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This first tab below is a statement made on behalf of The Jockey Club and relates to The Modern Slavery Act 2015 for our financial year ending 31st December 2019. 

 

The second tab outlines our Tax Strategy and how we are committed to meeting our tax compliance obligations. 

 

The third tab is our Section 172 statement. 

INTRODUCTION

 

This statement is made on behalf of The Jockey Club and relates to The Modern Slavery Act 2015 for our financial year ending 31st December 2018. The Jockey Club has a zero tolerance approach to modern slavery of any kind within our operations and supply chain. We all have a responsibility to be alert to the risks, however small, in our business and in the wider supply chain. Our employees are encouraged to report concerns using our Whistle Blowing policy and management are expected to investigate, and where necessary act upon, these concerns.

 

View this report as a PDF

 

OUR BUSINESS AND SUPPLY CHAIN

 

The Jockey Club has been at the heart of British Racing for many years and today is the largest commercial group in the sport, comprised of four main operating brands, which between them mean we are involved in virtually all aspects of the British Racing Industry.

 

These are:

 

  • Jockey Club Racecourses - our racecourse arm
  • Jockey Club Estates - our training grounds and estate management
  • The National Stud - our breeding and educational arm
  • Racing Welfare - our charity

 

We are also unique for a commercial business in that we don’t make profits for shareholders. Instead we invest all profits back into the sport to support its long term health so British racing will continue to be enjoyed by millions for many years to come. The Jockey Club employs over 600 permanent people in various locations across the UK. In addition, there are thousands of temporary workers employed directly or indirectly by our partners and suppliers to service peaks of high demand at major horse racing meetings and other events.

 

In recent years sustainable and ethical principles have become increasingly important to us which are reflected in our supply chain. Our products and services are predominantly sourced via UK providers. We also have joint ventures with key providers including catering. We expect the joint venture managements to share our intolerance on Modern Slavery and Human Trafficking. E.g. Jockey Club Catering is a joint venture with Compass Group UK, an organisation with an equally strong stance.

 

POLICIES AND CONTRACTUAL CONTROLS

 

Relevant internal policies include Environmental, Health & Safety, Whistleblowing, Equal Opportunities, Sustainability, Bullying and Harassment, and Purchasing amongst others and provide a means of raising concerns, and as appropriate redress without fear of reprisal. Our management structure for each site ensures that we can directly implement our policies and procedures, conduct appropriate training and monitor compliance.

 

All Employment Contracts and Casual Worker Agreements since 2016 include reference to MSA15 and The Jockey Club’s compliance with it.  All employees who have contracts pre-dating 2016 have received information regarding the Act and particularly drawing attention to the Whistleblowing policy.  The information is available in The Jockey Club’s Employee Handbook and on The Jockey Club’s intranet.

 

Our Group purchasing policy requires evidence of a suppliers’ compliance with MSA15. In 2017 we received confirmation that our top 80% of supplier by spend comply with the Act.  Our requirement to comply with the Act has been written in to our standard terms and conditions as well as larger group contracts meaning that all new suppliers are bound by the requirement as well as capturing current suppliers when they renew their contracts. It has been made clear to all suppliers that any breach of our agreement could result in immediate termination of that contract.

 

FURTHER STEPS

 

We recognise that our suppliers can have complex supply chains and consequently it is challenging to monitor or control the working conditions of individual suppliers. We aim to reduce supply chain complexity to enable easier facilitation of these risk factors.  We are assessing which organisations fall in to the highest risk and assessing how best to further challenge these suppliers to ensure they are committed to the Act.

 

ASSESSMENT OF EFFECTIVENESS IN PREVENTING MODERN SLAVERY

 

We understand that Modern Slavery risk is not static and will continue to mitigate this risk on an on-going basis.

 

In addition we will review and assess the effectiveness of our policy annually and take appropriate action, if required.

 

Areas for consideration:

  • Employee training levels
  • Supply chain communication
  • Supply chain auditing
  • Investigations into reports of Modern Slavery and remedial actions taken
  • The new supplier form includes a link to MSA information for our suppliers

 

This statement is made in accordance with Section 54 (1) of the Modern Slavery Act 2015 for the financial year to 31st December 2018.

 

 

Simon Bazalgette signature.png

Signed by Simon Bazalgette, CEO of The Jockey Club

Date: 16th April 2019

 

The Jockey Club UK Tax Strategy


The Jockey Club is the largest commercial Group in Britain’s second largest spectator sport.  It operates 15 of Britain's famous racecourses nationwide, including Aintree, Cheltenham, Epsom Downs and both the Rowley Mile and July Course in Newmarket, as well as other related enterprises amongst other concerns such as the National Stud, Jockey Club Estates, Jockey Club Catering, Jockey Club Live and our charity Racing Welfare.

 

Our vision is for British horseracing to be the best in the world for many years to come and for the sport to be accessible for millions of people in the UK to enjoy.  As an organisation, we are committed to acting with integrity in all our business relationships and this informs our approach to taxation.

 

Tax compliance and reporting

We are committed to meeting our tax compliance obligations and will seek to apply diligent professional care and judgement in our tax compliance activities.  In order to achieve this, we have a well-resourced finance team and work with external advisors as appropriate to provide additional support, ensuring we are kept up-to-date with any legislative changes that may impact these obligations.  

 

Approach to tax planning

Like any other business activity, any action or lack thereof with implications for tax will be considered in light of the potential impact on our reputation.  We will not undertake any activities relating to tax, or accept any level of tax risk, that would result in damage to our reputation. 

 

Tax decisions are aligned to business and commercial strategy.  We may respond to tax incentives and exemptions where appropriate and in a way that is consistent with HMRC and government policy.  As appropriate, we will seek external professional tax advice to ensure we apply these incentives and exemptions legitimately, and if appropriate, we will seek advance clearances with HMRC to ensure we minimise the risk of uncertainty.


Governance and risk management

We understand the importance of having a strong corporate governance framework that ensures the accountability, responsibility and ethical behaviour of The Jockey Club. The board of Stewards and Finance Committee provides oversight in ensuring that tax is considered within the wider context of the business and in how tax risk is managed. Compliance and risk matters, including those concerning taxation, will be included on the agenda at board meetings as appropriate.   

 

The Group Finance Director has oversight and responsibility over The Jockey Club’s approach to tax on a day-to-day basis which includes the identification, prioritisation and monitoring of tax risk across the business, as well as the escalation of tax risk to the board of directors. 

 

The Jockey Club adopts a low risk approach to tax, as with other areas of the business, in line with our established governance and risk framework.

 

Relationships with Tax Authorities

The Jockey Club is committed to working with HMRC in an open and collaborative manner, much like any other stakeholder of the business.  Wherever possible, we will seek to achieve early agreement on issues and we will keep HMRC up to date about any commercial developments and events in our business that may have a tax impact. 

We will also seek external advice in respect of any matters of complexity and will work with HMRC to ensure that any differences of opinion in respect of the application of the law are resolved.

 

This Tax Strategy document

This document meets the requirement for the Group to publish its Tax Strategy as required by section 161 and section 16(2) of Schedule 19 of Finance Act 2016.  It is effective for the year ended 31 December 2019 and covers all of The Jockey Club’s UK Group companies.   

 

This Tax Strategy has been developed by the Group Finance Director.

 

Approved by the Board on 5 December 2019.

Section 172 Statement

 

The Jockey Club operates under Royal Charter with a mandate to consider and promote the wider interests of the sport of horseracing and a number of adjacent activities such as thoroughbred breeding. This Royal Charter was renewed and updated in 2017 to reflect the Club’s status and role in the sport, as well as the critical responsibilities that it now fulfils as the sport’s largest commercial operator. This follows the transfer of regulatory and governance powers to the British Horseracing Authority in the early 2000s.

 

The success of The Jockey Club, and therefore the extent to which The Board of Stewards (referred to hereafter as ‘The Board’) have discharged their duties to The Jockey Club are measured against the above mandate. It is only with a successful commercial operating model that the Jockey Club can continue to function effectively and all stakeholder interests are considered in making key decisions around this.

 

Section 172 of the Companies Act 2006 requires Directors, in the case of the Jockey Club the Board (and by delegation the Executive Management team), to take into consideration the interests of stakeholders and other matters in their decision making. The Board has regard to the interests of the Group’s employees, customers, suppliers and other stakeholders, the impact of its activities on the community, the environment and the Group’s reputation for good business conduct. In this context, acting in good faith and fairly, the Board considers what is most likely to promote the success of the Jockey Club for its members and in accordance with its Charter, in the long term. We explain in this annual report, and below, how the Board engages with stakeholders.

  • Relations with key stakeholders such as employees, shareholders and suppliers are considered in more detail below.
  • The Board is fully aware of its responsibilities to promote the success of the Group in accordance with section 172 of the Companies Act 2006.
  • The nature of the Jockey Club’s Royal Charter, and the way that the Board has discharged its duties in this regard, is considered to be consistent with the underlying objectives of Section 172: to operate in line with good corporate practice. More formally, Section 172 is now to be included as a specific consideration when making key decisions at Board and Executives meetings. Legal Counsel and the Company Secretary will provide support to the Stewards and Executives to help ensure that sufficient consideration is given to issues relating to the matters set out in s172(1)(a)-(f).
  • The Board regularly reviews the Jockey Club’s principal stakeholders and how it engages with them. This is achieved through information provided by the Executive team and also, within the Racing industry, by direct engagement with stakeholders themselves.
  • We aim to work responsibly with our stakeholders, including suppliers. The Board continues to have a diligent adoption policy for statutory measures which most recently have included anti-corruption and anti-bribery, equal opportunities and whistleblowing policies, the Corporate Criminal Offences Act and IR35.

 

Approach to engagement with stakeholders

  • The Jockey Club is able to take a long term view and this approach is reflected also in the engagement with the various stakeholders expected to be impacted by the Board’s decisions. As part of this, the Board maintains an ethos of being held to the highest possible standards of corporate conduct.
  • The Board is in regular communication with all key racing stakeholders (e.g. RCA, BHA, The Horsemen’s Group) to gauge potential views and reactions to important decisions made that impact across the industry. The Jockey Club also engages with a range of stakeholders, including, but not limited to, employees, sponsors, residents in areas where Jockey Club racecourses operate, suppliers, media and commercial partners.

 

Approach to engagement with stakeholders (continued)

  • The Board engages with all of the above stakeholders either directly or through the Jockey Club’s various management teams, at formal industry and other events, on racedays at JCR courses and elsewhere and through various industry forums.
  • There are Employee Days, ‘Town Hall’ sessions and team meetings across the Group which allow employees to voice any suggestions and concerns they may have. The Board and management also engage regularly with suppliers, media partners and sponsors, as well as taking feedback from customers. In addition, the Board and management foster strong relationships across all our locations with both Local Authorities, including individual councillors, and the local community in general via trade bodies, community groups and other relevant forums.


Key Board Decisions


During the year, the Board of Stewards made a number of key decisions which are considered to be in the interests of the overall success of The Jockey Club and the wider sport.  These decisions have impacts on certain stakeholder groups that have, to the extent considered appropriate by the Board, been reflected in the decision-making process. 


Prize Money Executive Contribution


The level of Prize Money contribution we make into our race programme is one of the most material decisions that the Board takes in any year. This impacts on the competitiveness of our business in attracting the best runners at each level of racing to our racecourses, and provides direct and indirect financial support to owners, trainers, jockeys, horsemen and their own employees.  We aim to strike a balance between ensuring our leading races and festivals maintain their global status and competitiveness in horse racing, while ensuring that we are supporting all levels of the ownership and breeding industry at both small and large racecourses.


Our decision on Prize Money contribution is traded off against other competing priorities for the Group, such as investments into property infrastructure at our racecourses, which are required to maintain the highest level of sporting and customer experience and safety for racing participants and spectators alike.


In 2019 our Prize Money decision was made in the context of a significant reduction in media rights income that year as a result of LBO closures.  We nevertheless made the decision not to adjust Prize Money materially and to maintain contributions at a sustainable level, as the Board considered the views of racing stakeholders, as well as the likely overall economic impact on the industry as a whole. This decision will need to be revisited later in 2020 in light of the impacts of Covid-19 on the business.


Use of Group Property Assets


The Board continuously reviews the best use of Group assets.  Where land assets are considered non-sacrosanct, the Board considers development opportunities. Projects at both Sandown Park and Kempton Park were considered during the year.  Both projects involve the potential development of Green Belt land and would yield significant capital receipts to fund material developments to various elements of the infrastructure of our racecourses.


In addition to discussions within Racing, extensive consultations with local interest groups have been carried out by management on both projects.  The Board took decisions during the year on both projects which it believes fairly took into account local stakeholder needs, but ultimately prioritised the Jockey Club’s mission to act for the long term good of the sport. 


In the case of Kempton Park, the decision was to submit alternate planning proposals that would not require a full sale of the Kempton site but would still involve a material capital receipt from redevelopment. These have received a positive reaction throughout the racing industry. In the case of Sandown, a planning application process is in progress.

 

 Approval of 2020 Budget and Five Year Plan


In approving the Annual Group Budget and Five Year Plan, the Board (and the Finance Review Committee) carried out a detailed review of the various commercial drivers and sensitivities in the business, including forecast admissions and hospitality performance and developments in the betting industry which have had negative impacts on the business.


The Board also considered continued investment in our employees, awarding a business-wide wage increase and in signing off specific budgets for training, employee medical and other benefits and a Diversity & Inclusion programme. 

The interests of racing stakeholders were also inherent in agreed investment in prize money (above) and other racecourse facilities. 


The above considerations were given in the context of ensuring ongoing bank covenant compliance, commitments to the Group’s Defined Benefit Pension Scheme, investment in customer experience and continued capital expenditure.

Some material elements of the Five Year Plan will need to be revisited later in 2020 in light of the impacts of Covid-19 on the business.

jockey club racecourses pension scheme

STATEMENT OF INVESTMENT PRINCIPLES

SEPTEMBER 2019

 

1       Introduction

2       Objectives and Strategic Allocation

3       Implementation

4       Risks and Other Matters

Appendix 1  Current Investment Strategy

 

1 INTRODUCTION

1.1 PURPOSE OF THIS STATEMENT

This statement sets out the principles and policies that govern investments made by the Trustees of the Scheme.

 

1.2 STATUTORY REQUIREMENTS

This statement is made in accordance with the requirements of the Pensions Act 1995 and the Occupational Pensions (Investment) Regulations 2005 made under the Pensions Act 2004.

 

1.3 INVESTMENT ADVICE

As required by legislation, in the preparation and maintenance of this statement and when considering the suitability of any investments, the Trustees have obtained and considered written advice from their investment adviser.


The Trustees are advised on investment matters by First Actuarial LLP. First Actuarial LLP is regulated by the Institute and Faculty of Actuaries and is qualified to provide the required advice through knowledge and practical experience of financial matters relating to pension schemes.

 

1.4 EMPLOYER CONSULTATION

Under legislation, the ultimate responsibility for determining the investment strategy rests with the Trustees. However, the Trustees must consult with the sponsoring employer and consultation must comprise a sharing of views, not simply notification of intent.

 

The Trustees have consulted with the sponsoring employer as part of the work preparing this statement.

 

1.5 REVIEWING THIS STATEMENT

This statement will be reviewed at least every three years and without delay after any significant change in circumstances or investment policy.


A copy of this statement and any amendments made to it are available to the Scheme Actuary and to the managers of the pooled investment vehicles used by the Trustees.

 

 

2 OBJECTIVES AND STRATEGIC ALLOCATION

2.1 INVESTMENT OBJECTIVES

The Trustees have set an investment strategy that reflects the following primary investment objectives:

  • Generating an appropriate level of investment returns – to improve the financial position of the Scheme thereby improving security for the members. 
  • Managing cash flow requirements – to ensure that sufficient assets and cash flows are available to pay members’ benefits as and when they arise.
  • Protecting the financial position – to limit the scope for adverse investment experience reducing security for members.

It is recognised that targeting strong levels of investment return introduces investment risk which increases the volatility of the financial position.

 

2.2 SETTING THE STRATEGIC ASSET ALLOCATION

The Trustees’ strategic asset allocation is determined after considering written advice from the investment adviser and is designed to strike a balance between the above objectives.  The strategic asset allocation takes into account:

  • the nature and timing of liability payments;
  • expected levels of investment return on the different asset clauses;
  • expected levels of investment return variability and, specifically, the expected level of short-term volatility of the Scheme’s financial position;
  • the sponsoring employer’s ability to withstand the additional contribution requirements that may arise from such volatility in the financial position; and
  • the full range of available investments (within the bounds of practicality).

 

In determining the strategic asset allocation, the Trustees view the investments as falling into two broad categories:

1.     Growth Assets

Assets that are expected to deliver long-term returns in excess of liability growth.  The use of growth assets is expected to generate an appropriate level of investment returns.

2.     Liability Matching Assets

Assets that are expected to react to changes in market conditions in a similar way to the liabilities.  The use of liability matching assets is expected to protect the financial position.

The Trustees’ strategic asset allocation is detailed in Appendix 1.

 

 

3 IMPLEMENTATION

3.1 IMPLEMENTATION OF THE INVESTMENT STRATEGY

Day-to-day management of the assets is delegated to one or more investment managers.  The mandates set for the investment managers are intended to implement the Trustees’ investment objectives within an acceptable level of risk.

 

Details of the mandates set for the investment managers are provided in Appendix 1.

 

The Trustees are satisfied that the investment managers have the appropriate knowledge and experience for managing the investments.

 

The Trustees consider each investment manager’s mandate carefully to ensure it is appropriate.  Where pooled investment vehicles are used, it is recognised that the mandate cannot be tailored to the Trustees’ particular requirements.  However, the Trustees ensure that any pooled investment vehicles used are appropriate to the circumstances of the Scheme.

 

The Trustees, in conjunction with their investment adviser, regularly review each of the investment managers to ensure that the manager remains competent and that the assets continue to be managed in accordance with the manager’s mandate.

 

3.2 SAFEKEEPING OF ASSETS

To ensure safekeeping of the assets, ownership and day to day control of the assets is undertaken by custodian organisations which are independent of the sponsoring employer and the investment managers. Where pooled investment vehicles are used, the custodians will typically be appointed by the investment manager.

 

3.3 REGULATED MARKETS AND DERIVATIVES

Assets are invested predominantly on regulated markets, as so defined in legislation. Any investments that do not trade on regulated markets are kept to a prudent level.


The investment managers are permitted to use derivative instruments only in so far as they contribute to the reduction of investment risks or facilitate efficient portfolio management.

 

 

4 RISKS AND OTHER MATTERS

4.1 INVESTMENT RISKS

Identification, measurement and management of risk form an integral part of the process adopted by the Trustees to determine the strategic asset allocation. The principal investment risks are listed in the Scheme’s Investment Risks Policy document along with an explanation of how those risks are managed.

 

4.2 EMPLOYER-RELATED INVESTMENT

The proportion of the Scheme’s investments which can be related to the sponsoring employer (as defined within legislation) is limited to 5% of the value of total assets.


The Trustees do not hold any direct employer-related assets and any indirect exposure is expected to be less than 5% of total assets.

 

4.3 SUSTAINABLE INVESTING AND CORPORATE GOVERNANCE

Investment Beliefs
The investment beliefs stated below have been developed by the Trustees and are reflected in the Scheme’s investment strategy.


Risk versus Reward
Targeting higher levels of investment return increases investment risk which increases the volatility of the funding position.


Asset Allocation
Long-term performance of the Scheme’s assets is attributable primarily to the strategic asset allocation rather than the choice of investment managers.


Diversification
Asset diversification helps to reduce risk.


Use of Pooled Funds
Taking into account the size of the Scheme’s assets, it is expected that pooled funds will typically be a more practical way of implementing the Scheme’s investment strategy than establishing segregated mandates with investment managers.


Use of Active Management
Active management has the potential to add value either through offering the prospect of enhanced returns or through the control of volatility. In addition, it is recognised that active management may help to mitigate the financial impact of Environmental, Social and Governance risks.


For each asset class, the Trustees will consider whether the higher fees associated with active management are justified.


Members’ Views
The Trustees recognise that it is likely that members and beneficiaries will hold a broad range of views on ESG and other non-financial matters. Whilst the Trustees will seek to avoid investing in a way that is likely to be strongly opposed by those individuals, the Trustees do not directly take such views into account when determining the Scheme’s investment strategy.


The Trustees believe that its duty to members and beneficiaries will be best served by ensuring that all benefits can be paid as they fall due and the Trustees’ Investment Objectives are designed to ensure this duty is achieved.


ESG Risks & Corporate Engagement
Where the Trustees invest in pooled investment vehicles, it is accepted that the extent to which corporate governance, socially responsible practices and ethical behaviour are used in the selection of suitable investments will be determined by the investment managers’ own policies on these matters.


Similarly, it is accepted that ongoing engagement with companies in which investments are made (including the exercise of voting rights) will also be determined by the investment managers’ own policies.
The Trustees recognise that the membership might wish the Trustees to engage with the companies in which the Scheme invests with the objective of improving corporate behaviour to benefit the environment and society.


However, the Scheme’s assets are invested in pooled funds and, as noted above, the Trustees therefore rely on the investment managers to carry out such engagement. The Trustees recognise that the investment managers’ engagement policies are likely to be focussed on maximising financial returns and minimising financial risks rather than targeting an environmental or societal benefit.


The Trustees do however consider ESG policies and, if they are felt to be inappropriate, will replace the fund in question.


Monitoring
The Trustees regularly review the Scheme’s investments to ensure that the assets continue to be managed in accordance with each manager’s mandate and that the choice of managers remains appropriate.


Furthermore, the Trustees regularly monitor the position of the investment managers with regards to ESG matters.
To assist with the monitoring of the investment managers, The Trustees receive regular information from their investment adviser providing details of investment manager performance and asset allocation decisions. This analysis includes comparisons with benchmarks and relevant peer-group data.


The analysis assesses whether performance has been in line with expectations given market conditions and whether the level of risk has been as expected.


The investment adviser also provides regular updates on the investment managers’ actions regarding ESG factors and shareholder engagement.


The investment adviser regularly meets with the managers of pooled funds on its approved list.

 

4.4 ADDITIONAL VOLUNTARY CONTRIBUTIONS

Additional Voluntary Contributions (AVCs) are held separately from the main assets and the Trustees aim to make a variety of funds available with the member choosing which funds to use. From time to time the Trustees review the range of available funds to ensure the choice remains appropriate for members' needs.


Details of the current AVC arrangements are provided in the Appendix.

 

 

5 FUTURE AMENDMENTS

From time to time, and following receipt of advice from its investment adviser, the Trustees may agree to make changes to the investment strategy set out in this statement. Any such changes will be summarised in an addendum to this statement.

 

Before any changes are made to the investment strategy, the Trustees will consult with the sponsoring employer.

 

The principles set out in this statement have been agreed by the Trustees.

 

APPENDIX 1

CURRENT INVESTMENT STRATEGY

View Appendix 1

 

jockey club racecourses pension scheme

ADDENDUM TO THE STATEMENT OF INVESTMENT PRINCIPLES

ORIGINAL STATEMENT DATED: SEPTEMBER 2019

DATE OF ADDENDUM: SEPTEMBER 2020

 

Purpose of the Addendum

This Addendum is made in accordance with the requirements of the Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019 and it updates the Statement of Investment Principles to record how the Scheme complies with the EU Shareholder Rights Directive (SRD II) which comes into effect on 1 October 2020.

 

Definitions relating to this Addendum and the Statement of Investment Principles

ESG – Environmental, Social and Governance (including, but not limited to, climate change)


In the relevant regulations “non-financial matters” refers to the views of the members. This includes, but is not limited to, ethical views, views on ESG factors and views on the present and future quality of life for the members.

 

INVESTMENT MANAGER ARRANGEMENTS

The Trustees believe that financially material considerations, including ESG factors and the risks related to such factors, can contribute to the identification of both investment opportunities and financially material risks. Consequently, financially material considerations can have a material impact on investment risk and return outcomes.

 

Compatibility of Pooled Funds with the Trustees’ Investment Strategy

When selecting a pooled fund, the Trustees consider various factors, including:

  • the assets that will be held within that fund and whether the asset allocation of the fund is expected to change over time;
  • the risks associated with the fund along with the return that is expected;
  • the fund’s objective (as stated by the fund’s investment manager) and whether the objective is consistent with the performance that the Trustees expect from that fund;
  • the fund’s fee structure to ensure that this is reasonable and that it does not provide an incentive for the investment manager to manage the fund in a way that differs from the expectations of the Trustees.
  • how frequently underlying investments within the fund are expected to be traded by the investment manager;
  • how financially material consideration(1) (including ESG factors) over the appropriate time horizon(2) are taken into account by the investment manager;
  • the investment manager’s policy in relation to the exercise of the rights (including voting rights) attaching to the investments held within the pooled fund; and
  • the investment manager’s policy in relation to undertaking engagement activities in respect of the investments held within the pooled fund*.

 

*This includes engaging with an issuer of debt or equity regarding matters including (but not limited to) performance, strategy, capital structure, management of actual or potential conflicts of interest, risks, and ESG matters. It also includes engaging on these matters with other investment managers, other holders of debt or equity and persons or groups of persons who have an interest in the issuer of debt or equity.

 

After analysing the above characteristics for a fund, the Trustees identify how that fund would fit within their overall investment strategy for the Scheme and how the fund is expected to help the Trustees meet their investment objectives.

 

1: “financially material considerations” includes (but is not limited to) environmental, social and governance considerations (including but not limited to climate change), which the trustees of the trust scheme consider financially material

2: “appropriate time horizon” means the length of time that the trustees of a trust scheme consider is needed for the funding of future benefits by the investments of the scheme

 

Duration of Investment Manager Arrangements

The Trustees normally expect that pooled funds will be held for several years. However, as part of the periodic strategic asset allocation reviews (which take place at least every three years), the Trustees will review whether the ongoing use of each fund remains consistent with their investment strategy.

 

The Trustees regularly monitor the financial and non-financial performance of the pooled funds held and details of this monitoring process is set out below. If the Trustees become concerned about the ongoing suitability of a pooled fund, they may reduce exposure to it or disinvest entirely. Such action is expected to be infrequent.

 

Monitoring Pooled Funds

The Trustees regularly assess the performance of each fund held and this monitoring includes an assessment of whether the investment manager continues to operate the fund in a manner that is consistent with the factors used by the Trustees to select the fund (as listed above).

 

When assessing the performance of a fund, the Trustees do not usually place too much emphasis on short-term performance although they will seek to ensure that reasons for short-term performance (whether favourable or unfavourable) are understood.

 

The Trustees expect the investment managers of pooled funds to invest for the medium to long term and they expect investment managers to engage with issuers of debt or equity with a view to improving performance over this time frame.

 

If it is identified that a fund is not being operated in a manner consistent with the factors used by the Trustees to select the fund, or that the investment manager is not engaging with issuers of debt or equity, the Trustees may look to replace that fund. However, in the first instance, the Trustees would normally expect their investment adviser to raise the Trustees’ concerns with the investment manager. Thereafter, the Trustees, in conjunction with their investment adviser, would monitor the performance of the fund to assess whether the situation improves.

 

Portfolio Turnover

The Trustees are aware of the requirement to monitor portfolio turnover costs (the costs incurred as a result of the buying, selling, lending or borrowing of investments).

 

When selecting a pooled fund, the Trustees will consider how the investment manager defines and measures:

  • the targeted portfolio turnover (the frequency within which the assets of the fund are expected to be bought or sold); and
  • turnover range (the minimum and maximum frequency within which the assets of the fund are expected to be bought or sold).

At least annually, the Trustees, in conjunction with their investment adviser, will consider the transaction costs incurred on each pooled fund. As part of this analysis, the Trustees will consider whether the incurred turnover costs have been in line with expectations.

 

The Trustees will take the above information on portfolio turnover into account when assessing the ongoing suitability of each pooled fund.

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