Holbein Partners LLP
UK Stewardship Code — Disclosure Statement
The UK’s Financial Reporting Council publishes a UK Stewardship Code (“the Code”) which aims to promote the long term success of companies in such a way that the ultimate providers of capital also prosper. The Code seeks to encourage and improve interaction between investors and the companies in which they invest, as well as providing greater transparency of these activities. In publicly listed companies primary responsibility for stewardship rests with the board of the company with investors in the company holding the board accountable for the fulfilling its responsibilities. The Code sets out seven principles of effective stewardship by investors and is directed in the first instance at institutional investors, such as asset managers, with equity holdings in UK listed companies.
The UK’s Financial Conduct Authority (“FCA”) requires that a firm that manages investments for Professional clients that are not natural persons, discloses the nature of its commitment to the Code or, where it does not so commit, its alternative approach. This statement is Holbein’s disclosure under the FCA requirements and explains how it complies with components of the Code or why it feels it is that particular parts are not relevant to its business.
Holbein Partners LLP (“Holbein”) is authorised and regulated by the FCA and has permission to manage investments. Most of its clients are classified as Retail clients, rather than Professional. The firm’s investment management activity is carried out mainly in the form of investment in funds (collective investment vehicles) rather than direct investment in the underlying assets of such funds. Great care is taken in the selection of these investee funds with a thorough due diligence process focussing on identifying a manager that can generate the best risk-adjusted returns in the asset class or strategy in which Holbein is seeking to invest. As part of the initial manager selection process and on an ongoing basis thereafter, Holbein considers a wide range of factors pertaining to the manager’s proposed investment strategy and its performance against that strategy. Holbein’s main objective in fund management is to ensure that it selects the most appropriate managers and funds to maximise investor returns, subject to the constraints set by clients.
Holbein does not generally invest in UK listed companies and any such transactions are normally at the request of, or with the specific permission of, the client. When the firm has an opportunity to exercise voting rights in respect of any investment, its over-riding priority is to put clients’ interests first and foremost.
Holbein supports the spirit and objectives of the Code and will follow them wherever it is feasible and appropriate to do so, however it believes that certain specific provisions are not relevant to the firm’s business activities.
The Code lays down seven principles:
Principle 1 — Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.
This document explains how Holbein discharges its stewardship responsibilities. Engagement with investee companies is primarily the responsibility of the investment team and it will speak to the management of all investee companies at least six monthly, normally face to face, and will meet with them at least annually. Such discussions cover a variety of topics, including performance, future prospects, investment strategy, governance, social/environmental impact and shareholder value.
Any matter relating to the exercise of voting rights is brought to Holbein’s attention by the custodian, the investments being registered in a nominee account of the custodian. The decision as to whether to vote or not, or how to vote, is done on a case by case basis and is always driven by the firm’s key consideration of acting in the best interests on the clients.
Principle 2 — Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed.
Holbein has a robust policy on managing conflicts of interest which is designed to ensure its decisions are taken wholly in the interest of its clients and that they are treated fairly. Issues such as trade allocation, personal account dealing, best execution and outside business interests are covered by specific policies and procedures. These may be disclosed to clients through due diligence questionnaires, client agreements or responses to specific queries. The firm’s aim is to ensure that all potential and actual conflicts are identified, assessed, managed and monitored on an on-going basis. Any conflicts of interest arising through its stewardship of investee companies will be handled in accordance with that policy and associated procedures.
Principle 3 — Institutional investors should monitor their investee companies.
Also see comments under Principle 1.
Comprehensive ongoing research and monitoring of investee companies is at the heart of Holbein’s investment process. The monitoring process includes meeting with senior management of investee companies, analysing annual reports and financial statements, attending company meetings and road shows.
Holbein seeks to identify problems at an early stage to minimise the risk of any loss to its clients. Where appropriate, if the investment team has concerns they will use their best efforts to raise them as soon as possible with the appropriate members of the investee company’s management. However, there may be circumstances were it is in the best interest of the clients that the investment is reduced or terminated promptly rather than engaging in prolonged discussions with the investee company.
Holbein does not generally wish to be made an insider so it expects investee companies and their advisers to ensure that it does not receive non-public price sensitive information without its prior agreement.
Principle 4 — Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.
Holbein will generally look to invest in companies that it believes to be well managed. As part of the research and monitoring process, if it has any concerns in this respect, especially relating to shareholder value, Holbein will request a meeting with the investee company and if it does not make adequate progress, it will escalate the matter to more senior management both internally and in the investee company. It may also decide to raise the issue formally in writing with the other party. It will also consider whether it would be more effective to involve other investors and with the possibility of acting in concert with them against the investee company.
Principle 5 — Institutional investors should be willing to act collectively with other investors where appropriate.
Holbein is willing to act collectively with other investors if it felt that by doing so it would be in the best interests of its clients and that such action would increase the possibility of a favourable outcome for its clients.
Principle 6 — Institutional investors should have a clear policy on voting and disclosure of voting activity.
Holbein’s policy is to exercise its voting rights on behalf of the client where it is in the interests of its clients to do so. It may elect not to vote on routine administrative matters where the outcome of the vote would have no material impact on clients. Where more substantive matters are involved, Holbein will consider its options carefully and may consult with clients before deciding how to vote. In all cases, the interests of the clients are paramount.
As a general policy, for confidentiality reasons Holbein would not reveal publicly how it had voted but would disclose this information to affected clients where it considered that the impact of the vote was material or the client had requested the information.
Under this principle, asset managers are advised to disclose their approach to stock lending and recalling lent. Holbein generally does not lend securities on behalf of its clients.
Principle 7 — Institutional investors should report periodically on their stewardship and voting activities.
Subject to client and commercial confidentiality considerations, Holbein will disclose to a client, when requested or as required by law, details of its relevant stewardship and voting activities. The information reported and the frequency and format of the reports will be as agreed between Holbein and the respective client.
Holbein believes that this approach achieves an appropriate level of transparency to promote effective stewardship whilst recognising that disclosure of confidential portfolio information may be inappropriate in some circumstances.
20 January 2017
For more information about this disclosure statement, please contact the Compliance Officer, Holbein Partners LLP, 80 Victoria Street, London SW1E 5JL.
Tel: +44 20 3195 6510