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Ardevora Asset 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

          Measures of effectiveness
        
          ESG integration.
        

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.

The objective of Ardevora’s investment process is to generate significant outperformance over the long-term whilst maintaining a relentless focus on risk. 

Ardevora’s approach to investing is fundamental. Ardevora look at many of the same things as other fundamental investors, but in a slightly different way. Like most investors Ardevora aim to invest in well managed, low risk businesses. But, unlike most, Ardevora think the best way to do this is to take the results of academic research from cognitive psychology, on errors and biases, and apply them to financial markets. Ardevora believes successful stock picking requires an understanding of how three groups of people interact: company managers, financial analysts and investors. Each group is potentially subject to bias, and the biases affecting each group are different. 

Ardevora actively manage equity portfolios, including four Global Equity products, as well as two UK Equity products. 

Ardevora’s fiduciary duty involves considering ESG factors while ensuring that assets under its stewardship are managed in a way which maximises value for its clients. This includes, but is not limited to, considering ESG factors throughout its investment process to safeguard the interests of its clients while making all reasonable efforts to act responsibly in this area.

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]

Cognitive psychology tells Ardevora that company managers, despite being intelligent and well informed, are especially susceptible to over-confidence bias. If the environment they face allows them to, they can take on too much risk. Ardevora take the view that, all things being equal, management are likely to push a business harder than is sensible. This is driven by their self-belief, their shareholders’ desire for growth and their companies’ remuneration policies. To get a sense of whether a company is being run in a sensible way Ardevora look at how fast the company is growing, how much cash is being generated by the business and what management are saying about their business and the industry conditions they face. All this helps us make a judgement on management’s attitude to risk. If we think a company is straining too hard for growth or in denial about how difficult conditions are becoming we will not buy the stock. Once we have identified those companies Ardevora think are being well managed, Ardevora apply the same lessons from cognitive psychology to financial analysts and investors to find mispriced stocks. In Ardevora's view, financial analysts can often under-appreciate how fast, and for how long, unusual businesses can grow, especially relative to superficially similar businesses. By exploiting this tendency Ardevora hope to identify interesting ‘growth stocks’. Separately, investors can often become sceptical and nervous about companies after a traumatic event. By exploiting this tendency Ardevora hope to identify interesting ‘value stocks’.

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].


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.

Ardevora undertake investment management activities for a number of clients (both funds and segregated accounts) and have a duty to perform these services in their best interests. However, a conflict could potentially arise between the interests of Ardevora’s clients, for example, where a decision or transaction benefits one client but causes detriment to another, or where one client is denied the opportunity to participate in an investment that would appear to be appropriate for them. Additionally, there may be a potential conflict between investors who are invested in different share classes in a fund.

In practice, and for the reasons outlined in Ardevora's Order Execution Policy and Investment Management and Dealing Procedures, such a conflict is highly unlikely to occur. However, Ardevora must be alert to any situations where it could arise and ensure these are properly addressed. Ardevora may also have a requirement to disclosure any such situation to a client.

In addition, Ardevora have a separate specific, Conflicts of Interest ("COI") policy, which covers Ardevora's actions in this area in more detail. The COI policy is reviewed annually and is available on request.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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