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Lynx Asset Management AB

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.

Lynx’s investment philosophy is to apply rigorous statistical techniques to analyse data, identify patterns and build trading models based on those patterns. The program is broadly diversified and solely invests in futures and forwards markets across four asset classes: equity indices, fixed income, currencies and commodities. The investment process is fully systematic from signal generation to risk management and execution.    

The objective of the Lynx program is to generate a high risk-adjusted return while maintaining favourable portfolio characteristics such as a low correlation to equities over time.

Details on how the Lynx program considers ESG factors and real economy impact are outlined below in SG 01.5.

 

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]

The investment style adopted, and the derivatives traded in the form of futures and forwards, do not involve discretionary fundamental analysis or security selection of single stocks or corporate bonds. Therefore, no screening is performed based on ESG factors, a practice that is predominantly focused on individual company-related assets like equities and credit. Common frameworks are usually unfit for screening asset classes such as currency forwards, interest rate derivatives, broad equity indices or commodity futures. Further, the instruments traded do not entail any legal ownership of the underlying assets and as such no voting rights can be exercised that would enable Lynx to be an active owner with influence on any company or other entity. With that said, the Lynx program is screened quarterly by the independent Brummer & Partners’ Risk and Sustainability teams. These teams collaborate with an external expert to identify direct holdings in companies involved in certain controversial activities linked to established ESG standards, such as the UN Global Compact framework and the OECD Guidelines for Multinational Enterprises. The screening process also covers companies directly involved in coal, or the development, production, maintenance or sale of weapons that are illegal or deemed particularly controversial because of the disproportionate harm they may cause. As expected, the derivative instruments traded by the Lynx program render this type of screening service to be less relevant.

Lynx is dependent upon the health of the financial markets as well as of the society in a wider perspective. Lynx manages quantitative strategies using a fully systematic investment process. Investments are made in exchange traded futures on equity indices, fixed income, commodities and currencies, as well as over-the-counter FX forwards. Lynx has a conservative market selection approach with a focus on the most liquid markets in order to minimize market impact and not disrupt or materially affect market prices. We aim to ensure that our positions and trade volumes are small in relation to the daily volumes in those respective markets and we have a dedicated team – Execution Research – that is responsible for the algorithms used in our trading process. Execution Research gathers data on each order, focusing on market liquidity and trade volumes, and reports to the Investment Committee with their findings.

In addition, to protect futures markets from excessive speculation especially in the commodity sector the U.S. Commodity Futures Trading Commission ("CFTC") has implemented limits on certain commodities to prevent “sudden fluctuations or unwarranted changes in the price of such commodity”. Lynx strictly adheres to these limits and applies complementary measures to avoid exceeding them. Physical delivery is not allowed. For investors who wish to exclude certain markets, we can offer our strategies via customized managed accounts. One of the fund vehicles managed by Lynx, Lynx Dynamic, ceased trading energy contracts at the end of 2019. 

The Lynx Program does not utilise high frequency trading. The typical investment horizon of the fund spans from a few days to multiple months. Timeframes are important; the goal is the creation of sustainable, long-term investment returns not just short-term returns. 

Furthermore, in light of our commitment to responsible investing and our aspiration to be early adopters, we acknowledge the emergence of equity index futures that incorporate ESG factors into their construction process. Lynx is monitoring this development and plans to assess these index futures for potential inclusion in our portfolios in 2020.

In addition to the sustainability activities associated with the investment process, Lynx Asset Management has developed policies and procedures which are applied on a company level. Among other things, Lynx works to reduce our environmental impact, and to take responsibility for how we conduct our business in terms of equal treatment of investors, alignment of interests, and the handling of conflicts of interest. The existence of such a policy framework alongside our investment policy is a prerequisite for achieving and maintaining sustainable global financial markets and for fulfilling our duties to our investors. 

We acknowledge the importance of continuous learning and development in the area of sustainability and responsible investment. We will work to foster transparency about our activities relating to these matters and provide information and support to clients, employees, governing bodies and other organisations. By doing so, we hope to raise awareness, encourage investors to pay attention to wider contextual factors, including the stability and health of economic and environmental systems and the evolving values and expectations of the societies of which we are part of. 

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.

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

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02.3. Additional information [Optional].

Lynx´s general mission and overall approach to sustainability is briefly summarised on the company´s website. The Sustainability policy document in its entirety, which is a higher level of disclosure of our RI capabilities, is provided to clients upon request. The policy covers both investment and company activities. 

The information disclosed on the website is updated on an ongoing basis in accordance with the Swedish industry standard to provide a comprehensive framework for end clients to gain a better understanding of sustainability practices. 


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.

The Board of Directors has adopted a policy describing the company’s efforts to identify, handle and supervise conflicts of interest including, inter alia, how conflicts of interests within Lynx’s investment and risk management processes are managed. Lynx maintains a conflicts of interest register. Currently, our assessment is that there are no unmanaged conflicts which are at odds with investor interests. The Compliance department monitors and advises on potential conflicts of interest. The CEO, or person appointed by the CEO, is responsible for identifying, managing, documenting and reporting conflicts of interest.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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