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Our UK investment operation, Canada Life Investments, is based in the heart of the City of London and manages over £26 billion of equity, fixed interest, cash and property assets (as at 31/10/11).
Our long history of investing has shaped the philosophy we have towards investment markets, which focuses on taking a long-term perspective to delivering sustainable and repeatable investment performance.
We believe in active investment management. Our investment approach is to analyse macro trends carefully. These top-down views help our fund managers focus on what matters and directs them to assets that we think can add value for our clients. We couple this with detailed research into potential investments in order to determine whether an asset is undervalued.
All our fund managers contribute continuously to a vigorous but co-operative debate which feeds directly into the conviction with which they take individual investment decisions. Our fund managers only hold assets in which they have a high level of personal conviction. This gives them the strength to challenge the consensus, focusing more on what they know and less on market noise.
The UK Stewardship Code
Background
In July 2010, the Financial Reporting Council (FRC) published its UK Stewardship Code. By way of its seven Principles, this Code aims to enhance the quality of engagement between institutional investors and companies, in order to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. The Code encourages greater transparency about the way in which institutional investors oversee the companies in which they invest.
Canada Life Investments (Canada Life) regards the combination of constructive dialogue with companies and the considered use of voting rights, as the basis of its stewardship responsibilities. In our view shareholders have a vital role to play in encouraging a higher level of corporate performance by adopting a positive approach to corporate governance engagement with companies.
We are an active investment manager. Fundamental research on stocks is crucial to the investment process, as are regular meetings with company representatives. In addition, Canada Life has UK proxy voting procedures and looks to resolve any contentious issues.
The Code’s seven Principles, and how and to what extent Canada Life incorporates them into our investment process, are described below.
Principle 1
Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.
Canada Life takes into account its stewardship responsibilities towards its clients, with regard to investment and performance, as well as its position as an agent on behalf of its clients. We recognise the responsibilities that come with significant share ownership and take them seriously, encouraging companies’ compliance with corporate governance as best practice. We routinely engage with and vote on all our UK equity holdings. We treat votes, and the influence these give us on behalf of our clients, as valuable assets and act accordingly in exercising them. The size of the clients’ shareholding and the materiality of any issue will determine the level of engagement we undertake. Our approach to stewardship is considered, constructive and pragmatic with the extent of any intervention determined on a case-by-case basis. In all our endeavours, the interests of our clients are paramount.
Principle 2
Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed.
First and foremost, Canada Life will always seek to act in accordance with the best interests of our clients as investors when casting votes on their behalf. We believe that strong corporate governance at the companies in which we invest best serves our clients’ interests.
It is extremely rare that we find conflicts of interest. However, on any potential conflicts of interest between Canada Life, the investee company and/or a client, the guidance of the Association of British Insurer’s (ABI) Institutional Voting Information Service which provides governance and voting research, will take precedence.
More generally, Canada Life also maintains clear policies governing other areas of potential conflict that may arise in interacting with the companies in which we invest, including such areas as outside employment or directorships by Canada Life personnel and acceptance of gifts.
Principle 3
Institutional investors should monitor their investee companies.
Our team of fund managers and research analysts rigorously monitor companies in which we decide to invest; this is key to our investment approach. Our Teams of fund managers and research analysts generate independent research on companies for our portfolio managers.
The monitoring process largely comprises meeting management, analysing company announcements and news flow, investment screening and studying external analytical research. The ABI’s Institutional Voting Information Service and the ISS ProxyExchange service provide reports regarding areas of concern which are likely to be discussed at forthcoming meetings. We generally aim to see investee companies at least once a year. This provides us with an opportunity to ask questions and to challenge their strategy and other relevant issues in a constructive manner, which may influence the value of our clients’ investments.
We maintain records of all our voting decisions which we disclose on our website and update on a regular basis.
Principle 4
Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.
Monitoring, dialogue and voting processes occasionally highlight areas of concern. If we believe a decision or proposal by company management will negatively affect the company’s long-term investment potential, our fund managers will usually eliminate the holding from their portfolios. In the rare instances in which we decide to escalate our activities, we do so via meetings or conversations between our investment managers and company management. Following a meeting, we monitor the company’s response to ensure that steps are taken to address the issues raised.
Assuming that it is not in the best interests of Canada Life or our clients to dispose of the security, a variety of routes may be pursued and the form of any intervention is determined on a case by case basis. Intervention would normally include contact via the corporate broker, or to approach the company directly. The aim of any intervention undertaken by Canada Life is to protect and enhance shareholder value for our clients.
Principle 5
Institutional investors should be willing to act collectively with other investors where appropriate.
Canada Life works with other investment institutions on collaborative engagement initiatives when it believes it to be in the interest of our own investors and is deemed the most effective course of action to address a specific issue or concern. Canada Life has historically used its involvement with and membership in various trade bodies. The appropriateness of collective engagement is considered on a case-by-case basis. When participating in collective engagement, due regard is paid to any conflicts of interest and to our appetite for being made insiders.
In deciding whether or not to act collectively with other investors, Canada Life takes into account a range of factors. These include:
• whether or not collective engagement is likely to be more effective;
• the extent to which the objectives of the other investors are in accordance with our own;and
• the need for confidentiality.
Principle 6
Institutional investors should have a clear policy on voting and disclosure of voting activity.
Canada Life aims to exercise all proxy voting rights of the London Stock Exchange listed investee companies. We employ the services of a specialist proxy voting agency, which analyses resolutions and tests them against our voting policy.
Our approach to voting includes careful consideration of explanations made by companies for departure from the UK Corporate Governance Code. We appreciate that companies differ and that the Corporate Governance Code should be applied with care and judgement, recognising that flexibility may be appropriate in certain circumstances.
Principle 7
Institutional investors should report periodically on their stewardship and voting activities.
Canada Life keeps a record of all voting decisions, maintaining an audit trail of votes cast. A summary of our proxy voting activities is published on a regular basis on our website under the ‘About Us’ section at www.canadalifeinvestments.com
Quarterly Voting Disclosure
Q3 2011 Disclosure Download PDF
Q2 2011 Disclosure Download PDF
Environmental Policy
Canada Life is committed to responsible environment risk management in making investment acquisition decisions and in managing its investment portfolio.
The primary objective of our environmental policy is to minimize the exposure of our investments to risks associated with or arising from environmental problems.
Accordingly, it is our policy to:
a) Create an awareness of environmental issues and responsible practices among staff who are directly involved in decisions which may have potential environmental implications;
b) Identify and assess environmental implications before investment decisions are made; and
c) Promptly deal with any potential environmental problems that may arise. |
