Mountains

Stewardship Policy

Purpose

The Stewardship Policy sets out the Firm’s framework for ensuring that we are committed to the principles of the Financial Conduct Authority’s (“FCA”)’s and its initiatives to promote shareholder engagement as required under its rules (Conduct of Business Rule 2.2B).

The Firm, is a company which acts as Authorised Corporate Director of a number of UK authorised open-ended investment funds; and which manages a range of assets for a number of clients.

In its capacity as Authorised Corporate Director of a number of funds which are asset owners, the Firm recognises its stewardship responsibilities and considers these responsibilities extremely carefully when selecting investment managers to manage the assets of the funds and also when monitoring the on-going activities of its investment managers.

The consequences of not meeting these requirements include: –

  •  Financial Costs. Fines, compensation, damages and fees could be applied / awarded to a third party by the regulator, Ombudsman or court of law
  • Reputational Damage to the Firm, which may threaten its ability to attract or retain custom
  • Opportunity Costs. If systems are not planned, maintained and organised then there is also a risk that the Firm cannot meet new demands, whether that be demands on the systems to cope with legal and regulatory change or growth in existing or new markets.

Therefore, and where investments of a material nature are made directly into shares traded on a regulated market, excluding trackers, the approach will always include engagement with investee companies on matters such as:
strategy, financial and non-financial performance and risk, capital structure, and social environmental impact corporate governance.

This will include the short, medium and long term impacts to ensure the funds best interests are considered and investee companies focus on long term sustainable value creation.

Where a third party is appointed to manage a fund, they will also be expected to also meet these requirements. Margetts, as the ACD, will conduct an initial and, thereafter, annual review. This review will include:
assessing whether the Stewardship Policy of the manager is sufficiently robust and complies with the requirements of the FCA, an analysis of their engagement and dialogue with investee companies, if any conflicts that arise, that these are managed to ensure the interests of the fund are placed ahead of the manager.

Margetts performs an in-depth research of every fund management company it invests in. This includes the assessment of the in-house ‘Request For Information’ questionnaire where the fund management companies provide information on their stewardship approach, team structure, remunerations, compliance, liquidity and attitude towards economic, social and governance factors of their underlying investments.

Margetts also monitors the fund managers’ reputation and past track record and look to identify cases of misconduct.

Responsibilities

The Investment Risk Committee (“IRC”) is responsible for the framework, setting the policy and reviewing reports relating to third party managers and their individual policies.

The named Scheme Manager or Team Manager will have responsibility for implementing the procedures internally and where investment Management is delegated, responsibility for implementation will be set by the delegated party’s Stewardship Policy.

The Compliance will have responsibility for auditing the processes and tracking errors and breaches.

 

Application

The fund management department will use reports from the Custodian to identify corporate action events and direct responses based on the best interest of investors.

The Compliance will use reports from the Custodian to review that corporate events have been actioned and also make this information available for third party visits to undertake the same audit process.

The compliance function will review the policy and procedures of delegated mangers during annual onsite reviews and the outcome will be documented within the report and distributed to the Compliance and Internal Audit Committee and the Risk Committee. We will expect delegated managers to be able to demonstrate they are committed to meeting the requirements.

The key areas of application are listed below.

1. Publicly disclose their policy on how they will discharge their stewardship responsibilities

Stewardship encompasses more than the exercise of votes in investee companies at general meetings. It also includes the selection of investments as well as the on-going engagement monitoring and communication with investee companies.

The Firm does not invest directly in companies as our investment strategies use collective investment vehicles. Therefore, many aspects of the FCA’s rules do not apply. Where a Margetts fund is managed externally and does hold equities directly, we review the manager’s policy in order to establish that it meets the requirements of the FCA’s rules and periodically monitor that the policy is being followed.

2. Have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed

Margetts has a Conflicts of Interest Policy which sets out our policy for identifying and managing conflicts of interest and handling matters where the interests of individual clients differ. This policy is overseen by the Margetts Risk Committee which is composed of investment, compliance and operations senior management.

3. Monitor their investee companies

Margetts does not invest directly into equities and therefore this element of the FCA’s rules is not applicable.

4. Establish clear guidelines on when and how they will escalate their stewardship activities

Margetts does not invest directly into equities and therefore this element of the FCA’s rules is not applicable.

5. Be willing to act collectively with other investors where appropriate

Margetts does not invest directly into equities and therefore this element of the FCA’s rules is not applicable.

6. Have a clear policy on voting and disclosure of voting activity

Margetts does not invest directly into equities and therefore this element of the FCA’s rules is not applicable.

7. Report periodically on their stewardship and voting activities

Margetts does not invest directly into equities and therefore this element of the FCA’s rules is not applicable.

8. Conduct dialogue with investee companies

Margetts does not invest directly into equities and therefore this element of the FCA’s rules is not applicable.