Luxembourg Regulatory Disclosures
1. Purpose and scope of the Policy
This complaints handling policy (the “Policy”) aims at implementing an appropriate internal structure and defining the internal responsibilities and instructions for the reception and the handling of complaints, to ensure that they are handled in a manner which is fair, objective, transparent, and truth oriented. The Policy also aims at enabling the identification and mitigation of any possible conflicts of interests.
Information regarding the Policy is made available to Investors free of charge.
2. Complaints handling officer
The Conducting Officer responsible for the Compliance function of Actis EU Management S.à r.l. (the “Company”), will be responsible for the implementation of the Policy in compliance with the applicable regulations. She/He will also be the point of contact for the CSSF.
3. Complaints handling
3.1 Complaint filing
Complaints are expected to be filed in writing to the attention of the Complaints Handling Officer by completing the first three sections of the Group Complaints Form and send it to the following address or e-mail:
Actis EU Management S.à r.l.
Attention: Complaints Handling Officer
1, rue Hildegard von Bingen
Complainants will be able to file complaints in English.
The following information shall be provided to ensure a prompt handling of the complaint:
- Identity and contact details of the complainant;
- Reason of the complaint and the resulting alleged damage or loss in relation thereof;
- Where necessary, copies of any documentation supporting the complaint.
3.2 Complaint reception
The Complaints Handling Officer is in charge of the management of complaints. All complaints, which are not directly addressed to the Complaints Handling Officer, should be forwarded to the Complaints Handling Officer without delay.
3.3 Acknowledgement of receipt
The Complaints Handling Officer must send an acknowledgment of receipt in writing within (10) ten business days of receipt of the complaint, unless the answer itself is provided to the complainant within this period.
Such acknowledgment of receipt should contain the name and contact details of the person in charge and an indication on when the answer to the complaint can be expected. This time indication shall be within one (1) month after the receipt of the complaint.
3.4 Registration and information
All complaints, as well as each measure taken to handle it are properly registered by the Complaints Handling Officer in the complaints register. The complaints register is maintained in electronic format in a folder only accessible by the Complaints Handling Officer, the Senior Management and the Board.
If the Complaints Handling Officer estimates that a complaint may have a material impact (financial and or reputational), the Complaints Handling Officer shall without delay inform the Board, which will decide to inform the CSSF, if appropriate. The answer to the material impact of complaints will be approved by the Board.
The Complaints Handling Officer will share the complaints register on a quarterly basis with the Board, with the mention of problems identified, the corrective measures taken and the follow-up on these measures.
Complaints will be assessed and investigated by a person appointed by the Complaints Handling Officer (this may be a member of the Compliance team or the Compliance Officer), who will investigate the events surrounding the reason for the complaint to identify and address any risks and potential concerns. Actis will seek additional information as necessary when considering the complaint. It is the responsibility of the individual investigating the complaint to ensure that the complaint is handled and settled expeditiously. The designated person should not have been personally involved in the matter.
3.6 Response to the complainant
A clear, concise and exact response must be sent within one (1) month of the receipt of the complaint. If an answer cannot be provided within this time, the Complaints Handling Officer shall inform the complainant of the reasons of the delay and indicate the date on which an answer is likely to be achieved.
Compliance must be kept informed of the progress of Actis’ interaction with the client in relation to the complaint. It is the investigating person’s responsibility to ensure that Compliance is updated.
3.7 Escalation of the complaint
If the complainant did not obtain an answer or a satisfactory answer from the Complaints Handling Officer, it shall be given the opportunity to raise the complaint up to the Senior Management and the Board if necessary, without prejudice to section 5.8 below. In this respect, the Complaints Handling Officer shall indicate to the complainant the means to contact the Board to escalate its complaint.
3.8 Existence of the out-of-court complaint resolution at the CSSF
Where the complaint handling at the level of the Complaints Handling Officer did not result in a satisfactory answer for the complainant, the Complaints Handling Officer shall:
- Provide the complainant with a full explanation of its position as regards to the complaint;
- Inform the complainant, on paper or by way of another durable medium, of the existence of the out-of-court complaint resolution procedure before the CSSF and send a copy of the CSSF Regulation or the reference of the CSSF website;
- Indicate to the complainant the different means to contact the CSSF to file a request; and
- Inform the complainant, on paper or by way of another durable medium, that s/he can file a request with the CSSF and that, in this case, his/her request with the CSSF must be filed with the CSSF within one (1) year after the filing of the initial complaint with the Company.
3.9 Eligible complainant
Complainant are understood to be investors in the Funds Managed by the AIFM.
4. Complaints handling for Branches
In the event that the Company open branches in other EU countries, this Policy will be applicable to those branches.
Potential location for branches could be, but not limited to: France, Germany.
Complementary to the requirement of this Policy the Complaints Handling Officer will also inform the Branch Manager of the related branch of the Complaints. The Branch Manager will provide all necessary supporting documents to the Complaints Handling Officer when needed and in the best time frame possible.
Should any reporting be made to the authorities where the branch is located, the Complaints Handling Officer will ensure to follow the applicable requirements.
A.1 Exercise of voting rights
As an above threshold authorised AIFM, Actis EU Management S.à r.l. (also referred to as the “Company”, the “AIFM”, “us”, “we” and “our”) is subject to rules on the exercise of voting rights as defined in the Section 5.5.10. of the CSSF Circular 18/698, the Article 23 of the CSSF regulation10-04 and Article 37 of Delegated Regulation (EU) 231/2013. Therefore, the Company must develop an adequate and effective strategy for determining when and how voting rights attached to instruments held in the managed portfolios are to be exercised, to the exclusive benefit of the AIF concerned and its investors.
A.1.2 Voting rights – AIFMD requirements
The strategies referred to in paragraph A.1.1. must determine measures and procedures for:
- Monitoring relevant corporate actions;
- Ensuring that the exercise of voting rights is in accordance with the investment objectives and policy of the relevant AIF (which, for each AIF managed by the Company, is to maximize gains for investors through capital growth and income growth); and
- Preventing or managing any conflicts of interest arising from the exercise of voting rights.
In general, the Company expects that the voting rights are assessed to be in the direction of long-term maximisation of AIFs value, while ensuring an acceptable risk level.
A.1.3 Delegation of portfolio management
The AIFM has delegated the Portfolio Management activity to a group company.
The delegated Portfolio Manager should ensure that the exercise of voting rights is conditional to specific voting principles that are considered reasonable and effective from an investment management perspective. In particular, the appropriateness of the exercise of voting rights is determined by taking into consideration the following main factors:
- The size of the position in the portfolio;
- Whether a minority or a controlling position is held;
- The country in which the issuer has its registered office;
- The availabilities of the shares;
- Obstacles arising from the decision to exercise the vote and the length of the blocking period, if any;
- The strategy behind the decision to invest in that particular company;
- The administrative costs or any other related costs.
The Company ensures the appropriate exercise of voting rights by the delegate, through appropriate contractual clauses and ongoing monitoring.
A.1.4 Actis’ policy
It is Actis’ policy to maintain strategies which enable it to determine when and how any voting rights held in the AIF’s portfolios are to be exercised, to the exclusive benefit of the relevant AIF and its investors.
While voting, the company shall always promote the following points:
- The effective corporate governance plan;
- The fair treatment of shareholders;
- The transparency and integrity of financial statements;
- The responsibility, competence and performance of the Board;
- The independence of the external auditor.
In general, the Company expects that voting rights are assessed to be in the direction of long-term maximisation of AIFs value, while ensuring an acceptable risk level.
Considering that the delegated Portfolio Manager is part of the Actis group, the exercise of voting rights will be managed in accordance with Actis’ policy as defined in the group Compliance Manual (and as authorised in art.394 of the CSSF Circular 18/698).
A.1.5 Prevention and management of conflicts of interest while exercising voting rights
Voting rights are exercised in the exclusive interest of the AIFs and their investors. The Company shall prevent or manage any conflicts of interest arising from the exercise of voting rights.
Where the Company is confronted with conflicts of interests, the conducting officer responsible for the portfolio management function warns the conducting officer in charge of risk and compliance that certain resolution(s) are in conflict with the Company’s voting policy. The conducting officers review together the issue and propose recommendations.
According to this scenario, the board of the Company shall take the final resolution with respect to the voting decision.
Conflicts of interests which would arise due to the exercise of voting rights, will be added to the Company’s conflicts of interest register.
A summary description of the strategies and details of the actions taken on the basis of those strategies must be made available to investors on request. Please refer to Actis’ Compliance Manual Chapter C.3.1. for a description of the investor disclosures and reporting obligations.
1. Purpose and scope of the policy
Actis EU Management S.à r.l. (also referred to as the “Company”. The “AIFM”, “Actis”, “we”, “us” and “our”) is an AIFM according to the Luxembourg law of 12 July 2013 on alternative investment managers (the “AIFM Law”). As such, Actis is entitled to provide risk management and portfolio management services for different regulated and non-regulated investment vehicles (hereinafter the “Funds”).
According to the AIFM Law, Actis is required to establish and implement a remuneration policy which is consistent with and promotes sound and effective risk management, including of long-term sustainability risks, and does not encourage risk-taking which is inconsistent with the risk profiles, management regulations or instruments of incorporation of the Funds.
The present remuneration policy (the “Policy”) and the subsequent measures provide principles and guidelines which aim at ensuring that:
1.1 Actis remuneration policy is in line with the business strategy, objectives, values and interests of Actis and the Funds or the investors of such Funds, and includes measures to avoid conflicts of interest;
1.2 The staff members are appropriately compensated for the services rendered to Actis;
1.3 The staff members are motivated to act in the best interests of Actis and the Funds; and
1.4 Remuneration is determined with a view to ensuring equity and consistency across Actis and compliance with regulations and law applicable to the context in which Actis operates.
The Policy concerns all forms of remuneration received by Staff of Actis (as defined below) in relation to the services rendered by them to Actis including:
- Payments and benefits paid by Actis;
- Any amounts paid by the Funds themselves, including carried interest, if any; and
- ny transfer of units or shares of the Funds;
Actis also adheres to the Group remuneration policy. “Group” means Actis, Actis Holdings SARL, Actis LLP, Actis GP LLP and their respective affiliates.
2. Definition of the Identified Staff
The Policy applies to all staff members of Actis but additional specific remuneration principles, as detailed hereinafter in the Policy, apply to categories of staff of Actis whose professional activities have a material impact on the risk profile of Actis or of the AIFM Funds (the “Identified Staff”). Identified Staff includes the following categories of staff:
2.1 Members of the Board of Actis;
2.2 Members of the senior management (i.e. Actis’s conducting officers);
2.3 Members of the control functions (i.e. staff responsible for risk management, compliance, internal audit and similar functions within Actis);
2.4 Any Actis employee receiving a remuneration that is equal to or greater than the total remuneration of [senior management];
2.5 Members of Staff whose professional activities exert material influence on the risk profile of Actis or one of more of the AIFM Funds;
2.6 Categories of staff who are voting members on the Investment Committees of the Actis UK Advisers Limited (”AUKA”) who are responsible for the portfolio management activities of the AIFM Funds whose activities have a significant impact on the risk profiles of the AIFM Funds.
Although there are partners and staff of affiliates of Actis and AUKA who provide advice to AUKA. All portfolio management decisions concerning the AIFM Funds are made by investment committees of AUKA.
3. Proportionality principle
This Policy has been drafted to be appropriate to Actis’s size, internal organisation, nature, scope and the complexity of activities performed by Actis. Actis has decided to apply the proportionality principle and consequently will not comply with the following:
3.1 Payment of at least 50% of the variable component, in financial instruments and subsequent retention policy;
3.2 Deferral of at least 40% of the variable part of the remuneration;
3.3 Ex-post risk adjustment for the variable remuneration.
Although Actis is not required to set up a remuneration committee due to the application of the principle of proportionality, it has decided that it will rely on the Group’s remuneration committee.
The role of the Group’s remuneration committee (“Remco”) is to determine the compensation of the Senior Partner of the Group. The Senior Partner is responsible for determining the compensation of members of the Executive Committee of each of Actis LLP and Actis GP LLP (“Exco”). Exco is responsible for determining the fixed and variable remuneration (including carried interest allocations) of all Group staff other than the members of Exco. With respect to Actis’s staff, any determinations made by Remco or Exco, are made in the form of recommendations to the Board of Actis. The Board is ultimately responsible for determining the fixed and variable remuneration for all of Actis’s staff.
4. Governance of remuneration
The governance of the remuneration principles within Actis concerns different levels of responsibility:
4.1 The Board
- lays down remuneration guiding principles;
- approves the Policy;
- periodically reviews the Policy’s general principles; and
- is responsible for its implementation.
4.2 The senior management (i.e. Actis’s conducting officers)
- implements the Policy according to the general principles adopted by the Board; and
- is responsible for the organisation of the annual review of the Policy.
Actis ensures that the remuneration of the staff members is appropriate to their responsibilities, expertise, tasks and powers.
5. Remuneration structure
5.1 Board members:
The Actis board of managers is comprised of two independent managers (the “Independent Managers”) and a further manager who is also an employee of one or more entities of the Group (the “Actis Manager”). The Independent Managers are remunerated differently to the Actis Manager.
- Independent Managers
- Actis Manager
The Independent Managers are entitled to receive an annual fee, paid in monthly instalments. The fee is set by reference to a range of factors, taking account the anticipated time expected to be devoted by the Independent Managers to Actis, the seniority of each of the Independent Managers and the market rate of pay for such position.
The annual fee payable to each of the Independent Managers will be reviewed annually by Actis Holdings SARL in consultation with Exco.
Variable remuneration and carried interest
Independent Managers will not be entitled to receive any variable remuneration or any allocation of carried interest.
Interests in the Funds
The Independent Managers may be offered the opportunity to participate in co investment schemes which co-invest alongside the Funds. In the event an NED does participate in any such scheme they will be responsible for funding their commitments to such vehicles. The Group does not fund commitments held by Independent Managers nor does it award fully or partially paid interests in the Funds to Independent Managers.
The Actis Manager receives an annual salary, paid in monthly instalments. Their salary is set taking into account a range of factors, including their seniority and responsibilities, their current and future contribution to the business of the Group.
The Actis Manager may be entitled to receive an annual discretionary bonus payment. Such bonus (if any) is paid from the Actis bonus pool, which is set by reference to the overall performance of Actis and the employment market for investment professionals and takes into account the full range of current and potential risks associated with activities undertaken. Awards from such bonus pool are made on the basis of individual performance reviews, which take account of both financial and non-financial criteria, the business area performance and the overall results of Actis.
The Actis Manager is entitled to be awarded carried interest. Please refer to paragraph 5.2(A) below.
Interests in the Funds
The Actis Manager is entitled to participate in co-investment schemes which co-invest alongside the Funds, The Actis Manager is responsible for funding their commitments (if any) to such vehicles. The Group does not fund commitments held by the Actis Manager nor does it award fully or partially paid interests in the Funds to the Actis Manager.
5.2 Identified Staff:
- Actis Staff
- Staff of AUKA
Actis’s staff receive an annual salary, paid in monthly instalments. Salaries are set by reference to a range of factors, taking account of the employee’s seniority and responsibilities and the market rate of pay for the relevant position. In all cases, salaries are set at such a level to allow the operation of a fully flexible policy on variable remuneration, including the possibility of paying no variable remuneration.
Employees may also be awarded an annual discretionary bonus payment. Such bonuses (if any) are paid from the Actis bonus pool, which is set by reference to the overall performance of Actis and the employment market for investment professionals and takes into account the full range of current and potential risks associated with activities undertaken. Awards from such bonus pool to individual employees are made on the basis of individual performance reviews, which take account of both financial and non-financial criteria, the business area performance or Fund concerned and the overall results of Actis. For example, bonuses awarded to staff working for the portfolio management function are influenced by their contributions to the investment portfolio (such as their role in making or realising investments, or in generating value-growth). By contrast, bonuses awarded to staff in risk functions are primarily a function of their contributions to risk management.
The fixed and variable components of the total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration.
Actis’s staff other than those engaged in control functions may be allocated units in the carried interest schemes of the Funds. Such units are allocated on the basis of contribution to the performance of the Fund (taking account of both financial and non-financial criteria).
The Funds operate whole-of-fund carried interest schemes, meaning that the interests of participants in the carried interest schemes mirror those of third party investors in the relevant Funds. By their nature carried interest allocations are subject to long-term deferral based on the life-cycle of the underlying Funds, with payments only being made to participants in the carried interest schemes if and when profits are also realised and distributed to investors. It should also be noted that the carried interest schemes incorporate clawback provisions and, save as set out below, escrow arrangements which are designed to protect the interests of third party investors. The carry structure of the carry structure for certain of Actis’ funds which may have a duration of 15+ years differs slightly from the foregoing. It is based on a whole-of-fund model, with some adaptions designed to incentivize investment professionals within the longer life fund structure. In particular, the clawback arrangement is supported by a firm guarantee instead of an escrow arrangement. The design of this structure nonetheless maintains an appropriate alignment between the Group and third party investors, with deferral over a multi-year period.
For senior members of staff, the payments to which they may become entitled under the carried interest schemes could potentially amount to a substantial portion of their overall remuneration (although, of course, this depends on the underlying performance of the Funds). This is expected by third party investors, given the close alignment between their interests and those of the relevant partners and senior members of staff, which is achieved via the carried interest structures.
Interests in the Funds
Whilst Actis’s staff are offered the opportunity to participate in co-investment schemes which co-invest alongside the Funds, Actis staff are responsible for funding their commitments to such vehicles. The Group does not fund commitments held by Actis staff nor does it award fully or partially paid interests in the Funds to Actis’s staff.
Please refer to Section 8.
6. Control functions
6.1 Staff engaged in control functions are awarded bonuses based on their achievement of objectives linked to their functions. Bonus decisions in respect of such other staff are made independently of the performance of the business areas they control. As a general rule, such staff in control functions receive a greater proportion of their total compensation as fixed salary than other staff in the operating units.
6.2 Staff engaged in control functions are not awarded carried interest in the AIFM Funds.
6.3 As noted in Section 3 above, Remco, the Senior Partner and Exco (as applicable) are responsible for determining fixed and variable remuneration (including carried interest allocations) However, determinations made by Remco, the Senior Partner or Exco, as applicable, are made in the form of recommendations to the Board of Actis. The Board is ultimately responsible for determining the fixed and variable remuneration for all of Actis’s staff, including that of the senior officers in the risk management and compliance functions.
7.1 Guaranteed variable remuneration. The Group does not typically award guaranteed variable remuneration. Any guaranteed variable remuneration may only be issued in relation to the hiring of a staff member and it may only be paid in the first year of an individual’s employment with the Group. If, on an exceptional basis, it is considered appropriate to award a guaranteed bonus or profit share, then such arrangement is subject to approval by both Exco and the Board.
7.2 Severance Payments. Members of the Group, including Actis, may from time to time reach agreement with a leaving member of staff under which such individual becomes entitled to a severance payment. Such payments are only offered consistent with market practice and where it is considered to be in the best interests of the Group (for example to ensure that Group’s’ business and confidential information is protected as far as possible, and thereby protecting the interests of investors in the’ Funds). Any such payment is designed to reflect the individual’s performance over time and not to reward failure.
7.3 Pension policy. The Group operates an occupational pension scheme to which contributions are made as part of the overall fixed remuneration package. The Group does not award discretionary pension benefits.
7.4 Personal investment strategies. The Group operates a personal dealing policy under which members of staff are restricted from making personal investments where doing so would involve the use of the Group’s confidential information. Staff are therefore restricted in terms of being able to hedge against the investments held by the’ Funds.
8. Application of the remuneration rules to Delegate(s)
In relation to the delegation of portfolio management activities to AUKA contractual arrangements are put in place with AUKA so as to ensure that there is no circumvention of the remuneration rules set out in the AIFMD. These contractual arrangements cover any payments made to the delegate(s)’ identified staff as compensation for the performance of portfolio management activities on behalf of Actis. Risk management activities are performed by the AIFM and are not delegated.
9. Internal disclosure
9.1 This Policy and the disclosures made in the annual reports of the AIFM Funds are accessible to all Identified Staff.
9.2 The criteria used to determine remuneration awards are communicated to each staff member and the appraisal process adopted is documented and transparent. Confidential information specific to an individual’s performance will not, however, be subject to general disclosure within Actis.
10. Document retention
Senior management is responsible for ensuring the retention of the following documents (electronic or hard copies):
- Copies of labour agreements between Actis and its staff;
- Copies of the appraisals for each Actis staff member;
- Copies of the decisions on allocation of variable remuneration to each Actis staff member;
- Copy of the assessment as regards the list of members of the Identified Staff.
1. Purpose and scope of the policy
As an above threshold authorised alternative investment fund manager (“AIFM”), Actis EU Management S.à r.l. (the “Company”) is subject to rules on order handling, best execution, placing of orders and allocation and aggregation.
The Company must take all reasonable steps in order to ensure the best possible result for its clients, taking into account the following factors: price, cost of execution, speed, likelihood of execution and settlement, size and nature of the order, and any other relevant factors.
This best execution and selection policy (the “Policy”) applies to the Company in the context of managing its funds and relates to the execution of decisions to deal and placing orders.
In the event where portfolio management of the funds is delegated by the Company to an external portfolio manager, the obligations described in this Policy will apply to that delegated portfolio manager.
In general, the Company ensures that it:
- acts honestly, with due skill, care and diligence and fairly in conducting its activities;
- acts in the best interests of the funds or the investors and the integrity of the market;
- has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities;
- takes all reasonable steps to avoid conflicts of interest and, when it cannot be avoided, identifies, manages and monitors and, where applicable, discloses, those conflicts of interest in order to prevent them from adversely affecting the interests of the Funds and their investors and to ensure that the Funds are fairly treated;
- complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of the funds or the investors of the funds and the integrity of the market;
- treats all investors fairly.
No investor in a fund obtains preferential treatment, unless such preferential treatment is disclosed in the relevant fund’s rules or instruments of incorporation.
2. Roles and responsibilities
Supported by the Compliance Function, the Conducting Officer responsible for portfolio management is in charge of the application of this Policy.
The Board and the relevant Conducting Officer are responsible for the activities connected to:
- Updating and reviewing of the methods of execution/transmission of trading orders;
- Keeping updated the policy related to the selection of any external intermediaries to be used as brokers;
- Periodic assessment of the coherence of the methods of execution defined within the best execution strategy set out by this Policy.
The Company commits to:
- take all reasonable steps to obtain the best possible result for the funds or its investors when executing portfolio management decisions or when placing order with intermediaries for execution;
- put in place a best execution policy, to be reviewed annually and whenever there are material changes affecting best execution;
- monitor the effectiveness of their best execution arrangements on a regular basis;
- be able to demonstrate that it has acted in accordance with its best execution policy; and
- make appropriate information on its best execution policy (and changes to it) available to the investors.
3. When is this policy relevant?
The Funds managed by the Company pursue “Private Equity style” strategies. It is therefore generally the case that investments in assets for the Funds are made in unlisted companies and after extensive negotiations on the terms of the agreement, with transactions being concluded by one or more of the Funds (acting by their general partner(s)).
In respect of such negotiated transactions, there is no relevant third party to whom the order could be transmitted for execution; no order is executed and there is no choice of different execution venues, as the transaction and the counterparties are unique. The Company nevertheless takes all appropriate steps to ensure that the transactions entered into by the Funds under management are on the best possible terms.
However, the Funds may occasionally transact in securities admitted to trading on public markets or for which there is otherwise a liquid market. For example, the Funds may sell down holdings of listed securities following an exit by way of IPO, or enter into foreign exchange futures or options as a hedge against currency movements between exchange and completion of a transaction. When dealing in such instruments, third parties (such as banks and brokers) are engaged as necessary.
3.1 Criteria for best execution
In order to act in the best interest of the fund, the investors and the integrity of the market, the Company ensures that:
- neither the Fund, nor its Investors are charged undue costs;
- all reasonable steps are taken to obtain, or ensure to obtain, the best possible result for the Fund and its Investors taking into account:
- Speed of execution;
- Likelihood of execution and settlement;
- Size and nature of the order;
- Nature of financial instruments or assets; and
- Any other consideration relevant to the execution of the order.
The relative importance of such best execution factors shall be determined by reference to the following criteria:
- The objectives, investment policy and risks specific to the Fund, as indicated in the Fund’s management regulations or articles of association, prospectus or offering documents of the Fund;
- The characteristics of the order;
- The characteristics of the financial instruments or other assets that are the subject of that order;
- The characteristics of the execution venues to which that order can be directed.
4. Best selection
The Company takes all reasonable steps to obtain from its counterparties the assurance that, when carrying out orders, they achieve the best possible result for its clients. The Company selects intermediaries granting it indirect access to execution venues. For the selection of intermediaries, the Company applies a stringent procedure. It verifies that the best execution policies and practices of its intermediaries are compliant with regulatory best selection requirements, and the Company’s standards. In addition it regularly monitors and assesses the best execution practices of its intermediaries and takes corrective measures, if required.
When selecting a counterparty, we ensure that the counterparty fulfils all of the following conditions:
- It is subject to ongoing supervision by a public authority;
- It is financially sound (taking into account whether or not the counterparty is subject to prudential regulation, including sufficient capital requirements, and effective supervision); and
- It has the necessary organisational structure and resources for performing the services which are to be provided by it to the Company.
As regards b), if the counterparty is subject to prudential regulation in the EEA we should usually be satisfied that the counterparty is financially sound. If the counterparty is not subject to prudential regulation within the EEA we consider whether it is subject to appropriate prudential regulation (including sufficient capital requirements) and effective supervision.
The Company will only pass orders to intermediaries, which were selected trough an evaluation and approval procedure. the counterparty’s appointment is approved by the group Investment Committee (or by a person to whom authority to approve the appointment has been delegated by the Investment Committee).
5. Order execution policy
When executing orders, the Company aims at obtaining on a consistent basis the best possible result for the Funds. The Company ensures that, when executing an order, the decision will be based on a thorough analysis of the instrument in question and the market conditions in general which will provide the basis for an adequate assessment to ensure best execution.Financial instruments and cash amounts received following a transaction on behalf of the Fund should be duly and promptly transferred to the Fund’s accounts.
The Company ensures that information concerning order execution on behalf of the Fund is not unlawfully exploited. The Company may not take advantage of information about orders not yet executed on behalf of clients and must take all reasonable steps to prevent any abuse of such information by Board members, directors, Staff members as well as other natural persons involved in the order execution.
5.1 Handling of orders
The Company must implement procedures and arrangements to:
- Ensure that orders executed on behalf of the Fund are promptly and accurately recorded and allocated;
- Ensure orders are executed sequentially unless prevailing market conditions make this impracticable or the interests of the Fund require otherwise;
- Ensure financial instruments/sums of money received in settlement of the executed orders shall be promptly and correctly delivered to the appropriate account;
- Ensure that there will not be a misuse of information relating to pending orders, and take all reasonable steps to prevent the misuse of information.
5.2 Allocation and aggregation of orders
The only circumstance in which an order in relation to financial instruments other than unlisted securities for a Fund will be aggregated with the order of another Fund is in circumstances where it has been determined or there is an obligation that the relevant entities should jointly participate in a transaction or where, having so participated, there is a decision to exit from the investment. Such circumstances are rare, but where they do occur, the transaction needs to satisfies the below:
- The aggregation of orders will not work overall to the disadvantage of any Fund whose order is aggregated (and risk warnings concerning aggregation and allocation are included in relevant Fund constitutional documents such as investment management agreements); and
- The policy provides in sufficiently precise terms for the fair allocation of aggregated orders, including, if applicable, how the volume and price of orders determines allocations and the treatment of partial executions
The order allocation process operates as follows:
- In determining the appropriate allocation, the Company must ensure that no Fund is given unfair preference. Where an order is completely filled, each Fund is allocated their respective pre-determined interest.
- Partial fills are allocated on a pro rata basis, except to the extent that a deviation from a pro rata allocation (which deviation all investors would regard as minor in respect of the relevant Fund’s order) would correct an odd allocation (for example by adding a few hundred securities to round out an allocation of several hundred thousand) or close out what would otherwise be a de minimis position. The Company must ensure that any instance of such deviation is recorded on the relevant transaction file.
- The Company may only permit a revised allocation of an aggregated order if:
- There is an error in the intended or actual allocation and the Company is promptly notified of this and records it; or
- The order is only partially executed resulting in an uneconomic allocation for some Funds (in which case the reallocation must be in the best interests of all Funds concerned).
- The price of the allocated instruments must be:
- The price paid for each investment (net of fees and commissions); and
- A volume-weighted average of all the prices in a series of transactions.
The Fund Services team is responsible for ensuring that orders are allocated in accordance with this policy.
6. Delegation to the Portfolio Manager
In the event where portfolio management of the Funds is delegated, the Company will not itself manage any assets nor operate directly on the markets/liaise with brokers and, thus, best execution requirements are to be complied with by the delegated Portfolio Manager.
The delegated Portfolio Manager is responsible for the execution of trading orders or their transmission to external intermediaries in line with this Policy.
As the Company remains responsible for best execution, it must ensure that the delegated Portfolio Manager applies similar and equivalent principles as set out in this Policy, and that it has adopted procedures in order to execute orders in line with this Policy.
6.1 Monitoring of the Portfolio Manager
At initial and on-going due diligence, the Company obtains the best execution policy from the delegated Portfolio Manager in order to verify their coherence with the Fund’s requirements and the Company’s Policy.
On an regular basis, the Company ensures that the execution and transmission strategies applied by the delegated Portfolio Manager are effective and in line with this Policy. This monitoring will be done through spot checks.
The Conducting Officer in charge of portfolio management is responsible for requesting, form time to time, the delegated Portfolio Manager to provide details about specific market orders if needed. For example, with a list of all executed orders on a given date, it can be checked that the market order details are in line with the best execution factors as detailed in the best execution policy of the Portfolio Manager.
6.2 Broker selection by the delegated Portfolio Manager
Brokers will not be subject to a specific due diligence and approval by the Company. However, a due diligence on the adequacy of the delegated Portfolio Managers’ process for the selection of brokers will be performed by the Conducting Officer in charge of portfolio management, in collaboration with the Compliance Function of the Company, on the occasion of the initial and on-going due diligence on a delegated Portfolio Manager to ensure it is in line with the Company’s best selection standards.
Results of the analysis of the delegated Portfolio Manager’s process for the selection of brokers are brought to the attention of the Senior Management and of the Company’s Board; if the process is considered adequate, the delegated Portfolio Manager will be allowed to use its own brokers for trading activities.