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Smith & Williamson Investment Management LLP

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Our approach to portfolio management is underpinned by the belief that each client needs a bespoke portfolio designed to meet their individual objectives. This encompasses everything from individual stocks held in the portfolio and reporting requirements to the broad asset allocation and ethical overlay. Within this our investment philosophy rests on three key pillars:

  • Liquidity: portfolios need to be flexible in order to adapt to changing economic and market conditions. We look to hold high quality investments which trade on large liquid markets. We regularly assess the liquidity of our portfolios, especially in the fixed interest and alternative sectors.
  • Quality: clients with long term horizons should invest in stocks that can grow over the long term. Companies with sound balance sheets and healthy cash flow generation are likely to grow their dividends, and sustainable business models should outperform across the economic cycle. To be clear, ‘sustainable’ includes consideration of ESG factors.
  • Genuine diversification: we do not look to outperform just in bull markets or just in bear markets; instead we use genuine diversification to add value throughout the economic cycle, and also to preserve capital during unexpected shocks.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

  • Asset Allocation Process

Our approach is divided into two stages: strategic asset allocation and tactical asset allocation:

  1. Strategic Asset Allocation process: identifies the appropriate mix of asset classes for various different broad risk and return profiles. The focus is on matching our long term capital market expectations with the requirements of different client types. We consider our in-house 20-year return forecasts, current asset class/regional valuations and a large degree of qualitative overlay.
  2. Tactical Asset Allocation process: devises short and medium term deviations away from the strategic asset allocation in order to add value in terms of either increased return or reduced risk. The committee of senior investment managers and strategists consider a set of leading macroeconomic indicators, market sentiment scores and their own research. The results are established by taking an average of the individual views.
  • Security Selection Process

We have 56 sector specialists who assign buy, hold and sell recommendations to our investment universe of UK and overseas equities. Smith & Williamson puts particular emphasis on balance sheet quality, cash generation and long term strategic drivers, as well as the qualitative views of the individual analysts. We are long term fundamentally driven investors the sustainability of each business is a key part of the process so understanding the ESG factors affecting each company is a part of the process of evaluation of the likely future success of each investment we make. The stock selection process is supplemented by our fund analysts and fixed interest specialists who produce recommendations for bonds, alternatives, real estate and collective investments.

All our analysts are also investment managers with client responsibility. This ensures that our research is produced from a practical buy side perspective and that our analysts have a stake in the ideas they produce (as they will buy these for their own clients).

  • Portfolio Construction

The output of the asset allocation and security selection processes are recommendations rather than mandatory actions or central model portfolios. We believe that it is the individual investment managers who know their clients best and as such they are the best placed to decide how to implement asset allocation and security selection decisions. The manager is responsible for considering the client’s risk profile (capacity for loss), restrictions (ethical or asset class), time horizon, return objectives and other constraints when structuring a portfolio. Each client is able to set their own restrictions on their portfolio including ethical and ESG constraints.

01.6. Additional information [Optional].


SG 01 CC. Climate risk (Private)

SG 02. Publicly available RI policy or guidance documents


02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.


02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

We define a conflict of interest as a situation which arises when: our interests or the interests of a partner, director or employee conflict with the duties it owes to a client; or the duties we owe to one client conflict
with the duties we owe to another client. We take all reasonable steps to identify conflicts of interest arising and to manage potential conflicts in a way that is fair to our clients and in accordance with our written policy. We avoid and manage these conflicts through a number of policies and procedures. These include:

  • Maintaining a confidentiality policy
  • Restricting staff dealings in securities
  • Restricting information flows
  • Carrying out transactions in Investments as agent not as principal
  • A policy to ensure gifts and inducements received from or given to third parties by members of staff are declared, and pre-approved as appropriate.
  • Maintaining appropriate and transparent charging policies
  • Disclosing in accordance with market practice
  • Obtaining clients’ informed consent

03.3. Additional information. [Optional]

S&W is not subject to any conflicts arising from its ownership structure. The only substantial shareholder of the group is AGF Management Ltd, a Canadian investment management firm which owns 30%, with the rest owned by current and retired staff and their families. No third party product provider or supplier has a material shareholding or financial interest in the S&W (or vice versa) such as to be able to influence S&W’s operating decisions to the detriment of client interests. We take all reasonable steps to identify conflicts of interest arising and to manage potential conflicts in a way that is fair to our clients and in accordance with our written policy.

SG 04. Identifying incidents occurring within portfolios (Private)