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Cadence Investment Partners LLP

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

投資ポリシー

SG 01. RI policy and coverage

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

01.1. 責任投資アプローチをカバーする投資ポリシーを策定しているかどうかを明示してください。

01.2. ポリシーの構成要素/種類と対象範囲を示してください。

当てはまるものをすべて選択してください。
ポリシーの構成要素/種類
AUMの対象範囲

01.3. 投資ポリシーが以下のどの項目をカバーしているか明示して下さい:

01.4. 組織の投資原則および全体の投資戦略、受託者義務(または同等のもの)の解釈、ならびに、ESGファクターおよび実体経済の影響をどのように考慮に入れているかについて説明してください。

We invest in a focused list of listed equities that can capitalise successfully on Asian growth prospects over time. Our investment horizon is long-term, and we aim to derive returns through the compounding the operating profits of each company we own with low turnover. As such, we require a very high level of confidence in the ESG credentials of our invested companies, underpinning sustained ownership through challenging market cycles or short-term operational problems. ESG factors are highly relevant to successful relationships with customers and suppliers, impacting directly on long-term success in an industry and by implication our investment returns over multi-year periods. We analyse both "direct" and "indirect" environmental and social factors as part of both initial due diligence and our ongoing monitoring of each company. Corporate governance is reviewed in extensive detail in a regularly updated document for each of our investments.

Portfolio construction is not relative to any index, but built on a combination of conviction levels in each holding and a sensible diversification of macro risk factors. This unconstrained approach reflects our high governance standards. Valuation is based on conservative expectations for future cash flows, discounted by our own required minimum rate of investment return.

01.5. 責任投資アプローチをカバーする組織の投資ポリシーの重要な構成要素、バリエーション、例外事項を簡潔に説明してください。[任意]

To begin with a simple statement, we aim to deliver compelling investment returns with relatively low turnover and volatility. We think of ourselves as 'owners' of equity stakes in each business as opposed to speculative investors. By this we mean that we expect our long-term investment returns to be driven by the compounding of operational cashflows, encompassing the normal "ups and downs" of the economic cycle. To achieve this we identify companies we believe are capable of sustained growth and sound capital-management on behalf of shareholders. There is a natural scarcity of such businesses, reflected in our focused, unconstrained portfolio construction.

We believe that attractive financial returns are only sustainable over the long-term if a company can successfully manage all aspects of good governance as well as the operational dynamics of their sector or industry. Factors under the "ESG" umbrella are integral to this assessment. We analyse both "direct" and "indirect" environmental and social factors affecting each of our invested companies, and look for evidence that each is being managed effectively. Crucially, we recognise that standards and expectations are evolving continually in these areas and management teams must display an adaptive and progressive approach beyond simple "box-ticking". Where this is lacking, businesses risk serious damage to their brand and "franchise" in an industry, and this will undermine the sustainability of returns we rely on as long-term investors. In terms of corporate governance we produce and maintain an extensive analysis based on multiple years of financial reports and accounts. Some of the key elements of this work include capital management, alignment of interest between management and shareholders and the performance of the board of directors.

We take an active roll in promoting socially responsible and ethical corporate governance in each of the companies which we invest in. Whilst we must be pragmatic, to a degree, about the differing "norms" in the developed and emerging markets in our investment universe, we ask all managements to be progressive in their policies, benchmark international best practice and seek to affiliate with relevant industry groups to drive standards. In addition to our signatory status under UNPRI, we incorporate the UK Stewardship Code of Practise to reflect the importance of responsible investing in our process.

The investment policy is set up as follows:

1.Franchise identification

We look for businesses that have a strong position in a particular growth industry. These industries include areas such as internet services in China, regional life insurance and the growth of environmentally friendly technologies globally such as hybrid and electric components in the automotive market.

What we look for in a business

  • Evidence of return as an indicator of franchise
  • Unique industry position
  • Large and exploitable long term opportunity
  • Owner/manager alignment and integrit1y.

2.Owner due diligence

We view our investment in any company as ownership of that business. The question we ask is "if the stock market risked closing for ten years, would we be happy to own the equity position in question?". The work consists of the following analyses:

  • The company's approach to corporate governance. We look in detail at shareholder and board structures, management compensation, related party transactions and conflicts of interest as well as employee compensation and pension provision. We also consider any sustainability reports produced by management and related statements under items related to "business risk".
  • The environmental and social factors which the company faces. We categorise these under "direct" (ie the explicit result of manufacturing processes - eg mineral extraction - or the impact of a product on consumers or the environment) and "indirect" (ie damaging by-products of manufacturing - eg energy usage, air pollution - or impacts on workforce or the immediate social environment. We assess these factors based on how effectively each is managed against current best-practice and the ongoing evolution of company policies.
  • The quality of the accounts: We adopt a forensic approach to analysing the company's accounting information, reviewing the last 5 years report and accounts as well as recent accounting policy announcements. This includes a review of assets and liabilities and the use of capital within the firm. For example, 
    • We regard management use of capital and their ability to create value for shareholders as a key barometer of governance. We closely examine and monitor changes in the capital structure and the deployment of capital to assess if management are deploying funds appropriately. This will include such things as charting a company's share issuance history, tabulating its M&A activity, assessing the price paid for assets and the goodwill created and trying to unravel whether past capital deployment has accrued reasonable returns.
    • In addition many of the companies we invest in have large and complex group structures. We make efforts to understand where assets or liabilities are held and where returns or losses are being generated. We also assess the level of ownership and control over subsidiaries and affiliates, the level of any related party transactions and the extent to which tax planning may be taking place through the presence of subsidiaries and affiliates in low tax jurisdictions.
  • Alignment with minority investors: If the business is controlled by the major equity holders (which is the norm in many Asian businesses), are the management's interests aligned with those of minority shareholders in terms of returns. We avoid companies where this is inequitable.

3.Valuation

Our approach to valuation is based on the conservative extrapolation of cash-flow returns into the future, discounted by our own minimum required rate of investment return. This valuation is used as a reference to aid our judgement from a potential investment point of view rather than to provide a specific "price target".

  • Value assessment is shaped by:
    • Historic returns- what has been delivered?
    • Franchise strength- Can it be sustained?
  • Consider scenarios and risks, looking for asymmetry.
  • Discount cash flows by our required rate of return.
  • Classic "margin of safety" to allow for error.

We invest only in the equity of any business therefore there are no variations or exceptions in this approach.

01.6. 補足情報 [任意]

          
        

SG 01 CC. Climate risk (Private)


SG 02. Publicly available RI policy or guidance documents

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

02.1. 一般に入手できる組織の投資ポリシー文書を記載してください。その文書のURLを記入し、該当文書を添付してください。

URL/添付ファイル

添付ファイル


URL/添付ファイル

添付ファイル


URL/添付ファイル

添付ファイル


02.2. 一般に入手できる組織の投資ポリシー文書を記載してください。その文書のURLを記入し、該当文書を添付してください。

URL/添付ファイル

添付ファイル

02.3. 補足情報 [任意]

The policy document setting out our overall investment approach can be requested by any client or potential client.


SG 03. Conflicts of interest

03.1. 組織として、投資プロセスにおける潜在的な利益相反を管理するポリシーを策定しているかどうかについて明示して下さい。

03.2. 投資プロセスにおける潜在的な利益相反を管理するポリシーについて説明してください。

Cadence understands the need to identifying potential conflicts of interests and the importance of having robust systems and controls in place to protect our clients’ interests. Cadence has developed a policy for managing conflicts of interest associated with voting proxies and engaging with investee businesses. This forms a key part of our Compliance Manual and is available on request.

Cadence prefers not to become an insider on any stock position and will inform all investment banking contacts of this request. However, in the event that it does become an insider on any stock whether held or not an e-mail will be issued to all staff members bringing them inside and ensuring that no trading is done in the shares of any company mentioned and no announcement is made about the nature of the inside information to any outside party until such a time that Cadence is no longer deemed to be an insider.

03.3. 補足情報 [任意]

A document based on our compliance manual on 'conflicts of interest' is available on request.


SG 04. Identifying incidents occurring within portfolios (Private)


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