EOS INVESTMENT MANAGEMENT LIMITED. Best Execution Policy

Transcription

1 EOS INVESTMENT MANAGEMENT LIMITED Best Execution Policy

2 Contents 1. Executive Summary Purpose & Scope of Policy Principle Governance Methodology & Process Overview Calculation Methodology & Process Mitigation of risk related to executions Training & Awareness Management Information Record Keeping Change Management & Policy Review

3 1. Executive Summary EOS Investment Management Ltd ( EOS IM or Firm ) has established and approved this Order Execution Policy ( Policy ). EOS IM is authorised and regulated by the UK s Financial Conduct Authority ( FCA ) as a full scope Alternative Investment Fund Manager ( AIFM ) for unauthorised alternative investment funds ( AIFs ). EOS IM manages the undertakings for FYSIS FUND SICAV-SIF S.C.A., an AIF collective investment, which includes its underlying Sub-Funds, investment vehicles and underlying investments (collectively known as the Fund ). This Policy applies to the Fund and thus all clients of EOS IM, when relevant regulated investment services are provided. EOS IM is required to abide by the FCA s Best Execution rule set out under the Conduct of Business ( COBS ) COBS Best Execution and COBS Residual CIS operators, UCITS management companies and AIFMs of the FCA Handbook (rulebook). Under the FCA rules EOS IM has the obligation to take all reasonable steps to obtain the best possible result for its clients should it owe contractual or agency obligations to the client. The FCA recognises that best execution obligations should be applied in a manner that takes into account the different circumstances associated with the execution of orders related to particular types of financial instruments. The Policy sets out the processes designed by EOS IM to achieve the appropriate results in accordance with its objectives of: 1. achieving the best results for the Fund; 2. performing its services in accordance with the Fund objectives; and 3. meeting EOS IM s regulatory obligations. At the date of the issue of this Policy, EOS IM, on behalf of the Fund, pursues a strategy that involves investing in unlisted European companies. The Fund does not invest in financial instruments which are traded on execution venues. Therefore, the application of the Best Execution requirements under the FCA rules is limited, as there is not a selection of trading venues to select from. The firm supports the objectives underlying the Best Execution rules, and under its business model applies all of the relevant rules. Through its Investment Policy for the Fund, EOS IM conducts its processes in a manner which is designed to achieve the best result for the Fund and meet the underlying objectives of the FCA s Best Execution Rules. Should any material changes occur to the strategies or regulatory classification of EOS IM, which would result in trading occurring in financial instruments on behalf of clients, on execution venues, the Firm would review and adopt the appropriate changes to the Policy. In accordance with sound practice and the regulatory requirements, EOS IM will periodically review and where relevant change its processes at that time, making appropriate disclosure. 2. Purpose & Scope of Policy The purpose of the Policy is to set out the structure and methodology adopted by EOS IM in relation to the best execution of transactions on behalf of the Fund. The processes and methodology for the best 3

4 execution forms a fundamental part of the role of EOS IM in the management of the Fund. It is therefore of importance that the best execution, supported by the other Policies are robust, consistent and timely. The scope of the Policy encompasses the Fund, which for the purpose of clarity includes the Sub Funds and other investment vehicles that are under the investment management of EOS IM. 3. Principle The Board of EOS IM ( Board ) and all staff of EOS IM are required to exercise due skill, care and diligence in relation to the operation of this Policy. Where the Policy requires the support of third parties in relation to outsourced or delegated functions, EOS IM remains responsible for the oversight of these functions. 4. Governance The Policy is subject to the assessment and approval of the Board. Changes to the Policy can only be made with the Board s formal approval. Appendices may be updated by the Senior Management team of EOS IM and duly notified to the Board, for information purposes. The Director Investments is the owner and responsible for the maintenance and operation of this Policy. 5. Methodology & Process 5.1 Overview The methodology and process for the execution of transactions, as set out in this Policy is split into two sections: a) Non-Execution Venue Transactions, which relate to the purchase and sale of assets purchased outside of an execution venue. This includes the purchase of non-listed companies and real economy assets from companies e.g. solar energy production facilities. EOS IM applies the methodology set out in the section below. b) Execution Venue Transactions (not currently conducted as an activity), which includes the purchase of shares or bonds that are traded on an execution venue e.g. the purchase of a companies shares, where it is listed on an EEA investment recognised exchange such as the London Stock Exchange or Borsa Italiana. As at the date of the issue of this Policy, EOS IM does not apply the methodology applicable to these activities. Should EOS IM on behalf of the Fund initiate and conduct activities either directly or through brokers, it will adopt the relevant processes under the FCA rules. The key controls applied to the execution process are: approved and standardised investment methodology and process; 4

5 the conduct of extensive due diligence processes, prior to the execution of acquisition or disposals. The processes are set out in the Investment Procedure of each Sub-Fund; appropriate and independent external source pricing (either from an independent valuation agent or the markets); investments are reviewed and approved by the Board prior to execution; the review programme includes an assessment of investments on a post execution basis; periodic review of the investment process itself and of third parties supporting the execution process and Policy to ensure that it continues to be fit for purpose; and periodic review of the Policy itself to ensure that it continues to be fit for purpose. 5.2 Methodology & Process The Methodology and Process is split into the two sections. a) Non-Execution Venue Transactions The methodology and process established by EOS IM is set out in the Investment Procedure of each Sub-Fund. The procedures underlying these Investment Procedures may be adapted and enhanced from time to time, with the appropriate changes being made to the document. Due to the differing nature of the underlying investments, plus the parties required to perform certain tasks, may vary between the underlying funds of the Fund. b) Execution Venue Transactions As EOS IM and the Fund do not currently conduct transactions that fall within this category, the methodology and process does not apply to this section. However, it is to be noted that, should this change in the future the Best Execution section will be updated to include details as to how EOS IM will meet the requirements and its objectives. When establishing the Best Execution process for execution venue transaction, EOS IM will adopt the following approach. Execution Factors and Order Handling: In seeking to give the Fund best execution, EOS IM is required to take into account certain execution factors and decide on their relative importance. Whilst price is likely to be the key execution factor, in seeking the best possible result the following additional factors may, in some circumstances, be important: Total cost of execution; Speed of execution; Likelihood of execution or settlement; Size of the order; Nature of the order and any other consideration relevant to the efficient execution of the order (including the availability of liquidity and the market impact of the order). 5

6 Criteria for Execution Factors (Currently Applied) In determining the relative importance of the execution factors, EOS IM will take into account the following criteria: The characteristics of the Fund including its categorisation; The characteristics of the Fund order (e.g. type of trade); The characteristics of financial instruments that are the subject of that order (e.g. the asset class); The way the instrument is traded; The characteristics of the execution venues to which that order can be directed (e.g. only available to be purchased from the issuer, the particular market, country or region); The objectives, investment policy and risks specific to the Fund managed by EOS IM, as indicated in the prospectus or in their constituting instrument. Upon making a decision to execute a transaction, EOS IM will arrange for the prompt, fair and expeditious execution of that order and ensure that it is promptly and accurately recorded and allocated. Orders will be executed promptly except to the extent that characteristics of the order or current market conditions make this impracticable or it is otherwise in the best interests of the Fund. In relation to transactions on execution venues (if this was to occur), EOS IM will also take the following actions: 1. Select the approved brokers on the basis of the execution factors. In assessing the factors, the Firm will consider whether the brokers who have the relevant geographic and/or sector knowledge and/or undertake activity in the particular financial instrument. 2. EOS IM would only pass an order to a broker to execute a transaction, which: i. Is subject to the obligation to take all reasonable steps to obtain the best possible; ii. result for its clients taking into account the execution factors; and Has established and implemented an order execution policy to enable it to comply with this obligation in accordance with all regulatory requirements and if passing this order is consistent with EOS IM s own obligations. Execution Venues Through the establishment of approved brokers, EOS IM will have access to a number of trading venues including regulated markets and multilateral trading facilities. However, EOS IM may on occasion, through one of its approved brokers, execute transactions outside of a regulated market or a multi-lateral trading facility. 6

7 5.3 Mitigation of risk related to execution The main risks related to execution of transactions, as at the date of the issue of the Policy, are: a) failure to execute transactions in accordance with the Investment Policy, including conducting appropriate due diligence; b) failure to keep up to date with sound business practices in terms of valuing assets; c) failure to adapt the Policy and the Investment Policy to changes in the regulations and/or Fund mandate, should these arise. In order to mitigate these risks, both the transactions and Policy are reviewed and approved by the Risk and Investment Committee ( RIC ) and by the Board. EOS IM is kept up to date with the regulatory and best business practice requirements through the activities of its internal Compliance function and external professional advisers 5.4 Training & Awareness All EOS IM individuals involved in the execution process and the Board are required to read and understand this Policy. This is to ensure that the allocated responsibilities are performed appropriately in accordance with sound practice. As and where appropriate, such individuals will be provided with training to support this awareness requirement. 6. Management Information EOS IM will create and issue Management Information (MI) which is designed to enable the Board to assess the adherence to the Policy. This MI is designed to enable EOS IM to: a) Ensure that it has the appropriate information to assess the execution performance against the Policy and the Mandate requirements; b) The performance of the investments against the projections, which are used as the basis for the pricing; c) Identification of any issues that arise through the execution process, which require changes to the Policy or other remedial actions; and d) The efficiency, effectiveness and accuracy of the execution process. The quality of individual executions be subject to periodic review. In addition, on a regular basis EOS IM assesses the quality of its execution arrangements and, where appropriate, make changes. The results of such reviews shall be included in the MI. The MI is subject to periodic review by the RIC, who in turn will formally escalate any significant issues to the Board. The MI for the valuation of the Fund is to include, but is not limited to: Post transaction reports from the Deal Team, including confirmation that the processes were completed in a timely manner, any issues arising and changes required to processes, etc.; Summary transaction reports for the Fund (by Sub-Fund and new investments); 7

8 A report for each transaction setting out the level of the valuation and performance against predetermined threshold levels; and Periodic reviews of individual executions, through the above monitoring process. 7. Record Keeping EOS IM is required to retain and maintain records of the transactions in order to meet regulatory, internal policy and investor requirements. The underlying transaction records will be maintained as follows. Under the EOS IM internal requirements, the records are to be retained for the following period by EOS IM: i. Transactions executed for the Fund to investors not destroyed; ii. Supporting analysis and reports of transactions five (5) years from the date of the completion of the transaction; iii. Investment Committee approval and supporting information a. For the period that the investment is held not destroyed b. For the period post disposal of the investment - five (5) years from the date of the completion of the sale transaction; iv. Board approval of transactions not destroyed. In the event that a fund or investment vehicle appoints a new AIFM to replace EOS IM, records (i) and (ii) will be retained for a period of five (5) years from the replacement date. 8. Change Management & Policy Review This Policy will be subject to review at least annually. All changes to the Policy are to be approved by the Board 8