Purpose of the Policy
FundRock Management Company (“FRMC”) as Management Company under Chapter 15 of the amended Law of 17 December 2010 and AIFM under Chapter 2 of the amended Law of 2013 shall obtain the best possible result when executing decisions to deal on behalf of its funds under management according to the objectives, investment policy and specific risks, as indicated in the respective prospectuses (CSSF Regulation 10-04, article 28, Commission Regulation 231/2013, AIFMD Level II articles 27, 28 and 29).
Key Principles
FRMC shall take into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.
The relative importance of such factors shall be determined by reference to the following criteria:
- the objectives, investment policy and risks specific to the fund, as indicated in the fund’s rules or articles of association, prospectus or offering documents of the fund;
- the characteristics of the order;
- the characteristics of the financial instruments or other assets that are the subject of that order;
- the characteristics of the execution venues to which that order can be directed.
As part of these principles it is assumed that the most suitable means of execution of Equities or exchange traded derivatives would generally be executed through intermediaries on regulated markets, exchange trading systems, Foreign Exchange, OTC derivatives would generally be traded on bilateral basis, including a broker as applicable.
While some are traded publicly through exchanges, Bonds or Fixed Income would generally be traded on bilateral basis and/or through a broker as applicable.
Delegates Best Execution
When FRMC delegates the portfolio management function to appointed Investment Manager (‘IM’) delegates; FRMC ensures that these Investment Managers to which portfolio management has been delegated, have defined implemented and monitor the implementation of a best execution policy.
IM delegates shall establish, implement and apply procedures and arrangements which provide for prompt, fair and expeditious execution of orders on behalf of the funds. The procedures and arrangements shall satisfy the following requirements:
- orders are promptly and accurately recorded and allocated;
- they shall execute otherwise comparable fund orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the funds or of the investors in the funds require otherwise.
IM delegates shall ensure that the financial instruments, sums of money or other assets received in settlement of the executed orders shall be promptly and correctly delivered to or registered in the account of the relevant funds.
IM delegates shall not misuse information related to pending fund orders, and shall take all reasonable steps to prevent the misuse of such information by any of their relevant persons.
IM delegates shall establish and implement effective arrangements for complying with the key principles referred to in point 2 of this policy. In particular, IM delegates shall establish and implement a policy to allow them to obtain, for funds orders, the best possible result in accordance with point key principles of this policy.
IM delegates shall obtain the prior consent of the fund on the Best Execution policy and shall make available appropriate information to investors on the policy established in accordance with key principles disclosed in point 2), and on any material changes to their policy.
IM delegates shall monitor on a regular basis the effectiveness of their arrangements and policy for the execution of orders in order to identify and, where appropriate, correct any deficiencies.
IM delegates shall review their Best Execution policy on an annual basis. A review shall also be carried out whenever a material change occurs that affects their ability to continue to obtain the best possible result for the managed funds.
IM delegates shall be able to demonstrate that they have executed orders on behalf of the fund in accordance with the Best Execution policy.
IM delegates may directly execute client orders or directly execute discretionary investment management decisions to transact on behalf of the clients or funds.
IM delegates may also transmit client orders to other entities for execution purposes or place discretionary investment management decisions to transact on behalf of clients or funds.
IM delegates shall be able to demonstrate and explain when there is no choice then to use a single execution venue.
Responsibilities
The Management Committee of FRMC is defining the best execution framework, ensuring that it is cascaded down to the relevant oversight teams via proper training and instructions.
The Compliance Function ensures that any new rules concerning best execution are analysed and communicated to the teams in charge of delegates oversight. The Compliance Function also ensures monitoring of compliance with the regulatory requirements, i.e. the effectiveness of the control by the FRMC oversight teams on the implementation of the relevant policy requirements by appointed delegates.
FRMC team managers are responsible for defining procedures of oversight that fit legal requirements and compliance advice and for escalating any breach detected to the Management Committee and the respective Funds Boards of Directors.
A paper version of this Policy is made available free of charge to investors at FundRock’s registered office.
