1 Preamble
This Policy summarises the main policies that Swisscanto Asset Management International S.A. («SAMI») considers essential to the execution of trading decisions in order to obtain the best possible result for the investment funds it manages (Best Execution).
The implementation of these policies by external service providers to whom order handling and trade execution are delegated is contractually ensured by means of instructions.
2 Scope
The stipulated policies apply to the execution of trades for the purpose of purchasing or selling securities or other financial instruments and for carrying out EPM (Efficient Portfolio Management) transactions1 that SAMI has delegated to third parties in the course of delegation of asset management functions.
3 «Best Execution» factors
3.1 General information
With regard to the direct execution of trades or the placement of orders with authorised counterparties/brokers, SAMI considers the following factors acceptable in order to obtain the best possible result for SAMI funds. These factors primarily include:
- Price (market value and cost of execution)
- Speed of execution
- Size and nature of the order
If an instrument has limited liquidity, SAMI also considers the following factors necessary to obtain the best possible result:
- Likelihood of execution and settlement
- Security of settlement
- Special prevailing market conditions
The following execution factors are to be considered whenever the asset manager has an approval process for counterparties/brokers:
- Quality and reputation of the counterparty/broker
- Services provided by the counterparty/broker
In general, SAMI considers it necessary to take all the above execution factors into consideration in order to obtain the best possible result; however, the instrument-specific policies listed below must also be adhered to.
3.2 Equities and Exchange-Traded Funds (ETFs)
Care must be taken to settle the orders at the lowest possible cost. If the transaction costs include a service, for example in the form of research, such service must clearly be to the benefit of the fund managed by SAMI.
For over-the-counter equity securities, the transactions must be executed at a price in line with the market price. Any premiums or discounts on the current market price are disclosed to the Portfolio Manager. To this end, Alternative Trading Systems in particular will be taken into consideration in addition to local stock exchanges.
Equities are traded exclusively through authorised counterparties/brokers.
3.3 Debt securities and convertible bonds
When trading debt securities and convertible bonds, Requests for Quote (RFQs) must be submitted to at least three counterparties, and the trade executed at the best offered price. If there is a lack of liquidity or a limited number of market participants, an exception can be made to the above RFQ rule.
In this case, the execution factors that were considered must be documented on the order. In addition, RFQs must be documented.
Trading must only take place with authorised counterparties/brokers.
3.4 Investment funds
Subscriptions and redemptions for investment fund units must always be executed at the Net Asset Value (NAV) on the valuation day (plus issue and redemption fees). This policy does not apply to Exchange-Traded Funds (ETFs).
3.5 Money market products
Fixed-term investments are placed in consideration of the set counterparty limits, with an RFQ having been sent to at least two counterparties.
3.6 Exchange-traded derivatives
Care must be taken to settle the orders for derivative financial instruments at the lowest possible cost and on the designated stock exchanges.
3.7 OTC derivatives
Transactions involving over-the-counter derivative financial instruments must only be carried out on the basis of a standardised master agreement, and only with counterparties subject to supervision and specialising in such types of transaction. Furthermore, it is policy that OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed out by an offsetting transaction at the valuation at any time.
Before entering into the contract, offers must be sought from two potential counterparties, with the most favourable offer being accepted in consideration of the price, credit rating, risk diversification and the range of services offered by the counterparty.
3.8 Foreign exchange
Foreign exchange is traded through the custodian bank or through selected third-party banks within the set limits.
The most important execution factors are the price and the likelihood of execution and settlement.
3.9 Securities lending
Securities lending transactions are exclusively carried out through RBC Investor Services Trust (agent) with Zürcher Kantonalbank (principal). To ensure market conformity, price comparisons are carried out with other market participants or peer group, and the spreads or return to lendable are compared between similar transactions or peer group. In addition, the fees and the cost split are monitored at both security and fund level.
4 Execution venues
Transactions are typically executed at the following venues:
- Via the stock exchange, i.e. directly in a regulated market
- Via Multilateral Trading Facilities (MTFs) (e.g. Bloomberg, Instinet, Market Axess, TradeWeb)
- Via a brokerage firm with which the delegated party has an order settlement arrangement
- Via fund companies or their transfer agents
- Direct transaction between clients or investment funds
- Fund platforms
- Custodian bank for securities lending
The execution venues permitted for each financial instrument are listed in the annex.
5 Order handling
The delegated asset manager is authorised to execute trades in its own name or in the name of a third party for account of the investment fund and, to this end, has drawn up and put into effect suitable processes, directives and guidelines to guarantee prompt and fair order execution.
5.1 Policies for prompt and fair execution
When executing a trade, it must be ensured that:
- Trade orders from different funds are treated equally in equal circumstances.
- Comparable trade orders are executed in the order received, unless the characteristics of the orders or the prevailing market conditions prevent this.
- In principle, trade transactions are executed immediately, in full and – subject to the contractual limits, conditions and restrictions – at the best possible market price. The only exception to this is if immediate and full execution is not possible in the market situation (liquidity) or is in the interest of the fund.
- For over-the-counter equity securities, the transactions are executed at a price in line with the market price – if available. To this end, Alternative Trading Systems in particular will be taken into consideration in addition to local stock exchanges.
- Immediate allocation: Once executed, securities trades are immediately allocated, recorded, settled the same day and documented accordingly.
5.2 Pooling policies
Pooled orders involving different investment funds are subject to partial execution as a percentage of the breakdown according to the original order. Deviations from this principle, e.g. based on investment restrictions (minimum size of transactions) or costs (fees), are recorded in writing and documented.
6 Recording and storing trading information
In principle, the following parameters must be recorded in writing for trade orders:
- The name or other designation of the investment fund and the person who acts for account of the investment fund
- The details necessary to identify the instrument concerned
- The size
- The nature of the order or transaction
- The price
- In the case of orders, the date and exact time of order transmission and the name or other designation of the person to whom the order was transmitted, or, in the case of transactions, the date and the exact time of the decision to transact and of the execution of the transaction
- The name of the person who transmits the order or executes the transaction
- If applicable, the reasons for order rejection
- In the case of executed transactions, the counterparty and the execution venue
- Evaluated alternative prices (RFQs) along with the date and exact time
Annex
1 The only EPM transactions that SAMI engages in are securities lending.