Stewardship Code policy

Under Rule 2.2.3R of the FCA’s Conduct of Business Sourcebook, we are required to provide a disclosure about the nature of our commitment to the UK Stewardship Code.

Our policy

We seek to comply with the principles of the UK Stewardship Code, with the exception that we do not seek to obtain an independent opinion on our engagement and voting processes.

Principle 1

Institutional Investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

Our investment approach is long-term and focuses on a small number of well understood investments. We make decisions based on data which leads to a disciplined and objective approach to how we invest our customers’ money. Before investing in a company, we assess its intrinsic value by creating long-term financial projections under a range of different scenarios, together with an assessment of the assets that it owns. We also evaluate every company based on a set of both quantitative and qualitative quality checks which determine its desirability as an investment. Finally, we attempt to evaluate how the company would be impacted under a range of external shocks in the economy, such as an increase in inflation or large currency movements. This three-pillar framework drives our investment decisions and is how we expect to enhance and protect value for the benefit of our customers. Where we believe it may add value we will engage with a company’s management, but regular company meetings do not form a core part of our investment process. Where we do have a direct interaction, we will look to promote the best interests of our customers and feedback the results of the meeting into our assessment of the company.

Principle 2

Institutional Investors should have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed.

We have Conflicts of Interest and Corporate Inducements policies that apply to situations involving an actual, or potential, conflict of interest involving a company that we have invested in. Our preference is to avoid such conflicts but when this is not practical we will first attempt to mitigate it and where this is not possible make a full disclosure to those parties that it effects.

Principle 3

Institutional Investors should monitor their investee companies.

The framework that we have for assessing the intrinsic value and quality of every company that we invest in forms the basis of our monitoring approach. When new information becomes available we check that our prior views and assumptions about the company still hold true. This process is mechanical, making extensive use of data and technology, which allows us to efficiently monitor a large number of companies. Where this mechanical monitoring highlights a concern we manually review the company and reassess the reasons why we wish to own it.

A lack of compliance with the UK Corporate Governance Code, or equivalent international standards, will not stop us investing in a company but will cause us to lower our assessment of its quality as an investment. We do not wish to be made an insider and will always make this clear when speaking to investee companies. We make detailed reviews of the financial reports of the companies that we invest in, but as a small investment manager have a limited ability to directly engage with company management.

Principle 4

Institutional Investors should establish clear guidelines on when and how they will escalate their stewardship activities.

Regular management contact does not form a core part of our investment process, but where we have concerns about an investee company we may escalate them with the company’s management. We would ordinarily only consider such action where we hold more than 1% of the company’s outstanding share capital, and when we believe that it will lead to a better outcome for our customers. This escalation would take the form of initiating contact in written form which may then be escalated to meet management. These interactions will be conducted on a confidential basis, but we would not seek to be made an insider. The objective of such interactions would be to gain confidence in the assumptions that underpin our investment decision and to promote our interests as a long-term shareholder.

Principle 5

Institutional Investors should be willing to act collectively with other investors where appropriate.

We do not actively seek to engage in collective action with other investors but are happy to do so where we think it would be in the best interest of our customers. All such situations would be considered on a case-by-case basis.

Principle 6

Institutional Investors should have a clear policy on voting and disclosure of voting activity.

We look to always use our right to vote as a way of safeguarding the interests of our customers in the companies in which we invest. We do not automatically support the board of a company when voting but supporting them will determine our default position. Where we think voting in support of the board will not be in the best long-term interests of our customers then we will deviate from this default position.

The proxy voting process in managed via ProxyEdge, which is a system that manages the process of meeting notifications, voting and record maintenance. We do not use third parties to recommend how we vote. Details of our voting records are available on request.
We do not engage in stock lending.

Principle 7

Institutional Investors should report periodically on their stewardship and voting activities.

We produce a comprehensive annual report for our investors, which contains a section that details our stewardship and voting activities. We do not comply with the Code’s recommendation to obtain an independent opinion on our stewardship and voting activities, because given our small size we believe the costs to be disproportionate to the benefits for our customers. We review this policy on an annual basis.

Contact

Enquiries about this policy should be directed through our website which can be found at www.havelocklondon.com.