This applies only to a Style Benchmark; for Market Benchmarks, it is the same as the standard R2. The Adjusted R2 is based on the Standard R2, but it imposes a penalty for each additional index that is used to build the Style Benchmark.

Adjusted R2 = 1 – ((m - 1) / (m - n)) * (var(e) / var(M))

where:

• var(M) = variance of manager returns   
• var(e) = variance of excess return of manager over benchmark
• n = number of indices used in building the Style Benchmark
• m = number of returns