UK Stewardship Code Disclosure
Under COBS 2.2 of the FCA Handbook, we are required to make a public disclosure in relation to the nature of our commitment to the above Code, which was published by the Financial Reporting Council (‘FRC’) in July 2010. The Firm acts as Investment Manager and Investment Adviser to a number of Open Ended Investment Companies (OEICS) (including UCITS and Non-UCITS Retail Scheme), Investment Trusts (Alternative Investment Funds) and Segregated Accounts. The Firm complies with the Stewardship Code. The Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practice on engagement with investee companies and is to be applied by firms on a “comply or explain” basis. The FRC recognises that not all parts of the Code will be relevant to all institutional investors and that smaller institutions may judge some of the principles and guidance to be disproportionate. It is of course legitimate for some asset managers not to engage with companies, depending on their investment strategy, and in such cases firms are required to explain why it is not appropriate to comply with a particular principle.
The seven principles of the Code are that institutional investors should:
Publicly disclose their policy on how they will discharge their stewardship responsibilities;
Have and publicly disclose a robust policy on managing conflicts of interest in relation to stewardship;
Monitor their investee companies;
Establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value;
Be willing to act collectively with other investors where appropriate;
Have a clear policy on voting and disclosure of voting activity;
and Report periodically on their stewardship and voting activities.
The Firm’s investment objective is to preserve and grow the real value of the investors’ capital over the long-term. The Firm’s approach combines decisive asset allocation with well-researched investment. Portfolios are constructed without any reference to index benchmarks or investment fashion. Our statement of compliance with the seven principles of the Code is set out below:
1. Policy on discharging stewardship responsibilities
This disclosure sets out how the Firm seeks to discharge its stewardship responsibilities; in particular, it sets out how the Firm monitors the companies in which it has invested in, its strategy on engagement and its policy on the exercise of voting rights on behalf of its clients.
2. Policy on managing conflicts of interest in relation to stewardship
It is the Firm’s policy and duty to act in the best interest of all of its clients. This includes considering matters such as company engagement and voting on shares held on behalf of its clients. Should a conflict of interest arise, the Firm’s senior management would take appropriate steps to ensure fair treatment of all clients, including disclosure of the conflict to the affected clients, if appropriate.
Dealings only take place on behalf of the Firm’s clients and the Firm does not deal in investments on its own accounts.
The possibility of any conflict of interest is seen as low; however the Firm ensures that steps are taken to identify any potential conflicts of interest that may lead to a material risk in the interest of its clients.
The Firm has a Personal Account Dealing Policy that all staff must adhere to when dealing on their own personal accounts. Each deal must be approved by the Investment Directors and the Compliance Officer before they can be actioned. No Investment Directors can authorise their own trades.
3. Monitoring of investee companies
A large proportion of the Investment Team’s time is spent on monitoring investee companies to ensure they remain suitable for the Firm’s portfolios. The process requires the analysis of financial results, an assessment of any changes in capital allocation and an appraisal of management’s financial incentives. Regular meetings with the management of investee companies form a part of this process where discussions can take place about corporate strategy and the use of a company’s resources. The Firm is typically a passive investor and is careful to select companies that have the business strength and corporate governance that does not require the intervention of shareholders. The Firm will, however, seek to influence management when they believe it is in the best interest of shareholders. This can involve meetings with members of the Board and /or the Chairman.
4. Guidelines on escalation
The Firm has a long-term investment horizon and as such takes its responsibilities as a steward of assets seriously. The Firm aims to use meetings with management teams to engage in constructive discussion concerning any issues that arise. Where concerns persist, the Firm will use its proxy voting rights as shareholders, additional meetings (with both management and board members) and more formal written submissions to endeavour to promote further constructive engagement. If the Firm’s concerns are not addressed during this process the Firm will consider the sale of its holding.
5. Acting collectively with other investors
The Firm has felt in the past, and may again feel, that it is appropriate to act collectively with other investors while any discussion with management remains productive. However, it is not compatible with the Firm’s investment objectives to engage in hostile or public disputes with the boards of investee companies. The liquidity of the Firm’s investments prevents this from becoming a necessity.
6. Policy on voting and disclosure of voting activity
The Firm considers proxy voting an important part of its investment process, and as such, seeks to vote on all proxies on behalf of investors in accounts for which it has proxy voting authority. The Firm seeks to always vote in the best interest of clients.
Automatic voting has been set up on line with Proxyedge for voting at EGM/ AGM on various accounts for which the Firm has proxy voting authority.
Voting records can be made available to investors on request from ProxyEdge. It is not the Firm’s policy to disclose publicly its voting records in the same way it is not the Firm’s policy to disclose publicly its holdings (except where required to do so for regulatory purposes).
The Firm has a procedural manual in place to deal with Corporate Actions. Standing instructions have been set up on the different accounts and ad hoc elections can be made by the dealers when advised to do so by the Dealers.
7. Reporting on stewardship and voting activities
The Firm does not believe it is in the investors’ interests to disclose publicly its shareholdings or how it may have exercised its proxy vote. The Firm can provide clients with information on voting, engagement and stewardship activity on request.
For further details on any of the above information, please contact Deepti Balloo, at firstname.lastname@example.org or Tel +44 (0)207 290 4030.