Your browser has disabled java script.
This page is optimized to work with java script. Some elements of these pages may not appear or work properly.

The purchase of a controlling interest in a corporation, or portion thereof, in order to take over assets and/or operations.

Active Commitments
An investment that has not reached the end of its legal term.

Active Management
An investment management approach with the objective of attaining excess risk-adjusted return versus the benchmark as a result of structuring a portfolio differently from the benchmark.

A person who statistically calculates risks, premiums, life expectancies, etc.

Actuarial Valuation
To ensure that benefits provided are fully funded and to determine employer contribution rates, annual valuations are completed. Actuaries use each employer's schedule of benefits, membership data, and a set of actuarial assumptions (i.e., life expectancy, inflation rates, etc.) to estimate the cost of benefits. Costs are allocated to the fiscal years within the employee's career.

Anything owned that has value and is measurable in terms of money.

Asset Backed Securities
A security backed by notes or receivables against assets other than real estate. For example, assets such as loans, leases, credit cards, royalites, etc.

Asset Classes
Categories of investments that share certain characteristics and exhibit similar patterns of return.
The performance objective or standard represented by a model portfolio used to define the return against which another portfolio is to be evaluated.

A person eligible to receive funds/payments from a retirement account to which they belong.
Capital Commitment
A Limited Partner's obligation to provide a certain amount of capital to a private equity fund for investments.

Capital Deployment
The portion of capital committed to a fund that is drawn down over time as the General Partner selects investments that meet the fund's investment mandate.

Carried Interest
A bonus entitlement accruing to an investment fund's management company. Carried interest (typically up to 20 percent of the profits) becomes payable once the investors have achieved repayment of their original investment in the fund, plus a defined hurdle rate.

Cash Equivalents
Highly liquid, very safe investments that can be easily converted into cash, such as Treasury Bills and money-market funds.

Cash In
The total capital contributed to the fund by the WSIB for the purpose of making investments and paying for the fund's expenses and management fees.

Cash Out
The total proceeds distributed by the fund to the WSIB which may include both return of capital and gain distributions.

Commercial Mortgage Backed Security. Similar to a mortgage backed security, but secured by loans with commercial property instead of residential property.

Collateralized Mortgage Obligation. A mortgage-backed, investment-grade bond that separates mortgage pools into different maturity classes and have a fixed maturity. They can eliminate risks associated with pre-payment because of the division into maturity classes that are paid off in order. As a result they yield less than other mortgage-backed securities.

Commingled Trust Fund (CTF)
An investment fund in which the manager pools the assets of several accounts to permit more efficient management and to reduce administrative costs.

An investment process that is not either growth oriented or value oriented but that buys securities that have characteristics of both growth and value.
Defined Benefit Plan
A pension plan that promises to pay a specified amount to each person who retires, generally based upon a formula combination of years of service, age at retirement, and salary history. This differs from a defined contribution plan in which benefits are determined not by a formula, but solely by the amount of contributions to an account plus interest earnings.

Defined Contribution Plan (DCP)
A pension plan in which the retirement benefit is based solely on the amount contributed to an individual account plus net investment earnings. The employee bears the investment risk, as there is no guaranteed rate of return and the value of the member's account will increase or decrease based on fluctuations in the market.

Direct Investment
Directly investing in an operating company, rather than investing through a partnership or fund vehicle.

Distressed Entities
The investment of equity or debt capital into an entity with various degrees of management assistance to help fix the underlying problems of the company.

A strategy of reducing exposure to risk by combining a variety of investments among different asset classes, which are unlikely to move in the same direction.

When investors commit themselves to back a private equity fund, all the funding may not be needed at once. Therefore, remaining capital is drawn down at a later date.
Efficient Market Theory
The hypothesis that prices of securities fully reflect all available information.

Emerging Markets
Investment markets in countries which are not fully developed and where there is a higher risk of default.

The Employee Retirement Income Security Act of 1974 is a federal law that regulates private retirement plans and specifies certain criteria that public plans must meet in order not to be subject to the bulk of the ERISa provisions. ERISA requires plan administrators to have fiduciary responsibility and operate under the prudent expert standard.

Ex-officio Member
A member by virtue of office or position.

Expansion Capital
The investment in established companies looking to enter new markets or expand operations.
An individual, corporation, or association holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of the other party.

Fiduciary Trust or Responsibility
The power entrusted to a person or entity (fiduciary) to manage money or property for another person. Fiduciary responsibility requires that actions taken on behalf of the principal will be beneficial to the principal's interests.

Fiscal Year
The WSIB operates on a fiscal year calendar, which is July 1 to June 30 each year.

Fixed Income
Securities representing debt obligations and usually having fixed payments and maturities. Different types of fixed income securities include government and corporate bonds, mortgage-backed securities, asset-backed securities, convertible issues, and may also include money-market instruments.
General partner
The managing partner in a private equity management company who has unlimited personal liability for the debts and obligations of the limited partnership and the right to participate in its management. The general partner is the intermediary between investors with capital and businesses seeking capital to grow.

A style of equity investing that focuses on the growth potential of the company.

Guaranteed Education Tuition Program (GET)
An investment program that allows participants to pre-purchase tuition fee credits at present rates for future use by themselves or other family members.

Guaranteed Investment Contract (GIC)
In this title, unless the context otherwise requires, "guaranteed investment contract" means any unallocated group contract, investment contract, funding agreement, guaranteed interest contract, or other similar instrument by whatever name in which an insurance company agrees to guarantee a fixed or variable rate of interest or a future payment that is based on an index or any other similar criteria, that is payable at a predetermined date on monies that are deposited with the insurance company and that is not dependent on the continuance of human life.
That which cannot easily be converted into cash, such as real estate, collectibles, thinly traded securities, and any investments that require a long time to mature (such as private equity investments).

A group of securities that represents the universe of available investments in a specific class or subclass of assets.

Internal Rate of Return (IRR)
The dollar-weighted internal rate of return, net of management fees and carried interest generated by WSIB investment in the fund. This return considers the daily timing of all cash flows and WSIB's cumulative fair stated value, as of the end of the reported period.

Institutional Investor
An organization whose primary purpose is to invest its assets or those held in trust by it for others. Includes pension funds, investment companies, universities, and banks.
J-CURVE Effect
In the early years, private equity funds usually show low or negative returns. Over time, companies progress and values increase resulting in unrealized gains above original cost. In the final years, higher valuations are confirmed by the partial or complete sale of companies, resulting in cash flows to the partners. The effect of this timing on the fund's interim returns is known as the J-Curve Effect. In practice, a private equity portfolio involves a series of J-Curves because funds are invested in at different times. However, not all funds will be profitable given the inherent risks of investing in private equity, including macroeconomic factors and the performance of underlying companies.

Judicial Retirement Account (JRA)
The retirement account for judges appointed or elected in Washington state.
L & I
Washington state Department of Labor and Industries.

The Law Enforcement Officers and Firefighters Retirement Fund.

London Interbank Offered Rate (LIBOR)
A daily reference rate based on the interest rates at which banks borrow unsecured funds from other banks in the London wholesale money market (or interbank market). It is roughly comparable to the U.S. Federal funds rate.

Limited Partner
An investor in a Limited Partnership (i.e., private equity fund).

Limited Partnership
Legal structure used by most venture and private equity funds that usually consists of a general partner (the management firm which has unlimited liability) and limited partners (the investors, who have limited liability and are not involved with day-to-day operations). The general partner receives a management fee and a percentage of the profits. The limited partners receive income, capital gains, and tax benefits. Using policies spelled out in a partnership agreement including terms, fees and structures, the general partner manages the partnership.

Measures or describes the ease and time in which assets can be turned into cash without an impact on price.
Management Fee
This represents management fees currently charged (typically on committed capital).

A type of equity financing used in takeovers. It uses preferred shares and convertible securities to make a target firm larger. Financing that combines debt and equity.
The dollar-weighted internal rate of return, net of management fees and carried interest generated by WSIB investment in the fund. This return considers the daily timing of all cash flows and WSIB's cumulative fair stated value, as of the end of the reported period.

Non-voting WSIB Board Members
Members, typically experts in the investment and economics fields, who are appointed by the voting Board members and act in an advisory capacity.
Passive Management
A money management strategy that seeks to match the return and risk characteristics of a market segment or index by mirroring its composition.

This is the Public Employees' Retirement System.

Plan 3s
Refers to the DRS plan 3 offered to TRS, PERS, and SERS.

Full, complete, absolute.

The mix and composition of an investor's holdings among different classes of assets, such as bonds, mortgages, and common stocks.

Private Equity
The infusion of equity capital into a private company (one which is not available on the public markets).

Public equity
Shares that trade on public exchanges or "over-the-counter".
Reciprocal Agreement
An agreement between two public retirement systems on coordination of benefits.

Real Estate Investment Trust - similar to a mutual fund, which invests in real estate loans (mortgages and trust deeds) or has equity interests in real estate.

Real Estate Operating Company. A firm whose primary business is to own, acquire, develop, and manage real properties.

Risk (investment)
The degree of uncertainty and/or the amount of possible loss on an investment.

Risk Pooling
Risk pooling is the process of comibining assets and liabilities across employers to produce large risk sharing pools.
Savings Pool
The savings pool is a diversified portfolio in the DCP made up of guaranteed investment contracts (GICs), bank investment contracts (BICs), and short term cash funds. The primary objective is to preserve principal while earning a rate of return in excess of the current yield of U.S. Treasury securities of similar maturities. It is managed in a manner to facilitate liquidity needs and maintain stability of return.

Self-directed Investment
An investment program in which individual members or participants choose the investment vehicles for their assets, usually from among a set of investment options provided by the trustee.

This is the School Employees' Retirement System.

State Street Bank (SSB)
This is the master custodian for the WSIB investment funds and the administrator of our supplemental savings programs.

Those people or entities who have an interest in the performance of the WSIB, i.e., organizations, state employees, the Legislature, and taxpayers.

Ownership of a corporation represented by shares that are claimed on the corporation's earnings and assets.

Strategic Planning
Long-term planning (at least five to ten years out) that includes consideration of the external environment and future trends.

Total Allocation Portfolio. A diversified investment portfolio in Plan 3 designed for the long-term investor. Assets are invested across five broad asset classes divided between public market securities such as stocks, fixed income, and cash, and private market investments such as real estate and private equity.

Treasury Inflation Protected Securities. A security which is identical to to a treasure bond, except that principal and coupon payments are adjusted to eliminate the effects of inflation.

The Teachers' Retirement System.

Trust Fund
A fund whose assets are managed by trustee or a board of trustees for the benefit of another party or parties. Applicable state and federal law and the instrument establishing the trust govern the fund.

An individual or organization which holds or manages and invests assets for the benefit of another.

TUCS Public Fund Median
Trust Universe Comparison Services Median return of other public funds.
A style of equity investing that focuses on buying undervalued or distressed stocks that the investment manager expects will be more fairly valued at future date.

Venture Capital
Equity financing of early, expansion, and later stage emerging small businesses. Companies grow from start-up to medium-size businesses and are then either sold to the public through an Initial Public Offering or are sold to a strategic or financial buyer.

In financial matters, volatility of returns is the measurement used to define risk. It describes the spread of annual returns from lowest to highest over a particular period. The greater the volatility, the higher the risk.

Voting WSIB Board Members
There are ten voting members on the Board. They include four members who represent various stakeholders in the pension systems, three ex-officio members, and one legislator each from the House and Senate. In September 2002, a tenth voting member was added representing active members of the School Employees' Retirement System.
Site Map | Privacy Notice
Copyright September 2004-2016 Washington State Investment Board All Rights Reserved