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LSV Asset Management

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

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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

          Internal research and analysis
        
          Disclosures and reporting
        

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.

LSV’s portfolio decision making process is quantitative and driven by (1) a proprietary model that ranks securities based on fundamental measures of value, past performance and indicators of recent positive changes and (2) a risk control process that controls for residual risk relative to a benchmark.  There are a number of ways in which ESG plays a role in our quantitative investment process.  In particular, there are a number of signals in LSV’s model that relate to governance.  See below for more information.
 

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]

LSV's policy outlines the six PRI principles and addresses how LSV seeks to promote such principles in its business.  The policy notes that LSV has taken the following actions that promote ESG factors and is committed to continuing such efforts into the future:


1. Investment Management
There are a variety of ways in which ESG plays a role in LSV’s quantitative investment process:

  • There are a number of signals in LSV’s model that relate to governance.
  • LSV can integrate certain ESG constraints into the portfolio construction process for clients that request it. 
  • LSV may choose not to purchase or increase its investment in particular issuers due to heightened ESG risk, such as news of a major environmental or governance risk related to the company.  Because LSV’s process is quantitative, LSV can typically find another highly ranked stock to replace a company that has such ESG risk associated with it.
  • LSV offers a commingled investment fund that excludes securities based on certain socially responsible investment considerations.
  • LSV can apply negative screens at the portfolio level for clients that request it.  Such screens can be applied based on client provided lists or based on certain third-party vendor data subscribed to by LSV.
  • Forecasts by equity analysts are factored into LSV’s quantitative model.  ESG factors, such as climate change, are considered by some equity analysts, and, therefore, have an effect on portfolio construction. 

2. Internal Research and Analysis
LSV conducts research on an ongoing basis on a variety of topics in order to develop enhancements to the LSV quantitative model.  LSV considers ESG factors using the same investment process as for its other investment ideas.  LSV has researched a variety of ESG-related topics and is committed to further review of ESG factors that may increase returns and/or reduce risk and, after appropriate verification and testing, incorporating such factors into its model.  In addition, LSV works with clients to develop ways to help achieve their goals with respect to ESG investing within the framework of LSV’s quantitative model.


3. Proxy Voting
LSV’s standard investment management agreement expressly authorizes LSV to vote proxies on behalf of a client’s account.  Therefore, unless the client reserves proxy voting responsibility, it is LSV’s responsibility to vote proxies relating to securities held for the client’s account.  LSV has retained an expert third party, currently Glass Lewis & Co. (“GLC”), to implement LSV’s proxy voting process, provide assistance in developing proxy voting guidelines and provide analysis of proxy issues on a case-by-case basis.  GLC is also a signatory to the PRI.  For clients where LSV has proxy voting authority, certain ESG factors are built into LSV’s standard proxy voting guidelines.  In addition, through GLC, LSV is able to offer ESG-focused guidelines that include an additional level of analysis on behalf of clients seeking to vote consistent with widely-accepted enhanced ESG practices.  These ESG-focused guidelines are designed for clients with a focus on disclosing and mitigating company risk regarding ESG issues.


4. Engagement with other Parties
LSV may, from time to time, engage with PRI staff, other PRI signatories or service providers regarding ESG issues.  Personnel of LSV attend ESG-related conferences.  In addition, portfolio managers make presentations to clients and/or consultants regarding ESG issues.  As a quantitative manager, LSV does not generally engage directly with issuers or policy makers on any matters, including ESG matters.  However, LSV advocates for greater ESG-related disclosures by issuers through its relationships with third-party data vendors.


5. Resources devoted to ESG
LSV has designated senior members of the firm to lead its ESG initiatives.  In addition, LSV has invested in a variety of ESG data in order to accommodate clients seeking to apply ESG principles to their portfolios and to support the firm’s ongoing research into ESG matters.  


6. Disclosures and Reporting
LSV discloses and reports information concerning its ESG initiatives in the following ways:

  • LSV annually reports to the PRI on its activities and progress toward implementing the PRI principles as required.
  • LSV makes this Statement of Responsible Investment Initiatives available on its website.
  • LSV provides a variety of different forms of ESG-reporting to its clients upon request.  
  • LSV’s proxy voting policy is publicly available in its Form ADV Part 2A.  In addition, LSV clients may obtain information from LSV about its proxy voting guidelines and how LSV voted any proxies on behalf of their account upon request.  

 

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

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URL/Attachment

Other, specify (1) description

          Internal research and analysis
        

URL/Attachment

Other, specify (2) description

          Disclosures and reporting
        

URL/Attachment

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

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

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02.3. Additional information [Optional].

Additional documents regarding LSV's approach to ESG investing are provided upon request.


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 same team of portfolio managers is responsible for the day-to-day management of all of LSV’s accounts.  LSV uses a proprietary quantitative investment model to manage all of LSV’s accounts.  LSV relies extensively on its quantitative investment model regarding the advisability of investing in a particular company.  Any investment decisions are generally made based on whether a buy or sell signal is received from the proprietary quantitative investment model.  Accounts or funds with performance-based fees and accounts or funds in which employees may be invested could create an incentive to favor those accounts or funds over other accounts or funds in the allocation of investment opportunities.  In addition, it is possible that a short position may be taken on a security that is held long in another portfolio.  LSV has procedures designed to ensure that all clients are treated fairly and to prevent these potential conflicts from influencing the allocation of investment opportunities among clients.  These procedures include quarterly reviews of allocation of investment opportunities among clients and allocation of partially-filled block trades to monitor for these potential conflicts and to ensure that investment opportunities are fairly allocated to all clients.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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