Principles for dealing with conflicts of interest
As of: February 2017
Information on how Universal-Investment deals with conflicts of interest
As an investment company, we have the responsibility to act exclusively in the interest of our investors and conduct our business truthfully, with the necessary care and diligence and honestly, acting in the best interest of the investment funds we manage or the investors in these investment funds and the integrity of the market.
Conflicts of interest cannot always be excluded particularly in an investment company that provides a broad range of services to many investors and clients.
Services of Universal-Investment-Gesellschaft mbH
Our firm provides the following services:
1. Management of domestic investment funds:
- UCITS-compliant investment funds
- Balanced investment funds
- Other investment funds
- Real-Estate investment funds
- Pension investment funds
- Open-ended domestic Special AIF with fixed fund rules
- General open-ended domestic Special AIF including hedge funds
- Closed-ended domestic Special AIF
- Closed-ended domestic Mutual AIF.
2. (Ancillary) services for the management of investment funds:
- Individual portfolio management and investment advice
- Distribution of shares in investment funds
- Participation in companies authorised to engage largely in the same activities as Universal-Investment-Gesellschaft mbH
- Conclusion of retirement planning contracts under the German Individual Retirement Planning Act (“AltersvorsorgeZertifizierungsgesetz”) including commitments to minimum pay-out levels
- Transactions to invest proprietary assets
- Ancillary services connected directly with the management of investment funds.
3. In particular, Universal-Investment-Gesellschaft mbH performs the following (ancillary) services that are directly connected with the management of investment funds:
- Services in connection with the portfolio management of investment funds managed by us, e. g. rules-based portfolio management, overlay management, currency and capital protection management, services in connection with security lending transactions, collateral management and transition management
Reporting services, e. g. IFRS and HGB reporting, risk reporting, VAG reporting, direct investment reporting, performance analysis
- Risk analysis and other ancillary services for risk management
- Fund accounting and related tasks for external asset management companies and the subsidiary Universal-Investment-Luxembourg S.A.
- Fund accounting and related tasks for external custodians
- Support in monitoring investment restrictions for investment advisers and asset managers
- Support in monitoring investment restrictions for custodians in charge of investment funds managed by us.
The following key services have been outsourced to third parties some of which may outsource these services to another third party in individual cases:
- Depository functions for investment funds
- Portfolio management of financial instruments and real estate
- Investment advisory for financial instruments
- Brokerage and counterparty for financial transactions
- Collateral management
- Execution of securities lending transactions
- Transition management
- Execution of trading orders
- Data provision for risk management purposes
- Internal audit
- Financial statement audits
- Legal counsel
- Tax counsel
- Property management, domiciling of real estate companies, valuation of properties and participations
- Consultant services
- Performance analysis
- Proxy voting services
- Insurance services
- Third-party evaluation (real estate surveyors)
- Data provision, e. g. index data, WM data service, ratings
- IT services (provided by Universal-IT Services-Gesellschaft mbH)
- Distribution services.
Our shareholders are
- Beta HoldCo GmbH
- Joh. Berenberg Gossler & Co. KG
- Berenberg Beteiligungsholding GmbH
- Lampe UI Beteiligungs GmbH.
Universal-Investment-Gesellschaft mbH holds shares in the following companies:
- Universal-Investment-Luxembourg S.A., Luxembourg, a Luxembourg-based asset management company.
- Universal-IT Services-Gesellschaft mbH, Frankfurt am Main, a servicing company to which Universal-Investment-GmbH has outsourced its IT services.
- Masterinvest Kapitalanlage GmbH, Vienna, an Austrian asset management company.
- DPG Deutsche Performancemessungs-Gesellschaft für Wertpapierportfolios mbH, Frankfurt am Main, a company that measures the performance of security portfolios.
Please find below our arrangements for dealing with conflicts of interest, outlined in accordance with the applicable statutory requirements.
Potential conflicts of interest
Conflicts of interest can arise between
- our company, other companies within our group, our management, our employees, external companies and individuals with whom we have contractual arrangements and other third parties and the investment funds and insourcing mandates we manage, our investors and our clients or
- between individual investors and clients or
- between our investors and the investment funds we manage or
- between different investment funds we manage.
Conflicts of interest could also arise between our company and asset managers mandated by us and other outsourcing companies, investment advisers or custodians.
Conflicts of interests that could inflict substantial damage to the investment funds or investors in these investment funds can arise particularly in connection with:
- Incentive systems for senior management or employees of the firm, other companies within our group or external companies that provide contractual services based on which we can perform the collective portfolio management;
- Transactions in elgible assets for our investment funds by senior managers or employees of our firm or senior managers or employees of companies that provide contractual services based on which we can perform the collective portfolio management;
- Rebalancing of assets within the investment funds;
- Transactions to improve the appearance of fund performance on specific dates (“window dressing”);
- Transactions between the firm and the investment funds or individual portfolios it manages or transactions between the investment funds and / or individual portfolios the firm manages;
- The combination of orders („block trading”);
- Mandating of closely related companies and individuals;
- Large single orders;
- „Frequent trading“;
- The definition of the cut off time;
- IPO allocations;
- The outsourcing of one or several functions to another company;
- The execution of voting rights in the portfolio;
- The activities of the custodian;
- Investors seeking to redeem their investments and investors seeking to keep their investments in the investment funds;
- Investment objectives that involve investments in illiquid assets and the redemption principles of the investment funds.
Measures to prevent, manage and monitor these potential conflicts of interest
Universal-Investment-Gesellschaft mbH has organisational and administrative arrangements in place to identify, prevent, solve, manage and observe/monitor conflicts of interest in order to avoid that conflicts of interest inflict serious damage to investment funds and investors.
In particular, we have set up a compliance organisation that monitors our arrangements for the avoidance of conflicts of interests independently of the individual businesses and regularly trains all our employees on regulatory requirements and our in-house guidelines. We have set ourselves high ethical standards for dealing with investors, clients and business partners by preventively creating sensitive areas and Chinese walls between individual businesses and between ourselves and external third parties mandated by us, separating businesses and responsibilities and implementing organisational guidelines. We expect our business partners to maintain similarly high ethical standards. Particular protection is in place to avoid conflicts of interests in our independent risk monitoring function.
If the organisational arrangements we have put in place to identify, prevent, solve and monitor conflicts of interest in order to avoid the risk of negative implications on investor interests prove insufficient, we will inform investors accordingly in advance and develop countermeasures.
Apart from the statutory requirements, our firm has also accepted and implemented the code of conduct issued by the German Investment Funds Association (BVI) as a standard for dealing properly and responsibly with our investors’ capital and rights.
We have also taken the following specific measures:
- Both our remuneration system and our internal procedure regarding secondary employment by our staff do not create any incentives to put personal interests above those of either the investment funds managed by us, investors or clients;
- We have committed our contractual external investment advisers and asset managers to avoid conflicts of interest;
- We have set up rules for employee trading that are continually monitored by our compliance department and maintain a restricted list that prohibits employee trading in certain assets to avoid potential conflicts of interest;
- We have implemented disclosure rules and rules for accepting and handing out gifts;
- We continually monitor transaction frequency in the investment funds we manage in order to avoid rebalancing of investment funds that disadvantage investors;
- We have taken measures for the prevention of transactions designed to improve the appearance of fund performance on specific dates (“window dressing”);
- We have published our Best Execution Principles;
- Apart from the investment of our own capital into funds we do not transact for our own account with the investment funds or individual portfolios we manage, and we only transact in securities between different investment funds we manage upon specific request by the affected investors or in order to achieve better trading results - always under the premise that none of the participating investment funds is in any way disadvantaged;
- We combine orders (in so-called „block trades“) based on a uniform allocation principle;
- To the extent that we outsource activities to closely related companies and individuals (particularly our affiliates) (for instance IT services) we always disclose this fact to the investors;
- We have internal monitoring in place to avoid trading in large single orders that could impact the market and, as a corollary, the investment funds;
- We discourage „frequent trading“through our employee trading rules and continually monitor the investment funds we manage to pick up any such activity;
- We have agreed cut off times with our custodians in order to avoid speculation against the investment funds we manage;
- IPO allocations are governed by our uniform in-house allocation principles;
- We outsource one or several functions to another company in order to broaden the range of services we can offer to clients;
- The execution of voting rights in the portfolios is based on the recommendations of an external, neutral consultancy and the BVI’s research principles;
- The custodians act independently of our firm and are contractually bound to act exclusively in the interests of the investors;
- Our internal liquidity management and our internal Principles for Revaluation of the investment funds managed by us are designed to balance the interests of investors wishing to redeem their investments in the funds and investors wishing to maintain their investments in the funds;
- The same applies to the conflicts between investment objectives that involve investments in illiquid assets and the redemption principles of the investment funds.
Should our firm be unable to avoid a conflict of interests, we will inform you of the nature of the conflict and its source.
Unavoidable conflicts of interest may arise out of the fact that our investment funds, for the management of which our firm receives a management fee, may invest in our own products; and we might in some cases additionally receive a distribution fee. Similarly, our investment advisers or asset managers may acquire or recommend the purchase of products for the investment funds that are managed or advised by those same investment advisers or asset managers who receive a separate management or advisory fee for such products. If such is the case we seek to prevent damages to investors by in ensuring that these products may only be acquired after objective deliberation of whether the purchase is in the interest of the investors.
In case the portfolio manager intends to contract with affiliated companies (e. g. property managers) in the context of the management of open-ended real estate funds or companies affiliated with him shall engage in a real estate transaction or in case the portfolio manager’s property shall be purchased for a fund, we will make reasonable efforts to avoid a resulting material prejudice to the investor’s interests.
Our subsidiary Universal-Investment-Luxembourg S.A. offers securitization services against remuneration. Products issued based on this service can only be acquired for our investment funds subject to an independent internal check.
In the exceptional case of our employees instructing real estate transactions by themselves we arrange for the avoidance of conflicts of interest which might disadvantage the investors of the relevant real estate investment funds.
Our managing directors have each taken the responsibility for the relationship management for certain of our clients. They are committed not to favour these clients vis-à-vis our other clients or to treat them differently.
English translation not legally binding – in case of any discrepancies please refer to the German version.