Under COBS 2.2 of the FCA Handbook, the Firm is required to make a public disclosure in relation to the nature of our commitment to the UK Stewardship Code (the 'Code'), which was published by the Financial Reporting Council ('FRC') in July 2010, amended September 2012 (effective October 2012).
The Code aims to enhance the quality of engagement between institutional investors and listed companies in the UK 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 and obtain an audit opinion on engagement and voting processes.
While the Firm supports the objectives of the Code, it does not currently comply with the Code. This is because the Firm does not directly make investment decisions itself. In its role as Investment Manager the firm delegates this responsibility to Sub-Investment Managers. Some of these Managers are non-UK managers and not captured by the Code and others deal almost exclusively in non-UK investments. Consequently, while the Firm supports the principles of the Code, its activities will be limited to monitoring its delegates' adherence to the principles where appropriate. For full disclosure of the Sub-Investment Managers adherence to the Code, please refer to their individual websites.
Should the Firm's business model changes in such a manner that the provisions of the Code become relevant, the Firm will amend this disclosure accordingly.