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The art of asset management

29 February 2024

Navigating the dynamics of asset management is all about finding a way to balance risk and return. This is one of the core capabilities JUMO offers funding and banking partners. Jan Harder, our Head of Asset Management, explains the nuances and how we approach asset management at JUMO to obtain the best results for all ecosystem players.

Strategically, asset management can be divided into two distinct facets: funder-specific allocations, which we carefully calibrate for the desired risk-return mix; and portfolio management, which oversees credit risk and overall portfolio sizes. For us, it’s about maximising the sum of these two parts. The deliberate separation of these two units empowers each one to concentrate on the intricacies of their respective roles, processes and specialised expertise. By deconstructing asset management in this way, JUMO not only enhances efficiency in addressing specific funders’ needs, but also maintains robust governance throughout the entire spectrum of portfolio management.

How it generally works

Asset Management, particularly in the realm of financial asset management, involves the expert management of investment funds and segregated client accounts within the financial services sector. This field can be broadly categorised into active and passive management.

Active asset management is a hands-on approach that requires meticulous planning and continuous oversight by asset managers.

They analyse and manage clients’ assets actively, offering recommendations based on individual financial health. While this approach is more labour-intensive, it provides a personalised strategy, albeit at a higher cost to investors.

On the other hand, passive asset management involves allocating assets to mirror market or sector indices. It is less intensive, less tailored, and comes at a lower cost. This approach requires minimal ongoing management and is suitable for investors seeking a more cost-effective solution.

How it works at JUMO

In the context of JUMO, asset management is an active discipline where decisions regarding the appropriate risk mix for each portfolio are made. Portfolios, defined as combinations of country (or market), partner and product, are carefully crafted to optimise risk and return. The linear lending space, characterised by a consistent pricing structure regardless of risk, necessitates a strategic blend of strong and weaker portfolio sub-segments to offer funders an optimal risk mix.

Our approach to asset management at JUMO lies at the intersections of optimising portfolio size, enhancing returns for all stakeholders, and upholding good governance with transparency. Leveraging JUMO’s advanced AI prediction capabilities, the asset manager allocates sub-segments of a portfolio to each funder on the platform. This allocation decision considers quantitative factors such as target risk, target return, risk rules, and available capital. However, the true art of asset management comes into play when considering broader allocations.

Our two key considerations:

1. Portfolio Outlook: Asset managers at JUMO consider factors not reflected in models, such as changes in the portfolio team’s settings leading to alterations in repayment behaviour. This forward-looking approach ensures a comprehensive understanding of the portfolio’s dynamics.

2. Capital Plan: JUMO’s asset management team meticulously plans the capital allocation, assessing whether over or under-allocation is necessary to optimally utilise available capital. This strategic decision-making ensures efficient capital utilisation while maximising returns.

JUMO’s commitment is to expand its asset management capabilities, aiming to deliver optimal returns to partners and JUMO alike, while growing eligibility for financial services across the African continent. By incorporating both quantitative metrics and the nuanced art of asset management, JUMO is able to navigate the complexities of this dynamic field successfully.

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