The language of allocation, plainly.
Terms an allocator or manager meets when evaluating strategies, structuring an allocation and reading a report — defined without the marketing.
Managed account
An investment account held in the client’s own name at a custodian, with a manager granted discretion to trade it. The client retains ownership of the underlying assets.
Commingled fund
A pooled vehicle in which many investors’ capital is invested together. Investors own shares of the fund, not the underlying positions.
Separately managed account (SMA)
A managed account operated to a specific strategy for a single client, allowing customization and position-level transparency.
Qualified custodian
A regulated bank or broker-dealer that holds client assets. An adviser using one does not take custody of client funds or securities.
Fund formation
The legal and operational work of creating an investment vehicle — entity setup, offering documents, service-provider appointments and regulatory filings.
Quantitative diligence
Evaluation of a manager using measurable data — returns, volatility, drawdown, correlation, exposure and portfolio characteristics.
Qualitative diligence
Evaluation of the manager rather than the numbers — investment process, decision discipline, communication and how the thesis evolves.
Track record
The historical performance of a strategy. A live track record is produced by an operating account rather than reconstructed after the fact.
Attribution
The breakdown of a strategy’s return into its sources — which positions, sectors or decisions produced the result.
Operational diligence
Review of the non-investment machinery around a strategy: trading, reconciliation, valuation, compliance and service providers.
Correlation
The degree to which two strategies move together. Low correlation is what makes an addition diversifying rather than duplicative.
Drawdown
The decline from a strategy’s peak value to its trough, and the standard measure of downside experience.
Volatility
The dispersion of a strategy’s returns, commonly used as a proxy for risk.
Sharpe ratio
Return earned per unit of volatility, above the risk-free rate — a measure of risk-adjusted efficiency.
Position sizing
How much capital a manager commits to a single idea. Sizing discipline often matters more to outcomes than selection.
Risk controls
Account-level limits — exposure caps, concentration limits, instrument restrictions — applied to a strategy as it is implemented.
Allocator
The party deploying capital — a family office, private client, endowment, foundation or institutional program.
Portfolio manager
The party operating an investment strategy and making the investment decisions within it.
Performance fee
A fee paid on gains earned by a strategy, typically calculated against a high-water mark.
High-water mark
The highest value an account has previously reached. Performance fees accrue only on gains above it, preventing repeat fees on recovered losses.
Lockup
A period during which invested capital cannot be withdrawn — a common feature of commingled funds and a common constraint for allocators.
Subscription cycle
The scheduled dates on which a fund accepts new capital, as opposed to funding an account when the decision is made.
Qualified client
An investor meeting regulatory thresholds that permit an adviser to charge performance-based compensation.
Form ADV
The disclosure document an SEC-registered investment adviser files, describing its business, fees, conflicts and disciplinary history.
A term we should add?
The glossary grows with the questions allocators and managers actually ask us.