UK Stewardship Code Statement
Trinetra Investment Management LLP (“Trinetra”) manages equity assets within one investment strategy: Emerging Markets Growth. Our goal is to earn attractive long-term returns in global emerging markets while minimising risks.
The UK Stewardship Code (The “Code”) is a set of guidelines and principles issued by the Financial Reporting Council (the “FRC”) to promote the long-term success of companies in such a way that the ultimate providers of capital also prosper. Effective stewardship benefits companies, investors and the economy as a whole.
Trinetra generally supports the objectives and principles that underlie the Code, however it does not attempt to comply with every principle in every instance.
Principle 1 - Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.
Trinetra aims to deliver attractive risk-adjusted returns by:
anticipating social and environmental themes in advance of the market, and maintaining a deep understanding of each theme through the investment cycle
investing in companies with sustainable business models and can capture the growth in our identified themes, and for which we can factor all risks, including ESG risks, in our risk assessment methodology
actively engaging with managements, to ensure that their strategy is aligned with our anticipated themes and their interest aligned to our investors.
We assess governance twice in our risk methodology:
We assess past management governance practices, and in the event that management has not fulfilled fundamental practices, and if we believe that cannot price such a fundamental risk in our risk assessment, we will not consider investing in the company.
At the risk assessment stage, we seek to factor all risks, including governance risks, into a cost of equity calculation for the company. As part of this process we assess, among others: stated strategy; whether management has shown discipline in the past regarding their cashflows and balance sheets, so that we can be comfortable that they will use incremental capital wisely to deliver expected returns; alignment to shareholder interest; and board composition.
We actively and deliberately vote according to our governance principles and do not rely on any recommendations from proxy voting providers.
Principle 2 - Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed.
Given our fiduciary responsibilities, we not only want to avoid conflicts of interest but also perceived conflicts. We are an independent dedicated investment boutique with a single strategy and a single vehicle. As such we do not face the conflicts of larger investment managers. However, we accept that conflicts of interest might arise, and aim to be stringent in our vigilance over, and management of, any such conflict.
We apply our Conflicts of Interest Policy, which seeks in the first instance to identify and avoid potential conflicts. The policy addresses the management of any conflict, and includes guidance on monitoring them, with a view to avoid them in the future. Within the policy, we have clear rules on gifts and inducements, and on personal account dealing, which are reinforced with regular training.
Our Conflicts of Interest Policy is available on request.
Principle 3 - Institutional investors should monitor their investee companies.
We closely monitor the companies in which we invest, or may consider investing, and it is an essential element of the investment process. Our research process involves scrutiny of companies’ financial statements and reports, analyst calls, discussions with management, and consideration of their external environment such as regulation and competition.
We interview management and keep records of any such meetings. We explore important subject areas including plans for use of capital, including acquisitions, an understanding of the company’s growth drivers, risks and governance, including alignment of the management’s interest with those of its shareholders. In doing so, we assess the quality of the company’s management, and the appropriateness of the various governance structures that exist, specifically with regard to the degree of alignment with shareholders.
In the process of monitoring companies, we also conduct ethnographic studies that allow us to identify potential consumers’ needs and trends, as well as to evaluate the degree to which companies meet consumers’ needs. When we engage with managements we also assess the processes through which they monitor their consumers and how well they understand them.
The outcome of engagements with both managements and consumers informs our decisions on whether and when to buy, continue to hold, or sell any investment, all within our framework for assessing risk-adjusted returns.
Trinetra invests in public equities in a variety of jurisdictions globally and exposure to UK listed companies is relatively limited, therefore we do not monitor adherence to the UK Corporate Governance Code. Nevertheless, as part of our investment process, we assess all companies on their adherence to good corporate governance principles as explained in Principle 1 above.
Our investment universe comprises companies with a material exposure to Emerging Markets, many of which are based in those markets. This often precludes our attendance of General Meetings of such companies.
We do not rule out being made insiders, however this is rare and is assessed on a case by case basis. Invitations to become an insider should be sent to the Compliance Officer via the contact details at the end of this statement.
We use Institutional Shareholder Services Inc. (“ISS”) to assist with adherence to our policy of participating in all votes. We maintain and periodically publish on our website records of the votes that we cast, and provide the rationale in any instance where our vote differs from positions recommended by ISS.
Principle 4 - Institutional investors should establish clear guidelines on when and how they will escalate their stewardship activities.
We engage with management on the strategic, operational, financial and ESG risks that the company faces. During our discussions we try to ascertain whether our estimate of the probability and materiality for each risk concurs with those of management. We try to understand whether the company’s own Internal Audit function has identified these risks, as well as any processes that they have put in place to monitor and control them. We use this opportunity to ask management to bring to their Internal Audit’s attention risks that we believe should be included in their risk assessment.
Failure to monitor and control risks increases the risk, and therefore the cost of equity of a company, reducing risk adjusted returns to our clients. If we believe that risk adjusted returns can be improved through better risk management, we are prepared to escalate our action.
We do not have detailed guidelines for each form of escalation as it depends on the probability and materiality of the specific risk/issue. For example, a risk that we view as low probability but highly material, is more concerning than a high probability but low materiality risk. The former could materially reduce risk adjusted returns whilst the latter could be more of a nuisance. The decision on how to engage and when to escalate will be made on a case by case basis, and depends on the magnitude of impact on risk adjusted returns to our investors.
Principle 5 - Institutional investors should be willing to act collectively with other investors where appropriate.
We are willing to act together with other investors to attempt to influence management and, in doing so, we would expect to be able to achieve greater impact than we would when acting alone.
We will consider joining collective engagement actions when the interests of our investors are sufficiently aligned with the objectives of the action. In certain circumstances, we would consider initiating a collective action. When we consider joining or initiating such an action, our clients’ interests, as well as compliance with relevant regulations, will dictate whether or not we pursue such actions.
Invitations for collective engagement should be addressed to the Compliance Officer, whose contact details are at the end of this document.
Principle 6 - Institutional investors should have a clear policy on voting and disclosure of voting activity.
We consider active participation in the voting process to be an integral part of our investment process and in line with our stewardship objectives. We therefore align voting with our clients’ long-term investment objectives.
There is no presumption on our part that we will vote with the board of the investee company. We will abstain or vote against management whenever we believe that the governance and investment objectives of our clients are at risk of compromise. When appropriate, we will inform the company of our voting intentions and give them the opportunity to respond. We will note the advice of ISS, our proxy voting service provider, but we do not default to following their recommendations.
We believe that our voting record should be transparent and periodically publish it on our website.
We do not lend stock from the pooled investment funds that we manage.
Principle 7 - Institutional investors should report periodically on their stewardship and voting activities.
We provide a range of qualitative and quantitative information to our clients, including voting records, in line with their individual reporting requirements.
Trinetra has a small investment team. Our investment process integrates stewardship and governance issues, and all investment conclusions and their rational are dutifully documented. Due to the lack of complexity in the internal structure of Trinetra and the way processes are monitored, an independent opinion on our stewardship and voting policies is not currently considered necessary.
For more information and enquiries regarding collective actions, please contact our Compliance Officer at the following address:
Trinetra Investment Management LLP
2 Eastbourne Terrace
London W2 6LG
Tel: +44 (0) 20 3908 8900
Issued: December 2017