UK Stewardship Code Disclosure
Under Rule 2.2.3R of the FCA’s Conduct of Business Sourcebook, Zetland Capital Partners LLP (“Zetland”) is required to disclosure the nature of its commitment to 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 improve long-term returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practise on engagement with investee companies. The Code is voluntary but is applied to institutional investors investing in equities of UK issuers on a comply or explain basis.
The Financial Reporting Council (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 particular principles.
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.
Zetland provides services which are generally concerned with the management of portfolios of distressed assets in a number of jurisdictions, the aim of which is the realisation of these assets.
So, whilst Zetland supports the broad objectives of the Code, many of its provisions aren’t directly applicable to Zetland’s investment strategy nor the types of opportunities in which it would currently look to invest. Consequently, Zetland has chosen not to commit to the Code.
Should this change in a manner that the provisions of the Code become more relevant, Zetland will review its commitment and amend this disclosure accordingly.