Risks
We consider it a strong declaration of confidence when investors entrust their investments to us. Therefore one of our most important tasks is to monitor the market-related and internal operational risks that may occur in connection with the operations of a mutual fund. It requires a disciplined and structure approach to risks. Investors should be aware that investing in a Jyske Invest International fund will always entail issuer, liquidity and counterparty risks as well as risks associated with investments decisions and the operations of the mutual fund. In connection with each fund, you can read more about the risks that are specific to the fund in question. All the risks mentioned above may affect the value of the investments and are described in detail under risk factors.
Our risk manager bears a heavy responsibility
We have appointed a risk manager who holds the overall responsibility for the risk management in the entire Jyske Invest organisation. His job is to identify, assess, monitor and report risks so we all the time are aware of and can handle as many risks as possible. He is also responsible for ensuring that our calculation principles and models take known risks into consideration.
Moreover, risk assessments form a natural element in the portfolio managers' investment decisions.
Market risk monitoring
Mutual funds as well as private investors assume market risks when they invest. Our risk monitoring helps us to avoid that the return of the individual portfolios deviate to an undesirable extent from the market return.
Portfolios
We work with risk models in respect of portfolios and individual securities. In respect of portfolios, we use Bloomberg PORT+ on our risk measurement, scenario analyses and detailed insight into the relationship between risk and return in our portfolios. We also use Bloomberg PORT+ to break down our return on individual components so we subsequently know which securities generated a loss or a gain.
Individual securities
1. Equities
In respect of equities, we have developed models that assess the individual share based on its stability and diversification effect on the entire portfolio. By focusing on risk at both portfolio and share level, we ensure that risk management is an integral part of our equity investment process.
2. Bonds
We calculate traditional risk ratios – such as yield to maturity and duration and its sensitivity to interest-rate changes – for all bonds that our funds invest in.
Our efforts to assess and prevent risks also apply to other instruments.
Operational risk monitoring
When people are involved in solving a task, there is, of course, always the risk of human error. We focus on minimising the risk of human error in all our processes.
Daily checks of exposure limits
Each morning we check, by means of our management system, the holdings of all our portfolios to ensure that we comply with the risk exposure of each fund and the current, relevant legislation.
When we trade
Investment decisions are generally made jointly by the Equity Group, the Bond Group and the Allocation Group. In this way, we try to minimise the risk of each individual portfolio manager making an error of judgment.
Our portfolio managers are authorised to make transactions on behalf of Jyske Invest’s funds. In respect of the bond funds, the portfolio manager sends a message about a specific transaction to the operations specialist of the fund, who will ensure that the transaction keeps within the defined exposure limits and meets the legal requirements. Not until then will the transaction be carried out and recorded. In respect of the equity funds, the portfolio manager will typically prepare a model portfolio, which the fund’s operations specialist will check and translate into practice.
Once we have completed a transaction with securities, we receive a statement from Jyske Bank, our custodian bank. We check that the statement agrees with the records in our system. In this way, we avoid that transactions are executed that have not been subject to our control procedures. Moreover, twice a month, we check that our custody account with securities at Jyske Bank agrees with our records.
We learn all the time from our errors
Twice a year, we prepare a statement listing the material errors and transgressions that we have registered over the preceding six months. This statement is used to improve and predict errors as well as to optimise our processes so we avoid making the same errors again. The statement forms the basis of a report to the Supervisory Board of Jyske Invest.
We focus on automation
We strive all the time to automate our processes to limit the human factor. And the more we automate, the bigger the need to have efficient disaster recovery plans in connection with our IT operations. Our disaster recovery plans will, for instance, ensure that another server takes over so that we will quickly be up and running again after any technical breakdown.
External supervision
Being a mutual fund, we are subject to supervision by the Danish Financial Supervisory Authority. The FSA ensures that we comply with the legislation in respect of investment policy, risk profile, exposure limits, placement limits, rules on instruments, bookkeeping, accounting, net asset value, publication of prospectuses and approval of articles of association. The FSA carries out its supervisory duties by requesting us to submit documents and statements as well as through inspection visits to Jyske Invest.
Moreover, our independent auditors call on us several times a year. The auditors, who are appointed by the members in Annual General Meeting, perform the statutory audit of our annual reports and review our half-year interim reports. At the statutory audit, they review our internal control procedures and perform an IT audit, tax audit, etc.