funds are those which invest in short-term, highly liquid money market instruments. In addition to offering a variety of funds, a cash management system provides services including investment management, check writing, debit card privileges and ease of accounting.
Certificate of Deposit (CD): A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, has a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are currently insured by the FDIC up to a maximum of $250,000. The term of a CD generally ranges from one month to five years.
Check Writing Privilege: After completion of necessary forms, a shareholder will be issued a book of checks, which can be used to redeem shares from his/her account. The minimum allowable check redemption for each fund is stated in the fund's prospectus.
Clone Fund: A fund which is identical in portfolio composition to an already existing fund but which is fully subject to the Federal Reserve Special Reserve Requirement. Clone funds can be used as variable annuity funds.
Closed-End Investment Company: Closed-end mutual fund companies issue only a limited number of shares and do not buy them back (redeem). Instead, closed-end shares are traded in the securities market, with supply and demand determining price.
Closing Price: The price of a security at the end of the day, after the final trade.
Commercial Paper: Short-term obligations with maturities ranging from 2 to 270 days issued by banks, corporations and other borrowers to investors with temporarily idle cash. Issuers like commercial paper because the maturities are flexible and because the rates are usually marginally lower than bank rates. Investors—actually lenders, since commercial paper is a form of debt—like the flexibility and safety of an instrument that is issued only by top-rated concerns and is nearly always backed by bank lines of credit.
Commercial Paper Funding Facility (CPFF): Authorized by Federal Reserve Board to provide a liquidity backstop to U.S. issuers of commercial paper. The CPFF is intended to improve liquidity in short-term funding markets and thereby increase the availability of credit for businesses and households.
Commission: A fee paid by an investor to a broker or other sales agent for investment advice and assistance.
Common Stock: Class of equity securities issued by a corporation that represents ownership in the corporation.
Coupon: The annual rate of interest on a bond's face value that the bond's issuer promises to pay the bondholder.
Credit Analysis: Process of (1) analyzing the record and financial affairs of an individual or a corporation to ascertain creditworthiness or (2) determining the credit ratings of corporate and municipal bonds by studying the financial condition and trends of the issuers.
Credit Crisis: Term referring to the current global economic situation, beginning as far back as 2005 with U.S. interest rates rising, creating the sub-prime crisis in the housing market. It describes a severe shortage of money or credit.
Current Income: Interest income expressed as a percentage of share price NAV.
Credit Quality Ratings: The ratings agencies that provided the ratings are Standard and Poor's, Moody's and Fitch. When ratings vary, the highest rating is generally used. Credit ratings of A or better are considered to be high credit quality; credit ratings of BBB are good credit quality and the lowest category of investment grade; credit ratings BB and below are lower-rated securities ("junk bonds"); and credit ratings of CCC or below have high default risk.
Custodian: An organization, usually a bank, which holds in custody and safekeeping the securities and other assets of a mutual fund.
Daily Gross Yield: An annualized yield based on the current day's dividend factor unadjusted for the effect of expenses.
Daily Liquid Assets: Assets that include (i) cash; (ii) direct obligations of the U.S. Government; (iii) securities that will mature or are subject to a demand feature that is exercisable and payable within one business day; or (iv) amounts receivable and due unconditionally within one business day on pending sales of portfolio securities.
Daily Net Yield: Based on the average net income per share for the date of calculation and the offering price on that date.
Dealer: Acts as principal and buys securities from or sells securities to his/her customers.
Declaration Date: Date when a fund's Board of Directors decides to pay a dividend or capital gain to shareholders.
Default: Failure to pay principal or interest when due.
Direct Obligation: A U.S. government security, such as a Treasury bill, note or bond, that is backed by the full faith and credit of the federal government.
Distributor: The organization normally associated with a mutual fund responsible for the sale or repurchase of fund shares either through the broker/dealer community or directly to the public. The distributor of all Federated Hermes funds is Federated Securities Corp., Pittsburgh, PA.
Daily Distribution Yield: The distribution yield reflects actual distributions made to shareholders. Those distributions are comprised primarily of ordinary income, but may also include return of capital under certain circumstances. The distribution yield is calculated by dividing the annualized dividend by the offering price/net asset value/market price. To understand a fund's performance trends, distribution yield should always be reviewed together with the fund's yield.
Diversification: The mutual fund policy of spreading investments among a number of different securities to reduce risks inherent in investing.
Dividend Factors: The per share amount that a fund declares daily as a dividend to its shareholders. The dividend is paid monthly and mutual fund owners may keep the dividend or reinvest it automatically to purchase additional shares in the fund.
Dividends: Those moneys earned by a fund on the equity or debt securities held in its portfolio. A fund pays a corresponding amount to its shareholders as dividends. Mutual fund owners may keep the dividend or reinvest it automatically to purchase additional shares in the fund.
Dollar-Cost Averaging: The practice of investing equal amounts of money at regular intervals, regardless of whether the securities markets are declining or rising. This strategy allows an investor to acquire more shares as a security's price drops and fewer shares as the price rises.
Duff & Phelps' Credit Ratings: Given on the basis of credit analysis, market risk, portfolio manager's experience and internal control systems. Credit Ratings are subject to change and do not remove market risk.
Duration: A measure of a security’s price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.
Effective Duration: A measure of a security's price sensitivity to changes in interest rates. One of the methods of calculating the risk associated with interest-rate changes on securities such as bonds.
Eligible Security: Under the 2014 amendments to Rule 2a-7, money market funds may generally invest in Eligible Securities, which include securities issued by another money market fund, government securities or securities with a remaining maturity of 397 days or less and are determined by a fund’s board or its delegate to present minimal credit risk.
EPS Growth–Next 5 Years: The estimated average annual growth rate of fiscal year earnings per share for the next five years for a given corporation.
Equity Fund: A fund whose investments are in common stock. Equity fund objectives may include capital appreciation, growth and income.
Ex-date: Or ex-dividend date refers to the day a stock begins to trade without including the value of its next dividend payment. The owner of the stock must have purchased it prior to its ex-date to receive the dividend payment. The ex-date is usually one business day before the record date established by a company’s board of directors.
Exchange Privilege: Enables shareholders to transfer investments from one fund to another within the same fund family as their needs or objectives change.
Exchange Traded Fund (ETF): Open-ended investments similar to mutual funds but with some specific differences. Investor’s fund share purchases and sales are traded in the securities market, with supply and demand determining price. While fund shares are continually offered for purchase or redemption at NAV; this can only be done by specific, contracted firms; Authorized Participants (AP). Typically the fund’s portfolio securities are exchanged in-kind with fund shares between the AP and the fund when the AP purchases or redeems fund shares at NAV.
Expense Ratio: A fund's cost of doing business, disclosed in the prospectus, as a percent of assets.
Family of Funds: Mutual fund companies with a variety of funds under their roofs. They allow for ease of switching investments from one type to another and may have combined monthly statements.
Federal Reserve System: A system of Federal Reserve Banks in the United States forming 12 districts under the control of the Federal Reserve Board. These banks regulate the extension of credit as well as other banking activities.
Financial Planner: A professional who advises individuals and corporations about their financial status and goals. Their compensation may be fee only, commissions or a combination.
First Tier Securities: An eligible money market security which receives the top short-term rating from any two Nationally Recognized Statistical Rating Organizations (NRSROs). If only one NRSRO has rated the security, it must receive the highest short-term rating from that NRSRO to be considered First Tier. U.S. Government Securities are considered First Tier Securities.
Fitch's Money Market Ratings: An assessment of a money market fund’s capacity to preserve principal and provide liquidity through limiting credit, market and liquidity risk. Ratings are based on an evaluation of several factors, including credit quality, diversification and maturity of assets in the portfolio, as well as management strength and operational capabilities. Credit Ratings are subject to change and do not remove market risk.
Fixed Income: Paying a specified rate of interest income.
Floating NAV Money Market Fund: A money market fund that prices and transacts its shares out to four digits ($1.0000). Shareholders in a floating NAV money market fund may experience a gain or loss if the per-share value of the fund changes by 1/100th of a penny (also known as a basis point). A floating NAV money market fund is required to utilize current market-based prices to value its securities (except as otherwise permitted to value individual portfolio securities with remaining maturities of 60 days or less at amortized cost in accordance with SEC guidance) and to transact at a floating NAV that uses four-decimal place precision ($1.000), rather than utilize amortized cost accounting and transact at a stable $1.00 NAV , as all money market funds were permitted to do prior to October 14, 2016. Institutional Money Market Funds transact at a floating NAV.
Floating Rate Note (FRN): A note with a variable interest rate. The adjustments to the interest rate are usually made every six months and are tied to a certain money market index. Also referred to as a floater.
Forward Pricing: Under Securities and Exchange Commission (SEC) regulations, all incoming orders to buy and sell mutual fund shares become effective at the next net asset valuation of the fund shares.
General Obligation Bond: A tax-free municipal bond secured by the pledge of the issuer's full faith, credit and taxing power.
Government Agencies: Organizations established to conduct specific government business. Securities issued by U.S. government agencies, unlike U.S. Treasuries, are not generally backed by the full faith and credit of the U.S. government.
Government Money Market Funds: Under the 2014 amendments to Rule 2a-7, a money market fund that invests 99.5% of its total assets in cash, government securities or repurchase agreements collateralized by government securities. A government money market is eligible to price and transact at a stable $1.00 NAV and is not subject to liquidity fees and redemption gates. Treasury Money Market Funds fall under this definition.
Growth Fund: A non-money market fund whose investments are generally common stock. The objective of the fund is the appreciation of capital.
Growth Stock: One whose value is expected to grow dramatically over time. Its return comes primarily from its rising share price and not from dividends.
Income Fund: Fund which has high return on investment as its objective. The securities in its portfolio usually yield high dividends.
Index Fund: Fund that purchases securities that mimic or represent a specific index, for example the Standard and Poor's (S&P) 500 stock index.
Individual 401(k) Plan: A retirement program for self-employed persons and their employees. They are allowed to deduct 15% or $15,000, whichever is less, from their taxable income by placing the money in a Trusted or Custodial Individual 401(k) Plan. There are penalties for early withdrawal and the employer must cover all eligible employees with the same benefits.
Individual Retirement Account (IRA): A retirement account for individuals. Up to $2,000 per year may be put into a tax-deferred IRA. Removing money from an IRA before age 59½ results in financial penalties. IRAs may be funded with mutual fund shares.
Inflation: A general rise in prices.
Intelligent Core: An actively managed portfolio, implemented primarily through baskets of securities and ETFs. Its objective is to provide broad asset class exposure.
Interest Rate Risk: The risk that a bond's price will decrease due to rising interest rates.
Investment Company: Firm that, for a management fee, invests the pooled funds of small investors in securities appropriate for its stated investment objectives. It offers participants more diversification, liquidity and professional management service than would normally be available to them as individuals.
Institutional Money Market Fund: A money market fund that does not qualify as a government or retail money market fund, under the 2014 amendments to Rule 2a-7. An institutional money market fund does not limit investments in the fund to accounts beneficially owned by natural persons. Institutional money market fund shareholders may include individuals, small businesses or large corporations. Institutional money market funds are required to transact at a floating NAV and must adopt policies and procedures to impose liquidity fees and/or redemption gates in the event a fund’s weekly liquid assets were to fall below a designated threshold, if the fund’s board determines that such liquidity fees or redemption gates are in the best interests of the fund.
Junk Bond: A debt obligation with a rating of Ba or BB or lower, generally paying interest above the return on more highly rated bonds. Junk bonds are also known as high yield bonds.
LIBOR: London Interbank Offered Rate.
LIBOR Rates: Rates that the most creditworthy international banks dealing in eurodollars charge each other for large loans. The LIBOR rate is usually the base for other large eurodollar loans to less creditworthy corporate and government borrowers.
Lipper Averages: Lipper averages are designed to reflect the average time weighted rate of return of all funds in a particular classification over time and do not reflect a sales charge. Data Source: Lipper from Refinitiv. ©Refinitiv 2019. All Rights Reserved. Any copy, republication, or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper will not be liable for any loss or damage resulting from information obtained from Lipper or any of its affiliates.
Lipper Rankings: Based on total return and do not take sales charges into account.
Liquidity: Characteristic of a security or commodity with enough units outstanding to allow large transactions without a substantial drop in price.
Liquidity Crisis: Period of short-term or technical insolvency during which persons or organizations cannot pay the due bills and meet other demands or obligations.
Liquidity Fee: Adopted under the 2014 amendments to Rule 2a-7, a money market fund’s board may impose a fee of up to 2% on shareholder redemptions if a fund’s weekly liquid assets were to fall below thirty percent. If weekly liquid assets were to fall below ten percent, a fund would be required to impose a 1% liquidity fee unless the fund’s board determines that a fee is not in the best interests of the fund. The fee would be removed when weekly liquid assets return to thirty percent or when the fund’s board determines a liquidity fee is no longer in the best interests of the fund.
Load: See Sales Charge.
Load Fund: Any mutual fund sold to an investor through a broker or salesperson. The fund pays a commission to the broker or salesperson for selling the fund.
Management Fee: Fee paid by a mutual fund to the investment advisor for its services.
Maturity: Date on which the principal amount of a note, draft, acceptance, bond or other debt instrument becomes due and payable. Also, termination or due date on which an installment loan must be paid in full.
Minimal Credit Risk: Under the 2014 amendments to Rule 2a-7, a fund's board of directors or its delegate must assess the credit risk of eligible security upon initial investment and on an ongoing basis in accordance with Rule 2a-7. This determination is based on an assessment of an issuer’s credit quality, including the capacity of the issuer or guarantor to meet its financial obligations.
Minimum daily liquidity requirement: A money market fund may not acquire any security other than a daily liquid asset if, immediately after the acquisition, the fund would have invested less than ten percent of its total assets in daily liquid assets. This provision does not apply to tax-exempt funds.
Minimum weekly liquidity requirement: A money market fund may not acquire any security other than a weekly liquid asset if, immediately after the acquisition, the fund would have invested less than thirty percent of its total assets in weekly liquid assets.
Money Market Account: Market-sensitive bank account that has been offered since 1982. The funds are liquid, meaning that they are available to depositors at any time without penalty, and the interest rate is generally comparable to rates on money market mutual funds.
Money Market Funds: Open-ended mutual fund regulated by Rule 2a-7 that generally may invest in high quality, short term investments which meet the definition of eligible securities under Rule 2a-7 and pays money market rates of distributions to its investors.
Moody's Credit Ratings: Obtained after Moody's evaluates a number of factors, including credit quality, market price exposure and management. Credit Ratings are subject to change and do not remove market risk.
Morningstar© Category Ratings™: Identifies funds based on their actual investment styles as measured by their underlying portfolio holdings over the past three years. If the fund is less than three years old, the category is based on the life of the fund. ©2016 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Morningstar© Ratings™: The rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Ratings do not take sales charges into account.
Morningstar© Style Boxes™: Reveals a fund's investment strategy. For equity funds, the vertical axis shows the market capitalization of the stocks owned and the horizontal axis shows investment style. For fixed-income funds, the vertical axis shows the average credit quality of the bonds owned, and the horizontal axis shows interest rate sensitivity as measured by a bond's duration.
Municipal Bond: A debt obligation to obtain funds for various public purposes, including the construction of airports, bridges, highways, housing, hospitals, mass transportation, schools, streets, and water and sewer projects. There are general obligation bonds that are secured by the issuer's pledge of good faith, credit and taxing power for the payment of principal and interest. There are also revenue bonds that are payable only from the revenues derived from a particular facility or from the proceeds of a special excise tax.
Municipal Bond Fund: A fund that invests in municipal bonds which is exempt from Federal Income Tax and passes this tax-free income through to its shareholders.
Municipal/Tax-Free Money Market Funds: Money funds investing in tax-exempt securities issued by municipalities. They may be specific to one or more particular states. Municipal/Tax-Free Money Market Funds may be designated as either Retail or Institutional Money Market Funds.
Mutual Fund: An investment company that pools money from shareholders and invests it in a variety of securities, including stocks, bonds and short-term money market instruments. As open-ended investments, most mutual funds continuously offer new shares to investors.
Net Asset Value (NAV): A mutual funds' price per share, calculated by dividing the total market value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.
Net Inflows/Outflows: Net inflow is the amount by which purchases exceed redemptions. Net outflow is the amount by which redemptions exceed purchases.
Net Yields: These are calculated for money market funds and are based on the average daily income dividend and average net asset value for the 7 days, 30 days and 12 months ended. The 7-day net yield annualized yield is based on the average net income per share for the 7 days ended on the date of calculation and the offering price on that date. The 30-day net yield is the annualized average net investment income per share calculated for each of the previous 30 days. The 12-month net yields are based on the average daily income dividend and average net asset value for the 12 months ended. The monthly average net yield is a simple annualized net yield. It differs from the 30-day yield in that it accounts for the actual days in the month which can be 28, 29, 30 or 31 days depending on the number of days in the months and a fund's accounting procedures.
No-Load Fund: A mutual fund selling its shares at net asset value (NAV) without the addition of a sales charge.
Non-Callable Bond: A bond that cannot be called for redemption by the issuer before its specified maturity date.
Open-Ended Investment Company: A term, primarily used in the United Kingdom and more commonly referred to in the United States as an open-end mutual fund, for an investment in stocks and other securities that continuously offers new shares to investors. The value of the investment is primarily based on net asset value, and the fund can readily adjust its size and investment criteria.
Option Adjusted Yield: Expected yield to maturity of a bond or note after adjusting for the probability-weighted impact of an embedded option, usually an issuer's call provision.
Par Value: The principal amount of a bond due at maturity.
Payout Ratio: The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage.
Pooling: The basic concept behind mutual funds in which a fund aggregates the assets of investors who share common financial goals.
Portfolio: All securities held by a fund.
Premium: The amount by which the price of a security exceeds its principal amount.
Prepayment Risk: The risk that falling interest rates will lead to heavy prepayments of mortgage or other loans—forcing the investor to reinvest at lower prevailing rates.
Price/Cash Flow Ratio: A stock valuation measure calculated by dividing a firm’s cash flow per share into the current stock price.
Prime Money Market Funds: Offer the potential for comparatively higher yields with the same attributes of all money funds governed by SEC Rule 2a-7: credit quality, portfolio diversity and daily liquidity. Prime Money Market Funds invest only in high-quality, instruments that may pose minimal credit risk and—like all 2a-7 regulated funds—have a dollar-weighted average maturity not greater than 60 days and final maturity of the individual security not greater than 397 days. Prime Money Market Funds may be designated as either Retail or Institutional Money Market Funds.
Principal: The amount of money you invest.
Premium Bond: A bond selling above par or face value.
Prospectus: The official booklet that describes the mutual fund and offers its shares for sale. It contains information, as required by the Securities and Exchange Commission (SEC), on subjects including the fund's investment objectives and policies, services, investment restrictions, officers and directors, purchase and redemption of shares, charges and financial statements.
Proxy: The document forwarded to shareowners of a publicly owned corporation requesting that they vote yes or no on certain key issues at the fund's annual meeting.
Record Date: The date which determines the shareholders who are eligible to participate in a corporate income distribution.
Redemption: Selling back by a shareholder of mutual fund shares directly through the transfer agent.
Redemption Gate: Adopted under the 2014 amendments to Rule 2a-7, a money market fund’s board may temporarily suspend all shareholder redemptions for up to ten days if a fund’s weekly liquid assets were to fall below thirty percent. The gate would be lifted when weekly liquid assets return to thirty percent or when the fund’s board determines a redemption gate is no longer in the best interests of the fund. Money market funds may not impose a redemption gate for more than 10 business days in any 90 day period.
Repurchase Agreement: Agreement between a seller and a buyer, usually of U.S. government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, usually, at a stated time. Repos are widely used both as a money market investment vehicle and as an instrument of Federal Reserve monetary policy.
Retail Money Market Fund: A money market fund that has adopted policies and procedures reasonably designed to limit investments in the fund to accounts beneficially owned by natural persons. Retail money market funds are permitted to continue to use amortized cost to value their portfolio securities and to transact at a stable $1.00 NAV. Retail money market funds are required to adopt policies and procedures to impose liquidity fees and/or redemption gates in the event a fund’s weekly liquid assets were to fall below a designated threshold, if the fund’s board determines that such liquidity fees or redemption gates are in the fund’s best interest.
Return: Profit or loss you assume through investing.
Revenue Bond: A tax-free municipal bond payable from revenues derived from tolls, charges or rents paid by users of the facility constructed with the proceeds of the bond issue.
Risk: The possibility that an investment may fluctuate in value. Factors that increase an investment's risk or volatility include credit quality, currency exchange rates and inflation rates.
Risk-off: Refers to changes in investment activity in response to global economic patterns. It is an investment setting in which price behavior responds to and is driven by declines in investor risk tolerance.
Risk/Reward Tradeoff: The concept that an investment must offer higher potential returns as compensation for the likelihood of increased price volatility.
Rollover: Shifting your assets from one qualified retirement plan to another—due to changing jobs, for example—without a tax penalty.
Rule 2a-7: Adopted under the Investment Company Act of 1940. Rule 2a-7 regulates money market funds and imposes various requirements on such funds, including, among others, regulations related to maturity, credit qualification and diversification. In March 2010 and July 2014, respectively, the SEC adopted a number of amendments to Rule 2a-7, which were designed to reduce the interest rate, credit and liquidity risks of money market fund portfolios. In addition, in September 2015, the SEC adopted amendments to Rule 2a-7 to remove credit rating references from the rule.
Sales Charge: Amount charged to purchase shares of a mutual fund.
Securities and Exchange Commission (SEC): The federal agency that regulates the registration and distribution of mutual funds.
SEC Yield: Since 1988, the SEC has required fund managers to report uniform, annualized 30-day yields. The standardized SEC yield allows different bond funds to be compared to each other by analyzing fund income pursuant to a uniform set of accounting assumptions. SEC yield is more predictive of a fund's total return than distribution yield. SEC yield is calculated by dividing the net investment income per share for the 30 days ended on the date of the calculation by the net asset value per share on that date. To understand a fund's performance, both SEC and distribution yields should be reviewed.
Secondary Market: Market for bond issues previously offered or sold.
Sector Composition: (Federated Hermes Muni and Stock Advantage Fund) is based on the classification given to a security under the Standard & Poor's Global Industry Classification System ("SPGIC System"). Those that are not classified using the SPGIC System categories are classified by the fund's advisor on a basis consistent with the SPGIC System methodology.
Shadow Net Asset Value (NAV): Separate from the Transactional NAV, the Shadow NAV may be used to measure the reasonableness of the Transactional NAV. The Shadow NAV is a money market fund’s price per share based on available market quotations of its securities. Where market valuations for many securities are not available, an independent pricing agent provides an estimated market value for each security based upon a homogenous set of instruments in the market with similar ratings, interest rates, maturities, etc. The mutual fund’s price per share (NAV) is then rounded to the fourth decimal place (i.e. $1.0000). Importantly, the Shadow NAV is not the price at which a money market fund sells or redeems shares.
Shareholder: An investor owning shares in a mutual fund.
Sharpe Ratio: The Sharpe Ratio is calculated by dividing a fund’s annualized excess return by the fund’s annualized standard deviation. The higher the Sharpe Ratio, the better the fund’s historical risk adjusted performance.
Small Cap: Companies with smaller capitalizations (usually under $650 million in total stock value). Small cap mutual funds invest in small cap companies that often have higher risk but also greater potential for capital gains.
Standard Deviation: Standard deviation is a statistical measurement of dispersion about an average which depicts how widely the returns varied over a certain period of time. The higher the standard deviation, the greater the volatility.
Special Purpose Bank: According to the Investment Company Institute, some have suggested that money market funds be required to either float their NAVs or become special purpose banks with capital requirements and deposit insurance.
Spread Weighted-Asset Maturity (Spread WAM): New calculation described by mutual fund industry's Working Group whereby funds calculate a WAM using only a security's stated (or legal) final maturity date or the date on which the fund may demand payment of principal and interest. Not to exceed 120 days.
Stable Net Asset Value (stable NAV): Government and retail money market funds seek to maintain a stable NAV of $1.00 per share. Under the 2014 amendments to Rule 2a-7, government and retail money market funds will continue to be able to transact at a stable NAV of $1.00 per share and to use amortized cost to value their portfolio securities.
Standard & Poor's (S&P's) Credit Ratings: Obtained after S&P evaluates a number of factors, including credit quality, market price exposure and management. Credit Ratings are subject to change and do not remove market risk.
Stock: A share of ownership or equity in a corporation.
Structured Investment Vehicle (SIV): A limited-purpose operating company that undertakes arbitrage activities by purchasing mostly highly rated medium- and long-term, fixed-income assets and funding itself with cheaper, mostly short-term, highly rated CP and MTNs.
Tactical Asset Allocation Strategies: A series of long-short strategies that are combined with the intelligent core to achieve the fund’s desired asset allocations. They are designed to be the primary source of alpha generation and are implemented primarily through derivatives.
Taxable Equivalent 30-day Yields: In calculating these yields, the 30-day SEC yield is divided by the applicable tax rate (1-applicable tax rate). The maximum federal tax rate is used when calculating the 30-day taxable equivalent for the national municipal funds. When calculating for the state-specific municipal funds, the maximum tax effective federal and state taxes [1-(maximum tax effective federal and state)] are used as the divisor. Federal Tax Rates are based on the 2003 rates as stated in the Jobs and Growth and Tax Relief Reconciliation Act of 2003. State Tax Rates are based on the most current rates released at the time of printing.
Term Asset-Backed Securities Loan Facility (TALF): A Federal Reserve credit facility authorized under section 13(3) of the Federal Reserve Act. The TALF is intended to assist the credit markets in accommodating the credit needs of consumers and small businesses by facilitating the issuance of asset-backed securities and improving the market conditions for asset-backed securities more generally.
Time Deposit: An interest-bearing deposit, at a savings institution, that has a specific maturity.
Total New Assets: The amount of assets in a fund remaining after meeting all the liability obligations of the fund.
Total Return: Represents the change in the value of an investment after reinvesting all income and capital gains.
Transactional Net Asset Value (NAV): The price at which a money market fund sells and redeems shares. For government or retail prime and municipal money market funds, the funds seek to maintain a stable transactional NAV of $1.00 by valuing the portfolio at amortized cost. For institutional prime and municipal money market funds, which may have floating NAVs, it is calculated by valuing all securities with maturities of 60 days or less at their amortized cost (when available) and valuing all other securities at matrix or other value obtained from a pricing service, rounded to the fourth decimal place (i.e. with an initial NAV of $1.0000). Transactional NAVs on institutional municipal and prime money market funds will fluctuate.
Transfer Agent: Organization that is employed by a mutual fund to prepare and maintain records relating to the accounts of its shareholders. Federated Hermes' transfer agent is Boston Financial Data Services.
Treasury Bill (T-bill): A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million and commonly have maturities of one month, three months or six months.
Treasury Bond: Government security with a maturity date of 10 years or more from the date of issue.
Treasury Money Market Fund: A money market fund that invests in cash, U.S. Treasury securities or repurchase agreements collateralized by U.S. Treasury securities. Because a Treasury money market fund will qualify as a government money market fund, it is eligible to price and transact using a stable $1.00 NAV and is not subject to liquidity fees and redemption gates.
Treasury Note: Government security with maturity date of one to 10 years, issued at face value and redeemed at face value.
Troubled Asset Relief Program (TARP): A voluntary Capital Purchase Program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. Under the program, the Treasury will purchase up to $250 billion of senior preferred shares on standardized terms as described in the program's term sheet.
Undistributed Net Investment Income: Undistributed Net Investment Income (“UNII”) figure represents the trailing 3-month average of the fund’s month-end undistributed net investment income per share determined according to Generally Accepted Accounting Principles.
Unexplained: Represents the difference between the sum of the estimated portfolio contributions shown on the report and the official fund return.
Unsubsidized Yield: Reflects the 30-day yield if the investment advisor were not waiving all or part of its fee or reimbursing the fund for part of its expenses. Total return would have also been lower in the absence of these temporary reimbursements or waivers.
Upside/Downside: The up and down market capture is a measure of how well a manager was able to replicate or improve on periods of positive benchmark returns and how badly the manager was affected by periods of negative benchmark returns. The up-market capture ratio is a measure of a manager’s performance in up markets relative to the index during the same period. For example, a ratio value of 115 indicates that the manager has outperformed the market index by 15% in periods when the index has risen. The down-market capture ratio is the direct opposite of the up-market capture ration, gauging performance of the manager relative to the index in down markets. A ratio value of 80 would indicate the manager had declined on 80% as much as the declining overall market, indicating relative outperformance.
Variable Annuity: An investment contract sold by an insurance company. Capital is accumulated often through investments in mutual fund clones (called variable funds) and converted to a tax-deferred income stream later, often at an investor's retirement. A variable fund offers a guaranteed death benefit.
Variable Rate Demand Note (VRDN): A debt instrument that represents borrowed funds that are payable on demand and accrue interest based on a prevailing money market rate, such as the prime rates. The interest rate applicable to the borrowed funds is specified from the outset of the debt and is typically equal to the specified money market rate plus an extra margin. Also referred to as a variable rate demand obligation (VRDO).
Weekly Liquid Assets: Assets that include (i) cash; (ii) direct obligations of the U.S. Government; (iii) government securities issued by a person controlled or supervised by and acting as an instrumentality of the government of the U.S. pursuant to authority granted by the Congress of the U.S., that are issued at a discount to the principal amount to be repaid at maturity and have a remaining maturity of 60 days or less; and (iv) securities that will mature or are subject to a demand feature that is exercisable and payable within five business days; and (v) amounts receivable and due unconditionally within five business days on pending sales of portfolio securities.
Weighted Average Bond Price: calculated by weighting the price of each bond by its relative size in the portfolio. This number reveals if the manager favors bonds selling at prices above or below face value (discount or premium securities, respectively). A higher number indicates a bias toward premiums. This statistic is expressed as a percentage of par (face) value.
Weighted Average Carbon Intensity (WACI) : Calculates the portfolio’s exposure to carbon-intensive companies, expressed in tons CO2/$M revenue. WACI is the summation of the current value of the investment divided by the current portfolio value multiplied by the sum of the issuer’s scope 1 and scope 2 greenhouse gas emissions divided by the issuers revenue.
Weighted Average Coupon: This figure is calculated by weighting each bond's coupon by its relative size in the portfolio. This figure indicates whether the portfolio has more high- or low-coupon bonds.
Weighted Average EPS Growth–Next 5 Years: The estimated weighted average annual growth rate of fiscal year earnings per share for the next five years for a given corporation.
Weighted Average Effective Duration: (Sometimes called "Option-Adjusted Duration") is a measure of a security's price sensitivity to changes in interest rates calculated using a model that recognizes that the probability of a bond being called or remaining outstanding until maturity may vary if market interest rates change, and that makes adjustments based on a bond's embedded options (e.g., call rights, or in the case of a mortgage-backed security, the probability that homeowners will prepay their mortgages), if any, based on the probability that the options will be exercised. A fund’s weighted average effective duration will equal the market value weighted average of each bond's effective duration in the fund's portfolio. As with any model, several assumptions are made so the weighted average effective duration of a fund in the Federated Hermes family of funds may not be comparable to other funds outside of the Federated Hermes family of funds. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.
Weighted Average Effective Maturity: Is the average time to maturity of debt securities held in the fund.
Weighted Average Life (WAL): WAL, as it applies to fluctuating funds, is defined as the average time a dollar of principal is outstanding at an assumed prepayment rate.
Weighted Average Life (WAL): WAL, as it applies to money market funds, is calculated in the same manner as the Weighted Average Maturity (WAM), but is based solely on the periods of time remaining until the securities held in the fund's portfolio (a) are scheduled to be repaid or (b) would be repaid upon a demand by the fund without reference to when interest rates of securities within the fund are scheduled to be readjusted.
Weighted Average Market Capitalization: Is calculated as the average market capitalization of the stocks within the portfolio, weighted by the amount of each stock owned.
Weighted Average Maturity (WAM): For money market funds, Weighted Average Maturity (WAM) is the mean average of the periods of time remaining until the securities held in the fund's portfolio (a) are scheduled to be repaid, (b) would be repaid upon a demand by the fund or (c) are scheduled to have their interest rate readjusted to reflect current market rates. Securities with adjustable rates payable upon demand are treated as maturing on the earlier of the two dates if their scheduled maturity is 397 days or less, and the later of the two dates if their scheduled maturity is more than 397 days. The mean is weighted based on the percentage of the amortized cost of the portfolio invested in each period.
For fluctuating net asset value funds, average maturity is equal to the effective term of each portfolio security, multiplied by each such security's market value, divided by the total market value of the fund. The effective term of a portfolio security is the period remaining until such security's stated maturity date; except that variable rate securities, floating rates securities subject to demand features, securities being hedged with futures contracts, mortgage backed securities, asset backed securities and securities subject to redemption at the option of the issuer on a particular date may be deemed to mature prior to the stated maturity date.
Weighted Average Modified Duration: (Sometimes called "Weighted Average Duration" or "Duration to Worst") is a measure of a security's price sensitivity to changes in interest rates calculated by assuming that a callable bond will be redeemed on the appropriate call date if the bond is priced to a call date or at maturity if priced to maturity. A fund's weighted average duration will equal the market value weighted average of each bond's weighted average duration in the fund's portfolio. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.
Weighted Average P/CF: Is calculated by first determining the price-to-cash flow ratio (current price divided by the trailing 12-month cash flow per share) for each stock in a fund’s portfolio and then taking the weighted average of those ratios.
Weighted Average P/E (NTM - Next Twelve Months): Is an average comparing share price to earnings per share with values greater than 75 are capped at 75 and excludes negatives.
Weighted Average Stated Maturity: For fluctuating net asset value funds, the stated term or maturity of each portfolio security, multiplied by each such security's market value, divided by the total market value of the fund. The stated term or maturity of a portfolio security is the period remaining until such security's stated maturity date, determined without taking into account the ability of a security to be called at the option of the issuer and by taking into account the ability to put the security at the option of the holder.
Weighted Average Yield to Worst: Is an average of the lowest potential yield that can be received on a bond without the issuer actually defaulting. The yield to worst is calculated by making worst-case scenario assumptions on the issue by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer.
Weighted Average YTM: This figure is calculated by weighting each bond's yield to maturity by its relative size in the portfolio.
Weighted Median Dividend Yield: A weighted average of the dividends of all the stocks in a portfolio.
Weighted Median Market Capitalization: Is the calculation representing the median market capitalization of the stocks in the portfolio, weighted by the amount of each stock.
Weighted Median P/E Last Fiscal Year (LFY): In calculating this, individual holdings with values greater than 60 are capped at 60 in accordance with Morningstar's methodology for calculating "Weighted Median P/E".
Weighted Median P/E Last Fiscal Year (LFY) for Federated Hermes MDT funds: The P/E is found by calculating the weighted median E/P, then taking its reciprocal. With this methodology, the calculation is not distorted by negative or very low earnings.
Weighted Median P/E (LTM - Latest Twelve Months): Is a ratio comparing share price to earnings per share using data from the previous twelve months.
Weighted Median P/E Latest Twelve Months (LTM) for Federated Hermes MDT funds: The P/E is found by calculating the weighted median E/P, then taking its reciprocal. With this methodology, the calculation is not distorted by negative or very low earnings.
Weighted Median P/E (NTM - Next Twelve Months): Is a ratio comparing share price to earnings per share using estimated data for the next twelve months.
Weighted Median P/E Next Twelve Months (NTM) for Federated Hermes MDT funds: The P/E is found by calculating the weighted median E/P, then taking its reciprocal. With this methodology, the calculation is not distorted by negative or very low earnings.
Weighted Median Price/Book: Is a ratio comparing share price to book value or assets minus liabilities.
Weighted Median Price/Book for Federated Hermes MDT funds: The P/B is found by calculating the weighted median B/P, then taking its reciprocal. With this methodology, the calculation is not distorted by negative or very low book values.
Wire Transfer: Electronic transfer of money. Money is moved by debiting and crediting accounts maintained in the Federal Reserves by member banks into customer's accounts.
Yield: Return on an investor's capital investment.
Yield to Maturity (YTM): Used to determine the rate of return an investor would receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield and the time between interest payments.
Yield to Worst (YTW): On a corporate bond, the yield to worst is the lowest yield that a buyer can expect among the reasonable alternatives, such as yield to maturity, yield to call, and yield to refunding.