Our Pillar 3 Disclosure and Remuneration Code Disclosure are included with our annual accounts and statements filed with Companies House.
CZ Capital LLP – UK Stewardship Code Disclosure Statement – September 2016
FCA COBS Rule 2.2.3R requires FCA authorised firms to disclose whether they conform to the requirements of the UK Financial Reporting Council’s Stewardship Code (the ‘Code’).
The Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practice on engagement with investee companies and is to be applied by firms on a “comply or explain” basis. The FRC recognises that not all parts of the Code will be relevant to all institutional investors and that smaller institutions may judge some of the principles and guidance to be disproportionate. It is of course legitimate for some asset managers not to engage with companies, depending on their investment strategy, and in such cases firms are required to explain why it is not appropriate to comply with a particular principle.
The seven principles of the Code are that institutional investors should:
- Publicly disclose their policy on how they will discharge their stewardship responsibilities;
- Have and publicly disclose a robust policy on managing conflicts of interest in relation to stewardship;
- 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; and
- Report periodically on their stewardship and voting activities.
CZ Capital LLP has 2 main fund clients, CZ Equilibria UK Fund and CZ Enhanced Fund, as well as two managed accounts, for which it operates a long-term investment strategy, primarily through investments (long and short) in UK equity and equity-related securities, aiming to achieve an absolute return while remaining neutral to the overall direction of UK equity markets. The Firm supports the objectives of the Code and has committed to the Code. Its statement of how the principles of the Code have been applied and, where appropriate, an explanation of those principles which have not been complied with, is set out below:
Policy on discharging stewardship responsibilities
Investment decisions are based on the Firm’s own research into the prospects of those businesses in which it is intending to invest. This research may be supplemented by meetings with the senior management of those businesses together with independent reports and other data, in order to arrive at the Firm’s own assessments of business strategies and likely turnout.
The process emphasises the long-term intent of the investment decision and includes an on-going monitoring review and internal challenge of the investment thesis. Engagement with the senior management of the businesses is followed through where considered necessary to augment the initial investment and subsequent review process.
The main investment instruments used by the Firm are “Contracts for Difference” (“CFD’s”) which do not confer the ability to vote at general meetings. Although the Firm is, therefore, unable to vote in respect of the vast majority of its investments it does have the ability to decide to sell a holding where this is considered the most appropriate response to any given situation.
Due consideration is given to the Financial Reporting Council’s UK Corporate Governance Code when assessing the responses of investee companies to the Firm’s queries.
Policy on managing conflicts of interest in relation to stewardship
At present the Firm only has one client and this section is not relevant. However, it is the Firm’s policy and duty to act in the best interest of all of its clients. Should a conflict of interest arise, the firm’s senior management would take appropriate steps to ensure fair treatment of all clients, including disclosure of the conflict to the affected clients, if appropriate.
For the reason mentioned above, the Firm often does not have the ability to exercise a shareholder vote.
Monitoring of investee companies
As appropriate, the Firm monitors its investee companies to determine when dialogue with management may be necessary. The monitoring process may include the following:
- Reviewing the governance arrangements of the companies, including the operation of the Board and any non-executive oversight.
- Where appropriate, meeting members of the Board and/or the Chairman.
- Retaining adequate records of company meetings.
The investment monitoring process aims to identify problems at an early stage and concerns will be raised with company management as appropriate.
Guidelines on escalation
It is not the Firm’s intention to micro-manage the business of investee companies however, where there are concerns about any aspect of an investee company’s investment strategy, performance, governance or any other matter, this may be escalated to the management of the company.
Examples of the way in which such matter could be escalated include:
- Holding additional meetings with management
- Expressing concerns through advisers
- Intervening jointly with other investors
Acting collectively with other investors
There may be situations where it is appropriate to act collectively with other shareholders in order to engage with an investee company in the most effective manner. This would only be considered if a material issue arose and there were no perceived conflicts.
Policy on voting and disclosure of voting activity
The Firm tends not to vote at general meetings of investee companies as its investment usually comprises a derivative-based CFD which does not confer the ability to vote.
The Firm does not, accordingly, have a disclosable voting history.
Reporting on stewardship and voting activities
The Firm will respond appropriately to requests but, for the reasons explained above, it has no voting record upon which to report.
For further information on the Firm’s approach to the Stewardship Code, please contact:
Chief Financial Officer
CZ Capital LLP
53/54 Grosvenor Street
London W1K 3HU