Statement on the UK Stewardship Code
Ruffer’s policy with respect to responsible ownership reflects our singular investment approach as an active investment manager dedicated to absolute return investing. We invest globally in selected securities unconstrained by benchmark considerations. To that end fundamental securities research across global markets is crucial to our investment approach, as are regular meetings with company representatives. Continuous assessment of companies’ strategy, performance and management is core to our stock selection with in–house expertise provided by our research team. We manage assets on behalf of both professional and retail clients.
Our policy with respect to responsible ownership reflects both our specific investment objectives and approach and the resources we can dedicate to these matters. Despite Ruffer remaining a modest sized institution within the context of global investment institutions, we devote considerable resource to investment research, monitoring and engagement with companies.
Ruffer’s stewardship policy aims to provide a pragmatic framework through which it can
- exercise its ownership responsibilities appropriately
- monitor companies in which Ruffer invests for its clients
- intervene with those companies, when necessary, on issues that are likely to impact the economic interest Ruffer’s clients hold through their investments
The policy is also intended to be sufficiently wide–ranging to reflect Ruffer’s global approach to investment and thereby operate consistently across all markets in which it invests for clients.
Ruffer broadly supports the principles of the UK Stewardship Code and has responded accordingly in its statement on the Code which is detailed below.
Ruffer believes that good practice by investee companies with regards to social, environmental and governance issues is likely to be consistent with good corporate performance. Where social, environmental and ethical issues are identified through the monitoring of investee companies, these are considered alongside other factors in determining the investment decision.
Where clients wish to impose restrictions on certain types of investment (eg alcohol, tobacco, armaments) the restrictions will be considered and agreed as appropriate.
The UK Stewardship Code
In July 2010 the Financial Reporting Council (FRC) issued a statement of seven principles which set out good practice for institutional investors’ engagement with investee companies. The principles state that institutional investors or their agents should
- Publicly disclose their policy on how they will discharge their stewardship responsibilities
- Have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed
- Monitor their investee companies
- Establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value
- Be willing to act collectively with other investors where appropriate
- Have a clear policy on voting and disclosure of voting activity
- Report periodically on their stewardship and voting activities
Ruffer’s response to the principles of the code
Ruffer supports the principles of the UK Stewardship Code as a guide for good practice engagement with our investee companies. It is broadly compatible with our stewardship policy.
- Stewardship policy and public disclosure. Ruffer’s stewardship policy is described in this document which is available on our website at ruffer.co.uk. We regularly monitor and engage with companies on matters such as strategy, performance, risk, capital structure as well as corporate governance, including culture, board composition, succession planning and remuneration. Our voting decisions are taken internally. We review local best practices and corporate governance codes when voting clients’ shares, and actively consider companies’ explanations for not complying with best practice to ensure we vote in the best interests of our clients.
- Conflicts of interest. Where conflicts of interest on voting or engagement exist between Ruffer, and/or a particular client and our wider client base, it is Ruffer’s policy to act in the best interests of all our clients. In accordance with its regulatory obligations (SYSC 10), Ruffer has a Conflicts of Interest Policy which addresses how potential conflicts are identified, considered, managed and recorded. It notes how Ruffer will always take reasonable steps to ensure fair treatment for clients, disregarding any interest it may have. The policy forms part of each client’s Investment Management Agreement. Since all interested parties are sent a copy of the policy directly we do not see any further benefit in making it publicly available. Conflicts of interest are reviewed by the compliance function and reported to the Audit Committee annually.
- Monitoring. All companies Ruffer invests in for its clients are monitored by analysts on Ruffer’s research team. Monitoring includes study of company statements and third–party reports, and attendance at public meetings, but Ruffer is also able to engage the board and senior management of investee companies directly, usually in ‘one–to–one’ meetings at Ruffer’s or the company’s offices. Monitoring is oriented towards identifying potential problems at an early stage in order to minimise any loss of shareholder value by Ruffer’s clients. Ruffer may, from time to time, choose to become an ‘insider’ when on consideration of the circumstances if considers it prudent to do so in the interest of good stewardship. The processes for monitoring, engaging and escalation are undertaken by Ruffer’s research team and are overseen and monitored by the Investment Review Committee, which reports to Ruffer’s Executive Committee.
- Escalation. When an issue is identified, Ruffer will usually raise it directly with the board or senior management of the investee company. Performance issues might be raised at the frequent one–to–one meetings with senior management, whereas governance issues might be more appropriately raised in separate meetings. These could be with executive or non–executive members of the board, as appropriate. If the outcome of this direct intervention is not satisfactory, Ruffer may consider further escalation within the board, the company’s advisers, to other shareholders (see below) or, if necessary, to a General Meeting of the company.
- Acting collectively. Where it makes intervention more effective, Ruffer may engage with other shareholders in the investee company, either to decide or implement a course of intervention
- Voting. It is Ruffer’s policy to vote on AGM or EGM resolutions and corporate actions where at least one of the following materiality tests is met (unless voting is not in clients’ best interests or where, after due consideration, not casting its vote is the preferred course of action)
- Ruffer’s clients have a material interest in the company
- the value of the holding is material to Ruffer’s clients
Ruffer applies this policy across all shares held, both domestic and international, reflecting the global nature of its investment approach. Ruffer may vote in other circumstances if it deems it appropriate to do so.
In gathering information and making our final voting decisions, we place great value in engaging with companies and their advisers. We endeavour to advise investee companies where we plan to vote against management.
Ruffer has access to proxy voting research to assist in its assessment of company resolutions and identification of contentious issues. Although we are cognisant of proxy advisers’ voting recommendations, we do not delegate or outsource any of our stewardship activities when deciding how to vote our clients’ shares.
Ruffer’s process for lodging proxy votes ensure all instructions are scrutinised by senior investment staff before submission. Where necessary, particularly contentious issues can be escalated to a member of Ruffer’s Executive Committee for approval.
Voting records are made available to clients on request. It is not Ruffer’s policy to disclose publicly its voting records in the same way it is not policy to disclose publicly its holdings (except where required to do so for regulatory purposes).
Ruffer does not participate in stock lending so recalling lent stock is not an issue, though some of its clients have chosen to do so through their custody arrangements. Where it is required to recall this stock, we would liaise with the client and custodian accordingly.
- Reporting. Ruffer’s stewardship activities, including monitoring and engagement with companies and voting activity, are clearly recorded. Ruffer can provide clients with information on voting, engagement and stewardship activity on request. Additionally we make our annual voting and engagement report available to clients and advisors on request.
It is not Ruffer’s policy to disclose publicly its voting records in the same way it is not our policy to disclose publicly its holdings (except where required to do so for regulatory purposes).