Consulting Services

For institutional investors

For institutional investors

Performance and risk analysis
Selecting the right investment manager is a daunting task requiring not only mastering the complexities in performance measurement, attribution and evaluation, but also an in-depth knowledge of the investment manager’s processes and strategy and a strong understanding of the workings of the financial markets.

 

My background in product management, manager selection and evaluation and vast board room experience with both domestic and international asset managers and fund companies combined with my professional training as Chartered Financial Analyst (CFA), Chartered Alternative Investment Analyst (CAIA) and Certificant in Investment Performance Measurement (CIPM) enables me to perform state-of-the-art performance attribution analyses and help guide institutional investors in the manager selection choices.

 

The ongoing monitoring process and the decision to retain or change a previously chosen manager is equally challenging. The consequences of keeping an underperforming manager on future returns and risk can be quite substantial. But distinguishing between a skilled manager who is temporarily out of luck and an unskilled manager who had a lucky quarter is not as easy as it sounds. An ongoing attribution of the manager’s performance, investment style and risk profile compared with a suitable benchmark, can however provide more clarity and enable the investor to ask the right questions before a decision is made.

 

The risks assumed to create returns deserves as much attention as performance. Unfortunately many investors tend to overlook the risks, at least while things are looking positive. But although it might be the returns that feed you, the risks can kill you. Accordingly any kind of thorough analysis of manager performance should include an analysis of the risks assumed to create the returns, risk-adjusted performance figures, and preferably a number of stress tests on the portfolio to get a better understanding of the risks going forward.

 

The performance attribution and risk reports from Jensen Capital Management can be produced at monthly, quarterly and annual frequencies depending on your needs and specifications.

Performance attribution report

  • Break-down of performance in portfolio segments depending on the asset class and strategy (e.g. geography, sector, credit quality, duration).
  • Sub-period return break-downs for portfolio, benchmark and active returns.
  • Average holdings in the portfolio and active weights relative to benchmark.
  • Performance attribution using state-of-the-art factor based models to identify sources of return differentials, with drill-downs to individual position level where relevant.
  • Analysis of active management including calculation of active share and risk-adjusted performance figures.
  • Simple and transparent explanations, conclusions and action points.
Risk report

  • Break-down of absolute and relative portfolio holdings and active weights in segments depending on the asset class and strategy (e.g. geography, sector, credit quality, duration).
  • Calculation of Value-at-Risk and Conditional Value-at-risk using specified horizons and confidence levels.
  • Decomposition of VaR- and CVaR-contributions on segment and position levels.
  • Calculation of Return on VaR risk-adjusted performance – absolute and relative to benchmark.
  • Stress testing of the portfolio across a number of historical stress scenarios.
  • Stress testing of the portfolio across a number of market scenarios.
  • Simple and transparent explanations, conclusions and action points.
Full report

  • Break-down of performance in portfolio segments depending on the asset class and strategy (e.g. geography, sector, credit quality, duration).
  • Sub-period return break-downs for portfolio, benchmark and active returns.
  • Average holdings in the portfolio and active weights relative to benchmark.
  • Performance attribution using state-of-the-art factor based models to identify sources of return differentials, with drill-downs to individual position level where relevant.
  • Analysis of active management including calculation of active share and risk-adjusted performance figures.
  • Break-down of absolute and relative portfolio holdings and active weights in segments depending on the asset class and strategy (e.g. geography, sector, credit quality, duration).
  • Calculation of Value-at-Risk and Conditional Value-at-risk using specified horizons and confidence levels.
  • Decomposition of VaR- and CVaR-contributions on segment and position levels.
  • Calculation of Return on VaR risk-adjusted performance – absolute and relative to benchmark.
  • Stress testing of the portfolio across a number of historical stress scenarios.
  • Stress testing of the portfolio across a number of market scenarios.
  • Simple and transparent explanations, conclusions and action points.

Sample reports can be viewed through the link here.

 

If you would like to learn more about Jensen Capital Consulting and how we can assist you in your performance and risk monitoring please contact us using this link.

 

Development and review of investment policies
Developing a set of proper and robust investment policies is key for achieving long-term risk-adjusted performance, and forms the overall framework for strategic asset allocation, manager selection and performance evaluation.

 

The investment policy serves several purposes. First of all it should express the investor’s attitudes towards a number of key issues such as the goals and objectives for the mandate and constraints such as the risk tolerance, income requirements and time horizon of the investor. Secondly it should act as a long-term strategic planning tool, defining the specific goals the manager is expected to meet, and the frame within which the realization of those goals are to be achieved.

 

Written properly the investment policy should impose a sense of discipline and direction, which can be monitored and evaluated in regular performance attributions and reviews. It should help identify the key strengths and weaknesses of the investment program by decomposing the investment results into identifiable and measurable decisions, focusing attention on any poorly performing elements.

 

Jensen Capital Consulting assists institutions in developing, reviewing and maintaining investment policies and is often able to provide a critical independent perspective on key decisions and parameters.

 

Manager reviews
Through the use of our performance attribution and risk analysis framework we assist investors in reviewing and evaluating manager performance. Our reports provide clear and concise analysis, transparent conclusions and action points, enabling clients to conduct more precise and efficient manager reviews. Where required we also engage directly with managers as an advisor to the investor in the review process. You can read more about the performance attribution and risk analysis reports here.

 

Manager selection services
Through an extensive network within the international asset management industry and frequent meetings with institutional investors and asset managers. We can assist institutions who lack in-house manager selection expertise with finding suitable external asset managers.

Our services range from assisting the institution in formulating the mandate and selection criteria and developing the request for proposals from potential managers, to quantitative and qualitative evaluations and final recommendations of individual managers.

We operate completely independently from asset managers, do not offer asset management services ourselves, and can accordingly provide guidance and advise without any conflicting interests.

If you would like to know more about our manager selection services please contact us using this link.

MADS JENSEN

  • "Distinguishing between luck and skill in financial markets requires thorough analysis."

  • "Independent and strong corporate governance is the investor's best risk management tool."

  • "Working in the financial industry must be a continuous learning process."