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DDJ Capital Management, LLC

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

          Proxy Voting Policy
        
          Engagement Policy
        

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.

DDJ's research process is designed to generate investment ideas with compelling risk/return profiles across an entire client portfolio. DDJ attempts to identify companies that have a solid core business with sufficient enterprise value coverage and generate sufficient free cash flow to service their fixed income debt obligations. DDJ's investment approach creates a comprehensive analytical overview of a target company focused on its current and future business prospects.

DDJ integrates into its investment research process various ESG considerations, such as a company's transparency in corporate governance, existence of an independent and experienced board of directors, a commitment to environmental protection and a track record of product safety. DDJ endeavors to identify material ESG factors that may contribute to financial downside (in particular, significant event risks that can affect an issuer's creditworthiness), as well as positive ESG factors or improving ESG trends that can create long-term value and assess whether or not market pricing adequately reflects such factors with respect to any proposed investment. If DDJ believes that an identified ESG-related factor will have a material impact on the business that may disproportionately change the risk/reward profile of such investment, DDJ will factor that assessment into its investment decision-making process

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]

DDJ believes that its clients have selected DDJ to manage their assets primarily to seek to maximize total return while minimizing risk, in each case in accordance with the desired investment strategy and any customized individual guidelines. In pursuing this objective, DDJ believes that it has a responsibility to take into account non-financial factors when allocating client assets to various investment opportunities. Accordingly, this Responsible Investment Policy outlines DDJ's integration approach with respect to assessing environmental, social and governance ("ESG") factors as an integral feature of DDJ's underlying investment philosophy and process.

To further enhance the quality of its ESG-related research, DDJ licenses ESG data from a leading third-party provider of such data for many of the companies within DDJ client portfolios as well as its investable universe more broadly. Such information includes both industry-wide and company specific research reports. In addition, the vendor provides ESG ratings for a broad list of corporate credit issuers, including many portfolio holdings of DDJ's clients. DDJ's research team can access such ESG ratings within DDJ's trade order and portfolio management system. Although DDJ does not use these ratings to strictly include or exclude an investment from client accounts, DDJ does instruct its analysts to incorporate such information in their fundamental research process in an effort to better understand the topical ESG-related risks as well as the relative value among existing and prospective investment opportunities.

DDJ, which pursues fixed income investment strategies on behalf of its clients, believes that issuer engagement as a debt holder tends to be more indirect when compared to that of an equity owner. In the high yield market, DDJ would like to see more robust ESG disclosures and increased transparency by issuers; to further this objective, DDJ seeks to influence terms in new issue bond indentures when possible (e.g., increased reporting obligations by issuers). DDJ also identifies inconsistencies between its third party ESG vendor research on certain companies and DDJ's evaluation of those companies. In such cases, DDJ initiated discussions with both the respective issuer and with its third party ESG vendor in an effort to improve the quality of the ESG research produced.

DDJ's active approach to fixed income investing oftentimes includes frequent interaction with company management, as DDJ seeks to keep an open line of communication with respect to actions that could negatively impact the investment made by DDJ on behalf of its clients. In the event that DDJ does not believe that it can advocate for practical change to mitigate a material ESG risk factor, divestment from a client portfolio may be warranted. In addition, DDJ implements exclusionary screens at the request of certain of DDJ's clients and works with new clients to tailor products that meet their internal requirements (e.g., investment restrictions on issuers associated with the production of Cluster Munitions, Tobacco, etc).

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.

URL/Attachment

URL/Attachment

URL/Attachment

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].

Not Applicable


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.

DDJ generally considers a conflict of interest to arise when there exists a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest (e.g., client interest) will be unduly influenced by a secondary interest (e.g., DDJ or personal interest). Such potential conflicts of interest include valuing illiquid or otherwise hard-to-price assets; regulating personal trading by DDJ employees; achieving best execution of trades; and allocating of investment opportunities amongst client accounts. DDJ believes that the compliance policies and procedures within its compliance manual are designed to address these potential conflicts of interests that may arise in the ordinary course of DDJ's investment management activities. The effectiveness of such policies and procedures is also reviewed periodically by DDJ's compliance personnel in connection with the firm's annual compliance review conducted pursuant to rules promulgated by the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended. Although numerous DDJ personnel share responsibility for managing these potential conflicts of interest, the firm's chief compliance officer is responsible for overseeing the compliance policies and procedures contained within the compliance manual.

03.3. Additional information. [Optional]

Not Applicable


SG 04. Identifying incidents occurring within portfolios (Private)


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