Architas Multi-Manager Limited
Policy for Compliance with UK Financial Reporting
Council (FRC) Stewardship Code
September 2016
Contents
Contents ...........................................................................................................................................2
I.
Introduction .........................................................................................................................3
II.
Architas’ Approach to Stewardship .....................................................................................3
III.
The Principles of the Code and how they Apply to Architas ...............................................4
IV.
Monitoring of Delegates ......................................................................................................5
V.
Relations with Investment Trusts ........................................................................................7
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I.
Introduction
Architas Multi-Manager Limited (‘Architas’) was formed on 1 July 2008 and is a Collective
Portfolio Management Investment firm. It is a company registered in England under company
registration number 06458717.
Architas is authorised and regulated by the Financial Conduct Authority (‘FCA’) and is a member
of the UK Investment Association. Architas’ FCA Firm Reference Number is 477328 and its
permissions can be checked on the Financial Conduct Authority’s website:
https://register.fca.org.uk/ShPo_FirmDetailsPage?id=001b000000Mfm9EAAR.
A specialist multi-manager, Architas manages assets on behalf of collective investment schemes,
as well as discretionary investment mandates for external clients and those in the AXA Group.
In role as Authorised Corporate Director of four UK authorised Open-Ended Investment
Companies (OEICs), Architas is acting as an “asset owner” under the Stewardship Code. As an
investment manager, both of its own OEICs and for other third party institutional clients,
Architas acts as an “asset manager” under the Stewardship Code.
Architas also provides advice to professional clients on investments in collective investment
schemes. Whilst this activity lies outside the scope of ‘asset management’ under the
Stewardship Code, Architas is nevertheless mindful of the principles of stewardship when
carrying out research to support its advisory recommendations.
Architas will review this policy at least annually. It was most recently reviewed in September
2016.
For further information about this policy, please contact the firm’s compliance department on
+44 (0)20 7562 4800 or compliance@architas-mm.com.
II.
Architas’ Approach to Stewardship
Architas is a “Multi-Manager” asset manager. We do not invest directly in any companies other
than some investment trusts, which are closed-ended investment funds constituted as listed
companies. The funds and mandates that we manage all follow one of two models:
1. “Fund of Funds”: our investment team invests in investment funds managed by other asset
managers; or
2. Delegated management: we delegate investment management to a third party asset
manager.
For the purposes of this document, we will use the term “delegate” to refer both to asset
managers who manage investment funds in which we invest and to asset managers to whom we
contractually delegate the management of our own funds.
Central to Architas’ investment philosophy is a commitment to ensuring our products and
services are appropriate to the objectives and requirements of our clients. This means that we
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consider, both in our research processes and in ongoing reviews, how well our delegated
managers understand their investee companies and how actively they engage with them. We
regard an assessment of how they discharge their stewardship responsibilities as an important
indicator of the quality of their overall investment approach and of their standard of regard to
investors’ best interests and we seek to use our interactions with delegates to promote the
stewardship agenda in the investment industry.
Architas does not have any direct relationships with investee companies and does not, as a
matter of policy, direct its delegates in respect of investment in particular companies, it is
therefore not practicable for Architas to direct the stewardship activities and policies of our
delegates.
Architas participates in industry discussion groups on stewardship and periodically monitors the
stewardship policies and activities of major delegates. Details of this monitoring and of how we
define ‘major delegates’ is set out under Section IV below.
III.
The Principles of the Code and how they Apply to Architas
Asset owners and asset managers such as Architas should:
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1. Publicly disclose their
policy on how they will
discharge their
stewardship
responsibilities;
We will review this policy annually and update as
appropriate.
2. Have a robust policy on
managing conflicts of
interest in relation to
stewardship policy,
which should be publicly
disclosed;
We maintain a Conflicts of Interest Policy that includes in
its scope potential conflicts relating to stewardship. We
also expect our delegates to operate conflicts
management in line with MiFID or equivalent local
requirements. As we do not direct investment into
particular companies, we do not typically encounter
specific conflicts relating to stewardship.
3. Monitor their investee
companies;
As we do not invest directly, we do not monitor investee
companies, but we encourage our major delegates to do
so. We monitor the stewardship policies and disclosures
of these delegates on an annual basis. Further details are
included under ‘Monitoring’, below.
4. Establish clear
guidelines on when and
how they will escalate
their stewardship
activities;
We regard the responsibility for escalation as lying in the
first instance with the delegate asset manager.
5. Be willing to act
collectively with other
investors where
appropriate;
We regard engagement with investee companies as a
responsibility of the delegate asset manager.
6. Have a clear policy on
voting and disclosure of
voting activity;
We delegate voting strategy and the operation of this to
our delegate asset managers. We are developing a voting
policy with regard to unitholder/shareholder votes in
funds that we own.
7. Report periodically on
their stewardship and
voting activities
Records of our voting activity are available on request.
IV.
Monitoring of Delegates
Architas applies the principle of proportionality in respect of our monitoring of delegates. So,
we actively review the stewardship policies and other stewardship disclosure of our major
delegates. We define a major delegate as any asset manager who meets either of the following
criteria:
1. We have granted them an investment mandate to manage specific client portfolios on
our behalf;
2. They manage, in their own right, one or more funds that we hold on behalf of our
clients. When we amalgamate the value of our holdings with all asset managers, this
manager ranks in the top ten as measured by total value of our investment.
We refer to these major delegates hereinafter as the “Delegates”.
We review stewardship in the context of our Delegates’ investment strategies within the
framework of our oversight processes. Our monitoring approach does not set any particular
threshold in terms of what we deem to be acceptable or not, but we highlight what we deem to
be good practice, areas in which improvements might be considered and improvements and
enhancements that we have seen since the previous review.
We do not regard our stewardship monitoring activity as constituting a “hard test” of our
Delegates, but rather as an opportunity to recognise and encourage good practice. On an annual
basis, for each Delegate, we aim to review the publicly disclosed policies and activity reports on
stewardship and produce a report on our findings. We share this report with the Delegate.
When reviewing Delegates’ policies and disclosures with regard to the remaining Principles, we
bear in mind the following principles of good practice:
Principle 1: General Standard of Disclosure
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Whether the disclosure indicates that the Delegate has in place substantive structures
and resources dedicated to promoting stewardship policies and practices in the firm;
-
How comprehensively the disclosure addresses the applicable range of the FRC’s 7
Principles;
-
The degree to which the disclosure appears to be substantively amended from year to
year;
-
The level of specificity in the disclosures in each area. We look for disclosure of actual
instances of engagement, conflict management, policy development and voting activity,
as well as for more general statements of intent, as indictors of a healthy stewardship
culture.
Principle 2: Conflicts of Interest Management
-
Their approach to voting shares in affiliated entities;
-
Their approach to circumstances in which the interests of clients diverge, or where a
client relationship raises a potential conflict.
-
How they put in place, maintain and publicly disclose a conflicts of interest policy.
-
Their ability to describe various possible types of conflicts in respect of stewardship even
if the policy is ultimately housed in a separate document.
Principle 3: Monitoring
-
Their approach to monitoring their investee companies – including the issues they
consider most important to monitor, the tools they use to do so and how they monitor
effectiveness;
-
Their approach to explanations for departure from the Corporate Governance Code,
identifying issues and engaging with the board or management as appropriate.
-
Their approach to being made an insider, with an indication of the mechanism to do so,
including providing a named contact.
Principle 4: Escalation
-
The circumstances in which they would intervene and how they assess the outcomes
and effectiveness of intervention.
-
The way in which issues are escalated in an informative manner.
-
The principles underlying their approach, even if ultimately issues will be escalated on a
case-by-case basis.
Principle 5: Collective Engagement
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-
Their policy on collective engagement, including the circumstances in which they may
consider engaging collectively.
-
Any formal or informal groups to which they may associate themselves, and providing
the circumstances in which they might engage, even if their final approach is to be
considered on a case-by-case basis.
-
How other investors might contact them for the purposes of collective engagement.
Principle 6: Voting and disclosure of voting activity
-
Their approach to voting and supporting the board, bearing in mind that the
Stewardship Code recommends that signatories do not automatically support the board,
that they register abstentions or votes against where appropriate and disclose their
approach to informing the company in advance in these circumstances. Divergence from
these recommendations should be explained appropriately.
-
Their voting records. The more effective statements provide links to comprehensive
disclosures and state the coverage of the disclosures and their timeliness.
-
Their use of advisory services, including the scope, provider and the extent to which
they follow the advice they receive.
Principle 7: Periodic Reporting
-
How they account to their clients, with what frequency and what is covered, even if
generally the reports are provided according to clients’ wishes.
-
Their approach to independent assurance, including whether it is done and available to
clients. Signatories that do not seek independent assurance should explain why not and
describe their alternative arrangements.
V.
Relations with Investment Trusts
As well as granting mandates to asset managers and investing in open-ended funds, Architas
also invests from time to time in Investment Trust Companies (“ITCs”), which are closed-ended
investment funds constituted as corporations. Architas’ stewardship of ITC shares involves
certain steps in addition to those applied to open-ended funds. For example:
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•
We investigate the background and expertise of the members of the ITC board and their
degree of involvement in investment decision-making;
•
We analyse the independence of the board from the delegated investment manager and
the structure of their financial incentives;
•
We investigate specific investor protection mechanisms, including discount controls and
continuation voting procedures;
•
We analyse controls over potential conflicts of interests for the directors.