CalPERS

Global Equity Glossary

This Glossary identifies, defines, and clarifies the meaning of investment terms used by CalPERS in our investment policies. The purpose of the Glossary is to establish a uniform vocabulary of terms for users of these policies.

Choose from the letters below to find a specific Global Equity Investment Policy term or phrase. You'll also find information about the related policies and asset classes for each term.

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E


Earnings/Price Ratio - The relationship of earnings per share to current stock price. The stock's trailing 12 months of reported earnings is often used as the earnings per share figure.

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Emerging Equity Market - A market classified by FTSE as an emerging market based on an assessment of World Bank gross national income per capita, as well as factors related to the market and regulatory environment, custody and settlement, trading, development of a derivatives market and size of the country?s stock market. Emerging Equity Markets are distinguished from: (1)Developed Markets which are markets domiciled in high-income countries, as defined by the World Bank, that most investors consider to have a well-developed operating and regulatory structure for its capital markets. These markets are included in the FTSE Benchmark Classification as Developed Markets. (2)Frontier Markets which are markets domiciled in low-income countries, as defined by the World Bank, whose capital market structure and regulatory mechanisms are not developed enough to be included in Emerging Markets. These are markets that are investable but not classified by FTSE as Developed or Emerging Markets. (3)Uninvestable Markets which are those markets that are not classified by FTSE as Developed, Emerging, or Frontier Markets. These markets generally lack a convertible currency and do not allow for investment by non-residents.

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Emerging Hedge Fund-of-Funds - An investment fund which is comprised of hedge funds. A hedge fund is an actively managed portfolio that may utilize long and short positions, derivatives, and leverage. A fund-of-fund allows an investor to invest in more than one hedge fund via a single investment fund rather than having to invest in individual hedge funds separately. The term ?emerging? applies solely at the fund-of-funds level and not to the underlying hedge funds within the fund-of-funds. This definition applies within the context of the MDP Transition Policy and MDP II program.

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Emerging Manager - An external money manager with less than $2 billion in assets under management at the time of initial investment.

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Emerging Manager Fund of Funds - An investment approach where a Manager contracts with multiple emerging investment managers to create one diversified portfolio. Diversification is created by including emerging managers utilizing different investment strategies.

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Enhanced Indexation - An equity-based strategy or synthetic strategy where managers are expected to add consistent alpha above the passive index by controlling tracking error at a level that is below traditional active management. For example, for U.S. large capitalization core equity, the expectation is a return of 1.00% per annum above the benchmark, net of fees, with annual tracking of 2.00%-2.50%.

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Equitize - Combining cash with derivative instruments to produce returns comparable to the equity market.

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Equity Based Strategy - Combination of active stock selection with risk mechanism designed to minimize tracking error relative to the benchmark. Seek to add value through minor variances relative to the market in sector/industry weightings, style (growth/value) tilts or stock weightings. Key inputs into the process come from either analysts' fundamental research or quantitative models.

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Equity Swaps - An agreement between two parties dictating a swap with payments on one or both sides, linked to the performance of equities or an equity index.

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Exchange Traded Fund - An exchange traded fund (ETF) is an investment vehicle that is a hybrid between a stock and a mutual fund. It is built like a mutual fund, being a pool of investment assets such as stocks, bonds, or commodities. Like a stock, however, they are listed on exchanges and traded throughout the day. Most ETF's track an index, though more complex ETF's such as inverse, leveraged, and active ETF's do exist.

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Exchange Traded Fund - An exchange-traded fund (ETF) is an investment company that is legally classified as an open-end company or a Unit Investment Trusts. An ETF is not classified as a mutual fund by the Securities and Exchange Commission because of limited redeemability. A typical ETF is similar to an index fund, and will invest in either all of the securities of a selected index or a representative sample of the securities included in the index. An ETF may be considered to be a derivative instrument as a component of their unit valuation is derived from the underlying value of the investments held by the fund.

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Exposure - The amount of funds invested in a particular type of security, sector, industry, or strategy.

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External Manager - An outside money management firm retained under contract by CalPERS.

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External Manager - An asset management firm retained by CalPERS to manage a portfolio of securities for a fee. The external manager usually has full discretion to manage CalPERS? assets, consistent with investment management guidelines provided by CalPERS and fiduciary responsibility.

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External Partner - An external manager who has executed a letter agreement with CalPERS under our Corporate Governance Co-Investment Strategy. Each letter agreement will be specific to each investment.

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