This guide shows how Venn can help investors accelerate the overall manager evaluation process by providing analytics that assess whether a manager seems to be in line with its stated objective and style and how a manager can potentially fit in their portfolio.

Manager selection is a highly important aspect of any institutional investment program. The process can be complex and lengthy, as investors navigate various exercises, from sourcing to due diligence to hiring decisions.

Vital qualitative aspects of the selection process, such as gaining a deep understanding of a management team and their strategy, rightfully require considerable time and effort. However, Venn can help investors accelerate the overall process by providing tools to assess:

  • Whether a manager seems to be in line with its stated objective and style
  • A manager’s potential fit in an investor’s portfolio

The Venn tearsheet is a dynamic, polished view of any investment return stream. Upload an investment’s returns onto Venn and promptly evaluate its historical performance, factor-driven risk and return breakdown, and potential impact on your portfolio.

Let’s walk through some of the tearsheet’s main outputs.

First on display are common performance metrics, such as return, volatility, and Sharpe ratio, to help you quickly understand if the investment meets your return and risk expectations.

Exhibit 1: Performance Summary Section of Venn Tearsheet

Source: Venn Tearsheet. April 2019.

Source: Venn Tearsheet. April 2019.

Next, better understand the drivers of risk and return in the investment using factor-based analysis. Venn’s Two Sigma Factor Lens1 can determine the investment’s risk factor exposures, which are then used to compute risk and return attribution.2 This information can help investors quickly identify gaps between their understanding of the investment’s strategy and the empirical analysis of past returns. Additionally, the trend view of factor exposures can uncover style drift exhibited by the manager over time.

Exhibit 2: Factor Analysis Section of Venn Tearsheet

Source: Venn Tearsheet. April 2019.

Source: Venn Tearsheet. April 2019.

As a next step, you can evaluate the investment’s potential impact on your portfolio. The Correlation section allows you to view the absolute, relative-to-benchmark, or residualized return correlations to the investments in your existing portfolio, providing a sense of how much diversification benefit this new investment can potentially offer.

Exhibit 3: Correlation Analysis Section of Venn Tearsheet

Source: Venn Tearsheet. April 2019.

Source: Venn Tearsheet. April 2019.

Using Venn, you can efficiently filter out investments that carry unwanted risk concentrations or lack diversification benefits, allowing you to focus your time on the investments that have the best chance of enhancing your portfolio.


1 Two Sigma’s paper, “Introducing the Two Sigma Factor Lens,” highlights certain aspects of factor definition and construction of the Two Sigma Factor Lens.
2 Risk factor exposures can be determined over any time frame during the overlapping period between the investment return history and the Two Sigma Factor Lens return history. As of the date of this blog post, the history of returns of the factors in the Two Sigma Factor Lens extends to December 2002.

This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Any statements regarding planned or future development efforts for our existing or new products or services are not intended to be a promise or guarantee of future availability of products, services, or features.  Such statements merely reflect our current plans.  They are not intended to indicate when or how particular features will be offered or at what price.  These planned or future development efforts may change without notice. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.

This article may include discussion of investing in virtual currencies. You should be aware that virtual currencies can have unique characteristics from other securities, securities transactions and financial transactions. Virtual currencies prices may be volatile, they may be difficult to price and their liquidity may be dispersed. Virtual currencies may be subject to certain cybersecurity and technology risks. Various intermediaries in the virtual currency markets may be unregulated, and the general regulatory landscape for virtual currencies is uncertain. The identity of virtual currency market participants may be opaque, which may increase the risk of market manipulation and fraud. Fees involved in trading virtual currencies may vary.

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