Conflicts of interest policy

Purpose

This policy details how Gresham House, comprising Gresham House Asset Management Ltd, Resi Capital Management Ltd, Resi Secured Income plc and TradeRisks Ltd (together, “Gresham House”) will identify, prevent, and manage Conflicts of Interest in respect of its business activities.
Gresham House is authorised by the Financial Conduct Authority (FCA) and, as such, will act in accordance to the Conflicts of Interest rules as defined in the FCA Handbook, which will take precedence over the requirements of this policy.

Review of policy

This policy will be reviewed regularly, at least once a year, and amended as considered necessary by Gresham House’s Management Body in the event of changing circumstances or regulations.

Responsibilities

The CEO of Gresham House is responsible for ensuring that its systems, controls and procedures are able to identity, manage and control or prevent any potential and actual Conflicts of Interest that may arise.

Introduction

Regulated Firms in the UK, particularly Investment Firms, are required to establish policies and procedures to ensure that Conflicts of Interest do not arise to adversely affect a client’s interests. Where this is not possible, the firm should inform its client of the conflict so they can make an informed decision on whether to continue with the investment service. The FCA has also issued the following principles to guide Firms’ relationships with clients:

Principle 6 requires that a firm must pay due regard to the interests of its clients and treat them fairly;
Principle 8 requires a firm to manage Conflicts of Interest fairly

A conflict of interest is a situation in which someone in a position of trust has competing professional or personal interests. Such competing interests can make it difficult for individuals to fulfil their duties impartially. A conflict of interest may exist even if no unethical or improper act results from it.

Gresham House is committed to identifying, monitoring and managing all actual and potential Conflicts of Interest that can arise, between us and our clients, or between clients of different areas of the Group. Gresham House is the manager, operator or adviser of its own and third-party funds. For the purposes of the FCA Rules, Gresham House considers the funds and investors in the funds in determining whether a conflict of interest exists or could potentially exist.

In the event of a Conflicts of Interest arising, where we identify that our actions to manage the Conflicts of Interest is not sufficient to ensure, with reasonable confidence, that risks of damage to Gresham House, or to the interests of our client will be prevented, we will clearly disclose the general nature and/or sources of Conflicts of Interest as applicable, including to our client before undertaking business for the client.

Gresham House may have potential Conflicts of Interest that could arise from services and activities on behalf of clients. An example of this could be asset allocation between clients.

Below you will find a summary of the principal Conflicts of Interest that may exist in our business and the steps we take to mitigate them. If you have any questions on this policy, please raise these with the Compliance Officer at info@greshamhouse.com.

What is a conflict of interest?

The circumstances which should be treated as giving rise to Conflicts of Interest include all cases where Gresham House and/or any person directly or indirectly linked to Gresham House:

is likely to make a financial gain, or avoid a financial loss, at the expense of the client; or
has an interest in the outcome of a service provided to the client or of a transaction carried out on behalf of the client, which is distinct from the client’s interest in that outcome; or
has a financial or other incentive to favour, or compete with the interests of, one Gresham House fund, investor or group of Investors over the interests of another Gresham House fund, investor or group of Investors; or
carries on the same business as the client; or
receives or will receive from a person other than the client an inducement in relation to a service provided to Gresham House or any of its funds in the form of monies, goods or services, other than the standard commission or fee for that service;
in acting for a client in one situation compromises its actions or creates a perception that its actions may be compromised in acting for another client

Identifying conflicts of interest

The following are examples of the types of conflicts that may arise in Gresham House’s business model:

Business interests and suitability

Where we use our discretion to make decisions or provide any advice or recommendations, we are required to ensure that our actions are suitable for our clients. However, we or some other person connected with us may have an interest, relationship or arrangement that is material to the service, transaction or investment concerned. This may include matters such as the retention of commissions which we receive from a third party.

In addition, our employees may have an interest, relationship or arrangement whereby they act as a Trustee, hold Power of Attorney on behalf of a client; or act as a Director for a corporate client. We require our employees to declare any such interests to us. To manage such conflicts, we require our employees to disclose Directorships and interests in other companies, obliging them to disregard and disclose the interest, relationship or arrangement concerned when acting on the client’s behalf.

Interests in competitors, clients, or suppliers

Employees of Gresham House may have interests in competitors, clients or suppliers that may create an incentive to act in ways that serve the interests of those entities to the detriment of Gresham House’s clients.

Except with the approval of the Compliance Officer, no person shall serve as an employee, partner, officer, director, trustee of, or have a substantial interest in or business relationship with, a competitor, client, or supplier (other than any affiliate or parent of Gresham House) that could create a divided loyalty or the appearance of one.

Gifts and inducements

Gifts, inducements, or other hospitality may create a bias that could lead Gresham House’s employees or Directors to favour one service provider over another in a manner that is detrimental or less beneficial to the client’s interests.

On occasion, our employees may personally benefit from dealings with potential or existing clients, suppliers, services providers etc. A Gifts and Inducements Policy is in place to ensure that these are not excessive and do not create an obligation or debt that impair on the employee’s ability to act in the best interest of Gresham House’s clients. Staff must not offer to give, or solicit, or accept any inducements in the course of carrying on regulated business which is likely to conflict with any duties owed to clients. Before offering gifts or benefits to third parties or accepting gifts or benefits from third parties as an incentive to doing business, the matter must be approved in advance by the Compliance Officer.

Interest in transactions and personal account dealing

Where Gresham House or its employees have an interest in transactions carried out on behalf of clients, this may lead it or those persons to engage in those transactions in a manner that is detrimental to the client, for example, by executing Firm or employee transactions before those of clients.

No person shall engage in any transaction involving Gresham House if he/she or a member of his/her immediate family (or any other compromising relationship) has an interest in the transaction or can benefit directly or indirectly from the transaction (other than through the employee’s normal compensation), except as specifically authorised in writing by the Compliance Officer.

Staff must comply with Gresham House’s Personal Account Dealing Policy at all times.

Funds

We may invest in funds that we manage. In the event that we decide to redeem our holdings in such funds, we will endeavour to inform the other investors of our proposed course of action.
Conflicts could also arise between one fund we manage and another particularly in instances where two or more funds share similar investment strategies (i.e. asset allocation).

An order allocation policy is in place to cover scenarios where one investment is equally suitable for two or more managed funds. All investments will also be considered by the respective Investment Committees to ensure they are suitable for those funds.

Diversion of business opportunity

Employees, for their own personal purposes, may divert Gresham House business to private interests leading to lost value for Gresham House and its clients.

It is therefore the policy of Gresham House that no person may acquire, or derive personal gain or profit from, any business opportunity or investment that comes to their attention as a result of their association with Gresham House, and in which they will, or expect to, participate or have an interest in, without first disclosing in writing all relevant facts to the Compliance Officer.

Outside employment and business interests

Outside employment and business interests outside the scope of the contract of employment or contract for services with Gresham House are not permitted unless specifically approved in writing in advance by the Compliance Officer (through consultation with senior management where appropriate) by providing full and accurate particulars. It is not permitted to participate in outside employment or business interests outside the scope of employment/services, including personal investments, which interfere with work or which may put personnel in a position of conflict with the interests of clients.

Employee loyalty

Employee loyalty may be compromised where an employee is considering employment with another entity that Gresham House conducts business with. Any employee considering employment with a client must contact the Compliance Officer.

Remuneration

Conflicts may arise where there is a direct link between the remuneration of persons principally engaged in one activity and the remuneration of, or revenues generated by, different persons principally engaged in another activity. For example, where the remuneration of those in control and oversight functions is directly linked to the revenues generated by the portfolio management team. Conflicts could also arise if the remuneration structure of employees is all variable and linked to metrics that encourage excessive risk taking.

A remuneration policy is in place to ensure the remuneration of control functions is separated from the performance of the units over which they are to exercise oversight.

Also, the remuneration of staff usually consists of a salary and a performance related commission/bonus. This commission is discretionary and linked to Firm-wide performance in addition to the performance of that unit and the individual. We strive to ensure our employees remain motivated whilst at the same time ensuring this remuneration scheme does not encourage inappropriate behaviour. We recognise this conflict and through our monitoring mechanisms remain alert to potential abuse.

Research

Gresham House may on occasion acquire research from third parties providing broking and other services to Gresham House. Whilst Gresham House’s Investment philosophy is to invest in the long term, there is at least a potential risk that Gresham House could be perceived as being incentivised to aggressively grow its assets under management by trading frequently on the basis of purchased research, thereby incurring significant expense on behalf of clients. A conflict also arises in relation to free research which is classed as an inducement as firms may execute transactions on the basis of the received research that may not necessarily be in the client’s best interests. The nature of research expenses has changed from January 2018 on the basis of MIFID II implementation.

In line with MIFID II rules on Research as a possible Inducement, Gresham House will not accept free research other than meets the definition of a minor non-monetary benefit; or provided under any applicable exemption which is research relating to a share issue and issued by the underwriter or person placing the shares; or research received during a three-month trial period to enable Gresham House evaluate the research provider’s service. Investment decisions are also reviewed and approved by the relevant committees to ensure these are suitable for the funds. We will monitor research expenditure on an ongoing basis and take steps to limit the receipt of free research.

The generic procedures referred to above are not a substitute for transaction-specific conflicts management. Persons dealing with clients must identify such specific conflicts as and when they arise.

Identifying, recording and managing conflicts of interest

We are required to take all reasonable steps to ensure we identify the Conflicts of Interest that arise, or could arise, in our business model. The circumstances where conflicts could arise have been identified above. The Directors remain alert to new Conflicts of Interest risks and consider these on an ongoing basis. The front-line business teams are also closely involved in the process of identifying any new, emerging conflicts.

To manage Conflicts of Interest within Gresham House, we maintain a Conflicts Register. The purpose of the register is to record and maintain a list of all actual and potential types of conflicts which may cause or create a perceived risk of damage to the interests of a client. The register also sets out measures Gresham House has taken to manage such actual or potential conflicts. This document forms the operational basis of Gresham House’s arrangements for reviewing and monitoring its conflicts management processes and is subject to regular ongoing review by Senior Management.

The register includes identified conflicts, specifies the procedures to be followed and measures to be adopted with a view to preventing the conflict of interest from constituting or giving rise to a material risk of damage to the interests of Gresham House’s clients. Where the arrangements and measures implemented are not sufficient to mitigate the risk of disadvantage to existing or potential clients, the nature of the Conflict will be disclosed to them prior to undertaking business. However, an over-reliance on disclosure without adequate consideration as to how conflicts may appropriately be managed is not permitted.

Monitoring and reporting

Within Gresham House, we ensure that our understanding and management of the Conflicts of Interest to which our business is exposed is kept relevant and up-to-date through a combination of measures. These include:

Training aimed at ensuring that staff understand the types of conflicts that may arise from Gresham House’s business and the process for identifying and reporting such conflicts;
Consideration of potential conflicts as a standard part of other in-house processes e.g. in relation to product/service development, change management, treating customers fairly and governance/operational reviews;
The involvement of senior individuals from across Gresham House in the identification and management of actual and potential conflicts;
Regular review and follow-up by an appropriate member of staff on data derived from conflicts management mechanisms;
Periodic review of identified conflicts, the adequacy of the mechanisms in place to manage them and of changes to business activities, processes or relationships that may give rise to new conflicts; and
Regular management information to the Board of Directors/Members on identified conflicts, the efficacy of the measures which Gresham House has in place to manage them and any further actions that need to be taken.

Over and above the formal procedures outlined above, all staff have an ongoing responsibility to remain alert to the possibility of Gresham House’s business giving rise to conflicts that have the potential to be disadvantageous to clients. Staff are encouraged to notify Compliance with any concerns or suspicions about an actual or potential conflict.

Escalation and compliance

As and when new areas of potential Conflicts of Interest are identified, these will be assessed by the Compliance Officer in conjunction with relevant investment or operations staff. In each case, a judgement will be made as to:

Whether existing control mechanisms are sufficient to mitigate the conflict identified;
Whether new/additional controls specific to the identified conflict are required; or
Whether the conflict should be disclosed to relevant clients so that they are able to take an informed decision with regards to the service in which the conflict arises.

Where the conflict is such that the arrangements put in place to manage the conflict are insufficient to adequately mitigate the risk of client detriment and the disclosures made to clients do not guarantee that clients are able to make an informed decision whether to proceed, or continue to, engage with Gresham House, the Compliance Officer may determine that the relevant business cannot be undertaken for the client(s) in question.

Notifying conflicts and escalation routes

The appropriate first port of call for any Conflicts of Interest which are identified within the business is the Compliance Officer. The Compliance Officer will review the circumstances surrounding the conflict, and determine whether it is an actual or potential conflict, or whether the circumstances may be perceived as a potential or actual conflict. Where possible, the Compliance Officer will advise on how to manage the conflict in question. Where necessary, the Compliance Officer will escalate conflict concerns to the appropriate line manager or business head for their consideration. Where the conflict in question involves material financial or reputational risk, for Gresham House or a client of its group, that conflict may need to be escalated to the Chairman or the Board of Gresham House, as appropriate.

Responsibility for conflict escalation rests with the Compliance Officer. Responsibility for identifying conflicts rests with every employee Gresham House.

Disclosure as a mechanism for managing conflict

In circumstances where the conflicts management mechanisms put in place by Gresham House are not sufficient to prevent risk of damage to clients’ interests, we must disclose to the relevant clients the general nature and/or sources of such conflicts. The FCA makes clear that disclosure of conflicts should not be seen as an alternative to managing/mitigating conflicts – specifically, an over-reliance on disclosure without adequate consideration as to how conflicts may appropriately be managed is not permitted.

Like all other client communications, the disclosure must be clear, fair and not misleading. In addition, it must:

Be made in a durable medium, i.e. on paper or by email; and
Be made before business is undertaken for the client; and
Include sufficient detail, taking into account the nature of the client, to enable the client to take an informed decision with respect to the service in respect of which the conflict arises.

Given that detailed conflicts disclosures, drafted to cover specific services or aimed at the circumstances of specific clients, may contain commercially sensitive information and/or potentially open Gresham House to legal risk, the drafting of such disclosures should be checked with the Compliance Officer before being used.

Information barriers

Gresham House, where necessary to prevent or control the exchange of information between persons engaged in activities which risk a conflict of interest, will establish an Information Barrier.

Conflicts training and annual declaration

On an annual basis, all members of Staff are required to complete an Annual Declaration of compliance with the Gresham House Conflicts of Interest Policy. Staff members also receive training on Conflicts of Interest.

Review

This policy must be reviewed at least annually for relevance and/or in line with any change in any guidance documents or regulatory regime that impacts this policy.

All modifications must have approval from the Board of Directors