ETHICAL PORTFOLIO MANAGEMENT SERVICE GUIDE TO THE ETHICAL PORTFOLIO

Transcription

1 ETHICAL PORTFOLIO MANAGEMENT SERVICE GUIDE TO THE ETHICAL PORTFOLIO MANAGEMENT SERVICE

2 INNOVATION BUILT ON TRADITION This brochure has been designed to be stored electronically. We have deliberately omitted any illustrations or photographs in order to minimise the use of printing materials and the impact on the environment.

3 CONTENTS Page 4. Welcome to Hawksmoor 5. The Hawksmoor Ethical Portfolio Management Service 6. What is Ethical Investment? 7. Ethical Investment in Practice 8. How We Invest 9. Key Risks 10. Becoming a Hawksmoor Client 11. Communicating with you and Distributions from your Portfolio 12. Custody of your Investments & Charges 3

4 WELCOME TO HAWKSMOOR Hawksmoor is an award-winning investment management boutique committed to the responsible management of the wealth entrusted to our care. Hawksmoor specialises in providing discretionary investment management services for private clients, trusts, pension schemes and charities. We are an independent business, without ties to a bank or any other financial institution. Hawksmoor s services bring together these highly qualified and experienced investment professionals, all of whom are focused solely on providing you with the best service. Our investment managers have worked in the industry for many years and hold relevant qualifications, such as the Chartered Institute for Securities & Investment Wealth Management Diploma. They are supported by leading third-party providers of custodial and settlement services as well as our highly experienced in-house Research and Administration teams. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. 4

5 THE HAWKSMOOR ETHICAL PORTFOLIO MANAGEMENT SERVICE It is our belief that ethical investment should be available to all, not just a specialist minority. Our Ethical Portfolio Management Service replicates our award-winning Discretionary Service in offering a comprehensive range of investment risks and portfolio objectives. It incorporates the same rigorous approach to risk management and asset allocation, but is comprised exclusively of investments chosen on the merits of ethical, environmental, social and governance criteria. The Service is available to private clients, trusts, pension schemes and charities. It invests both directly and via a range of tax-efficient structures, such as ISAs, SIPPs and Offshore Insurance Bonds. Each of our clients has a dedicated investment manager, supported by their team and our own in-house administration. After in-depth consultation with you, including a review of your attitude to and tolerance of risk, your requirement for income, your tax position and your particular ethical preferences, your investment manager will build and manage a portfolio that matches your individual needs. We will incorporate any existing investments when it is appropriate to do so. Your manager and their team will closely monitor your portfolio and ensure that is suitably invested at all times using our disciplined and structured investment process. We aim to meet you or your Financial Adviser at least once a year to review your ongoing requirements and to ensure that the portfolio is still properly reflecting these. We will also regularly send you investment reports, which include data showing the performance of your portfolio relative to appropriate benchmarks or indices. Your investments are held in separate nominee accounts by our custodian. This provides you with greater security and also enables the most efficient handling of your dividends, distribution of income payments, dealing with corporate actions and promptly executing all trades. We can use your annual ISA and Capital Gains Tax allowances to ensure the portfolio is managed as tax efficiently as possible. A comprehensive Annual Tax Report is sent to you each year, including the information that you will need to complete your tax return. 5

6 WHAT IS ETHICAL INVESTMENT? There is no single definition of ethical investment. At its broadest, it is a process built on the principle that the interests of all stakeholders in a business are best served if that business acts in a responsible and sustainable manner. Ethical investment tends to be categorized according to two acronyms: SRI and ESG. Social and Responsible Investment is the overarching process that incorporates Environmental, Social and Governance factors in judging the investment merits of a company. ESG factors may be looked at both positively and negatively. In the former, ethical investment tries to identify companies that make a positive contribution to the environment and society. The former includes such areas as alternative energy and the provision of clean water, but is not restricted to these. It may include companies that proactively seek equal opportunities employment, or carbon neutrality, or that provide housing and education for their employees in poorer countries. The latter seeks to exclude businesses involved in controversial activities. These typically include tobacco, alcohol, gambling, pornography, armaments, nuclear activities, animal testing, fossil fuels, human rights abuse, chemicals of concern and pollution. What is controversial will always be subjective and the list will never be comprehensive. For both positive and negative activities, the principal remains the same. The interests of share-owners are best served if the company acts in a responsible and sustainable manner. 6

7 ETHICAL INVESTMENT IN PRACTICE In practice, the absolute exclusion of controversial activities is extremely difficult. Fund managers will typically take a practical approach, by setting a limit on the amount of any activity that a company can do before it fails the screening process. In this way they allow themselves a sensible investible universe of potential stocks from which to pick. The complications can be illustrated by a simple example. The manufacturing of tobacco products is an activity that is widely seen as one that should be excluded from ethical portfolios. It is straightforward enough to identify businesses involved with this. But should the exclusion extend to the supermarkets and shops that sell the products? Or to the distribution companies that supply the retailers? Even if they use electric vehicles? What of the green electricity company that may supply renewable power to the factories? Where it is appropriate, we will also invest directly into UK equities of our own choosing. We will typically invest in up to 20 individual securities, combining our own proprietary research process with that of Vigeo Eiris, the market leaders in ethical research and screening. The usual solution is that funds will restrict the amount of the potentially controversial activity that any company can do. So while the manufacture of cigarettes can be set at a zero tolerance, sales of tobacco products may be capped at, for example, 5% or 10%. For these reasons you can reasonably expect that the funds in which your portfolio will be invested will not hold manufacturers of tobacco products; nevertheless it is possible that they will hold other companies, such as retailers, that have a limited degree of involvement. 7

8 HOW WE INVEST Our investment process is based on what we believe to be the basic objective of all investment: that our clients should expect to receive a net return in excess of inflation over the longer term. Underlying this deceptively simple ambition is our rigorous and highly disciplined investment approach and our fund and stock selection process. Having agreed your appropriate risk profile, our process is designed to deliver the portfolio performance you expect. We do this by rating the riskiness of every asset that you hold and monitoring your portfolio to ensure at any time that you are taking neither too much nor too little risk. We supplement this with our dynamic approach to asset allocation, based on the (again, deceptively simple) principle that we like to buy high quality investments as cheaply as possible. We offer three portfolio objectives: income, capital growth and a balance of both. Then, for each of these objectives, we will manage your portfolio according to one of five agreed levels of risk: low, low/moderate, moderate, moderate/high and high. Within each of these mandates there are maximum and minimum levels of risk that need to and can be taken in order for your investments to perform as you should expect. Our proprietary investment process is coordinated by our Head of Research and our research team, who have access to extensive third-party research. All our investment managers are also involved in the overall investment process and closely follow the mutuallyagreed strategy. Our motivation is simple: to increase the wealth of our clients. This philosophy forms the cornerstone of Hawksmoor s investment process and our belief that it is possible to achieve above-average investment performance without taking on unnecessary risk. 8

9 KEY RISKS You should be aware that the universe of stocks that qualifies for ethical investment is smaller than the overall market. As a consequence, the performance of your portfolio may deviate more from the overall market than if the manager were to choose from every stock. While we conduct due diligence on the funds in your portfolio, we cannot guarantee at all times that the fund managers will not hold stocks that engage in controversial activities that you have asked to be excluded. 9

10 BECOMING A HAWKSMOOR CLIENT Our investment approach is based on a clear understanding that behind every portfolio there is a living, breathing client with their own unique requirements and values. This means we need to ask you for information on your personal and financial circumstances and what you want your investment portfolio to achieve for you. This individual approach, together with our in-depth knowledge of investment markets, is key to our success. If you do not have a Financial Adviser; the first step is for you to meet one of our investment managers, either at our offices or a place more convenient to you. At this initial meeting we will collect all the information we need from you to develop a suitable investment strategy tailored to your specific needs. We will also ask you to complete a form with details of your circumstances (personal and family details, assets and income and tax position) and a short Risk Questionnaire to help us determine the right level of risk for your portfolio. If you have been introduced to us by a Financial Adviser, this fact finding process will be completed by them. Once we are sure we have a thorough understanding of your specific investment objectives and risk profile, we will prepare a comprehensive Investment Report confirming the recommended strategy and investment portfolio. This Report will take into account any restrictions and personal preferences you have told us about, including any existing investments you would like to add to the portfolio. Please refer to our separate document Explaining Your Portfolio for more details on how we select the right risk level and investment objective for your portfolio. 10

11 COMMUNICATING WITH YOU AND DISTRIBUTIONS FROM YOUR PORTFOLIO Communication with you As a client of Hawksmoor you will enjoy the highest level of service, including your personal investment manager supported by assistants and an administration team. Your manager will be responsible for your portfolio, aiming to maximize the returns within the risk parameters you have agreed, and keeping you regularly updated on the performance. You will have direct access to your manager and their team by telephone and by , and you will be encouraged to meet for regular face-to-face meetings to review the portfolio. The amount of written correspondence, reports and statements that you receive from us is entirely up to you, but you can expect at least to receive a formal valuation of your portfolio every six months. Also, shortly after the end of the tax year, you will receive a comprehensive tax report, which includes a Consolidated Tax Voucher and a Capital Gains Tax Report. Distributions from your portfolio Income can be distributed directly to your bank account, usually on a monthly basis. You can choose one of two ways: a regular sweep of all the income that has accumulated on the portfolio during the period since the last distribution, or; a fixed regular payment, usually based on the portfolio s projected annual income. Alternatively, you may retain and accumulate income to build up the value of the portfolio. 11

12 CUSTODY OF YOUR INVESTMENTS & CHARGES Custody of your investments Your investments will be held by a major third-party custodian, securely segregated and ring-fenced from the assets of both the custodian and Hawksmoor. In November each year, we will send you a Custody Statement listing the holdings held on your behalf by the custodian. Your investments will be covered by extensive professional indemnity cover: both Hawksmoor and the custodian maintain insurance policies to protect you from loss caused by such events as fraud, theft or negligence. Your portfolio also will qualify for protection under the Financial Services Compensation Scheme, the compensation fund for clients of authorised financial services firms. Charges All Hawksmoor s charges are transparent and competitive, with no hidden extras. The main charge is the annual management fee, which is based on the value of the portfolio and chargeable quarterly in arrears. Our standard pricing structure has no percentage dealing fee, just a flat administration charge for each sale and purchase. Please refer to the Ethical Portfolio Management Service Schedule of Charges for details of all the charges that may apply to your portfolio. 12

13 For further information on any of our services, or to arrange a meeting with an investment manager, please call one of our offices. You can also find more information on Hawksmoor, our services and full contact details on our website at Head Office: The Senate Southernhay Gardens Exeter EX1 1UG Offices also at: Bury St Edmunds Dorchester London Taunton info@hawksmoorim.co.uk Registered Address: 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter EX1 3QS. Company Number Hawksmoor Investment Management Limited is authorised and regulated by the Financial Conduct Authority HA1910