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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 2020 for our financial year ending 31st December 2020. 

 

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. 

MODERN SLAVERY AND HUMAN TRAFFICKING 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 2020. 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.

 

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.

 

Our Employee Handbooks contain the full Modern Slavery policy as does our intranet.  We draw attention to our Whistleblowing Policy as a way of escalating suspicions.  All employees and casual workers have easy access to the MSA policy.

 

Our group purchasing policy requires evidence of a suppliers’ compliance with MSA15. We have had confirmation that our top 80% of suppliers 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 have assessed which organisations fall in to the highest risk category and have identified and challenged 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:

 

  • Further training for employees
  • 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 2020.

 

Nevin signature.JPG

Nevin Truesdale

Group Chief Executive

The Jockey Club

 

Date:  6th January 2021

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 2020 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 17 December 2020.

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.

Statement of Investment Principles - April 2021

 

  1. Introduction. 1
  2. Investment Governance Structure. 2
  3. Investment Beliefs. 3
  4. Investment Objectives and Strategy. 5
  5. Use of Investment Managers. 6
  6. Stewardship. 7
  7. Investment Manager Arrangements. 8
  8. Risk Mitigation. 11
  9. Monitoring. 12
  10. Future Amendments. 13

 

Appendix 1: The Trustees Investment Strategy

Appendix 2: Fund Details

 

 

 

Glossary

 

Allianz

Allianz Global Investors GmbH

AVCs

Additional Voluntary Contributions

Aviva

Aviva Investors UK Fund Services Limited

BlackRock

BlackRock Investment Management (UK) Limited

ESG

Environmental, Social and Governance

(including, but not limited to, climate change)

LDI

Liability Driven Investment

Partners

Partners Group (Guernsey) Limited

Scheme

Jockey Club Racecourses Pension Scheme

Trustees

The Trustees of the Scheme

UNPRI

United Nations Principles for Responsible Investment

 

 

 

1.           Introduction

 

This statement is made in accordance with the requirements of legislation[1] and, in determining a suitable investment strategy for the Scheme, the Trustees have considered The Pension Regulator’s Investment Guidance for defined benefit pension schemes.

 

The main body of this statement sets out the principles and policies that govern investments made by the Trustees of the Scheme. Details of the specific investment arrangements in place are set out in the Appendices.

 

Upon request, a copy of this statement will be made available to members, the Scheme Actuary and any investment managers used by the Trustees. This statement will also be made publicly available, as required by legislation.

 

 

2.           Investment Governance Structure

 

Investment Advice

As required by legislation, in the preparation and maintenance of this statement and when considering the suitability of any investments, the Trustees will obtain and consider 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.

 

Legal Advice

Whenever deemed necessary, the Trustees will seek advice from their legal adviser on investment matters.

 

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.

 

Investment Managers

Day-to-day management of the Scheme’s assets is delegated to one or more investment managers.

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.

 

Members’ Views and Other Non-Financial Matters

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

 

The Trustees recognise that it is likely that members and beneficiaries will hold a broad range of views. However, the Trustees do not take non-financial matters into account in the selection, retention and realisation of investments. The Trustees will review their policy on whether or not to take account of non-financial matters as appropriate.

 

The Trustees believe that their 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.

 

Conflicts of Interest

 

The Trustees are satisfied that the investment strategy described in this Statement meets their responsibility to invest the assets in the best interests of the members and beneficiaries and, in the case of a potential conflict of interest, in the sole interest of the members and beneficiaries.

3.           Investment Beliefs

 

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

 

Appropriate Time Horizon

In determining investment objectives and a suitable investment strategy for the Scheme, the Trustees take into account an appropriate time horizon. The Trustees believe that an appropriate time horizon will be the period over which benefits are expected to be paid from the Scheme.

 

Risk versus Reward

Targeting higher levels of investment return requires increased levels of 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 ESG risks.

 

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

 

ESG and Other Financially Material Considerations

The Trustees believe that financially material considerations, including certain 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.

The Trustees also recognise that long-term sustainability issues, particularly climate change, present risks and opportunities that increasingly may require explicit consideration.

 

Assessment of how ESG risks are mitigated will be one of the factors considered by the Trustees when selecting and monitoring investment managers.

 

Stewardship

The Trustees believe that good stewardship can help create, and preserve, value for companies and markets as a whole, which is in the best interests of members as better run enterprises are more likely to perform better over the longer term.

 

4.           Investment Objectives and Strategy

 

Defined Benefit Assets – Investment Objectives

 

The Trustees' primary investment objectives are:

  • to ensure that the assets are sufficient and available to pay members’ benefits as and when they fall due;
  • to generate an appropriate level of investment returns – to improve the funding position and thereby improve security for members; and
  • to protect the funding position – limiting the scope for adverse investment experience reducing security for members.


The Trustees' investment approach is designed to strike a balance between the above primary objectives but also considers:

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

 

Defined Benefit Assets – Investment strategy


The Trustees have taken advice from their investment adviser to construct a portfolio of investments consistent with these objectives. In doing so, consideration is given to all matters which are believed to be financially material over the appropriate time horizon.

 

The Trustees do not explicitly consider non-financial matters when determining the Scheme’s investment strategy.

 

AVCs

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

 

Appendix 1.

 

5.           Use of Investment Managers

 

Investment Manager Selection

 

The Trustees delegate the day to day management of the assets, including selection, retention and realisation, to professional investment managers.

 

When considering the suitability of an investment manager, the Trustees (in conjunction with their investment adviser), will take account of all matters which are deemed to be financially material. In particular, the Trustees will:

 

  • ensure that the investment manager has the appropriate knowledge and experience;
  • ensure that the investment manager’s mandate is appropriate; and
  • consider the investment manager’s approach to ESG matters.

 

When selecting investment managers, the Trustees may also take into account non-financially material considerations such as the investment manager’s administrative capabilities and the liquidity of the investments.

 

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 will normally select investment managers who are signatories to the UNPRI and who publish the results of their annual UNPRI assessment. This principle may be waived if a fund offered by a non-signatory manager is deemed to have investment characteristics which are particularly important for meeting the Trustees' investment objectives.

 

Manager Implementation

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.

 

Use of Derivatives

The investment managers are permitted to use derivative instruments to reduce risk or for efficient portfolio management. Risk reduction would include mitigating the impact of a potential fall in markets or the implementation of currency hedging whilst efficient portfolio management would include using derivatives as a cost-effective way of gaining access to a market or as a method for generating capital and/or income with an acceptable level of risk.

 

Leverage

The instruments used by the investment managers of the Liability Matching Assets may result in the Liability Matching Assets being leveraged. Since these assets are closely aligned to the liabilities, the allocation to Liability Matching Assets (and any associated leverage) reduces the volatility of the Scheme’s funding position and therefore reduces risk.

 

6.           Stewardship

 

The Trustees' policy in relation to the exercise of rights attaching to investments, and undertaking engagement activities in respect of investments, is that they wish to encourage best practice in terms of stewardship.

 

However, the Trustees invest in pooled investment vehicles and therefore accept that ongoing engagement with the underlying companies (including the exercise of voting rights) will be determined by the investment managers’ own policies on such matters. For that reason, the Trustees recognise that their ability to directly influence the action of companies is limited.

 

Nevertheless, the Trustees expect that each investment manager will discharge its responsibilities in respect of investee companies in accordance with that investment manager’s own corporate governance policies and current best practice, including the UK Corporate Governance Code and UK Stewardship Code.

 

The Trustees also expect that each investment manager will take ESG factors into account when exercising the rights attaching to investments and in taking decisions relating to the selection, retention and realisation of investments.

 

When considering the suitability of an investment manager, the Trustees (in conjunction with their investment adviser) will take account of any particular characteristics of that manager’s engagement policy that are deemed to be financially material.

 

The Trustees recognise that the members might wish the Trustees to engage with the underlying companies in which the Scheme invests with the objective of improving corporate behaviour to benefit the environment and society.

 

However, the Trustees' priority is to select investment managers which are best suited to help meet the Trustees' investment objectives. In making this assessment, the Trustees will receive advice from their investment adviser. The Trustees recognise that the investment managers’ own policies are likely to be focussed on maximising financial returns and minimising financial risks rather than targeting an environmental or societal benefit.

 

7.           Investment Manager Arrangements

 

As the Scheme’s assets are held in pooled funds, the Trustees have limited influence over the investment managers’ investment decisions. In practice, investment managers cannot fully align their strategy and decisions to the (potentially conflicting) policies of all their pooled fund investors in relation to strategy, long-term performance of debt/equity issuers, engagement and portfolio turnover.

It is therefore the Trustees' responsibility to ensure that the approaches adopted by investment managers are consistent with the Trustees' policies before any new appointment, and to monitor and to consider terminating any existing arrangements that appear to be investing contrary to those policies.

 

The Trustees expect investment managers, where appropriate, to make decisions based on assessments of the longer term financial and non-financial performance of debt/equity issuers, and to engage with issuers to improve their performance. The Trustees assess this when selecting and monitoring managers.

 

The Trustees' policy on selecting, monitoring, evaluating and (where necessary) terminating these arrangements is set out in further detail below.

 

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 considerations (including ESG factors) over the appropriate time horizon 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.

  

  1. Investment Manager Arrangements (continued)

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.

 

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.

 

The Trustees expect to summarise certain aspects of their monitoring, particularly in relation to stewardship, in an annually produced Implementation Statement.

  

  1. Investment Manager Arrangements (continued)

 

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.

 

8.           Risk Mitigation

When determining suitable investment objectives and when designing the Scheme’s investment strategy, the Trustees (in conjunction with their investment adviser), will take into account all risks that are assessed to be financially material. The principal investment risks are listed in the Trustees' Investment Risk Policy. That Policy also provides an explanation of how the investment risks are managed.

 

Risk Capacity and Risk Appetite

In determining a suitable investment strategy, the Trustees consider how the volatility of the funding position is likely to be affected by changes to the asset allocation. An important consideration for the Trustees is whether a potential investment strategy is consistent with the ability of the sponsoring employer to address any future increase in deficit that may arise due to market movements.

 

Self-Investment Risk

Legislation imposes a restriction that no more than 5% of a pension scheme’s assets may be related to the sponsoring employer. The Trustees do not hold any direct employer-related assets and any indirect exposure is expected to be less than 5% of total assets.

 

ESG Risks

The Trustees (in conjunction with their investment adviser) have considered the likely impact of the financially material ESG risks associated with all of the Scheme’s investments and have assessed the mitigation of such risks implemented by each of the investment managers. In making this assessment, the Trustees recognise that, where pooled investment vehicles are held, the extent to which ESG factors will be used in the selection of suitable underlying investments will be determined by the investment managers’ own policies on such matters.

 

The Trustees however consider ESG factors to be important and this is reflected by the introduction of an ESG-focussed equity fund following a robust assessment process.

 

Liquidity Risk

The majority of the Scheme’s investments will be liquid and will be realisable for cash at relatively short notice without incurring high costs. However, the Trustees recognise that the liabilities are long-term in nature and that a modest allocation to less-liquid investments may be appropriate.

Details of the liquidity characteristics of the funds held are provided in Appendix 2.

 

9.           Monitoring

The Trustees regularly review the Scheme’s investments for all matters considered to be financially material over the future period for which benefits are expected to be paid from the Scheme. This includes reviewing 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.

 

 

10.       Future Amendments

 

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

 

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

 

The principles set out in this Statement have been agreed by the Trustees:

 

 

 

 

 

 

Signed:……………………………………………………                     Date: ………………………

For and on behalf of the Trustees of the Jockey Club Racecourses Pension Scheme.

 

 

Appendix 1: The Trustees' Investment Strategy

 

Strategic Asset Allocation

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 deliver a level of investment returns deemed appropriate by the Trustees given the risk involved.
  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 funding position of the Scheme.

 

In addition, the Trustees may hold cash. Cash will normally be held in the Trustees' bank account if it is to be used to make payments due in the short-term whereas cash that is to be held for more than a few weeks will normally be held in a cash fund.

 

At the time of preparing this statement, the Scheme was in the process of moving towards the allocations described below. The expected split of the Scheme’s assets between the above categories, once the transition is complete, is approximately 76% Growth and 24% Liability Matching.

The split of the Scheme’s assets between Growth and Liability Matching Assets is not regularly rebalanced and will vary over time as market conditions change.

 

The Trustees will review the strategic asset allocation periodically, and at least every three years, to ensure that the investment strategy remains consistent with the Trustees' funding objectives. As part of such a review, the Trustees will consider the risks associated with the investment strategy.

 

Investment Strategy Implementation

The Trustees have selected funds managed by Allianz, Aviva, BlackRock and Partners to implement the Scheme’s investment strategy.

 

Further details of the investment strategy and the funds used are provided below.

 

 Appendix 1: The Trustees' Investment Strategy (continued)

 

Design of the Growth Asset Portfolio

The structure of the Scheme’s Growth Assets has been designed to offer diversification across a range of underlying asset classes and to achieve this by combining investment managers with different asset management styles.

 

The strategic allocation for the Scheme’s Growth Assets is as follows:

 

Pooled Fund

Strategic Allocation of the Growth Assets

Allianz Global Multi-Sector Credit Fund

11%

BlackRock Dynamic Diversified Growth Fund

9%

BlackRock Institutional Equity Funds – Emerging Markets

5.5%

Partners Fund (Guernsey)

7%

Aviva Lime Property Fund

13%

BlackRock Sterling Short Duration Credit Fund

7.5%

BlackRock ACS World ESG Equity Tracker Fund

47%

Total Growth Assets

100%

The allocation of the Growth Assets is not automatically rebalanced but will be monitored and rebalanced at the discretion of the Trustees.

 

Design of the Liability Matching Portfolio

The Scheme’s Liability Matching Assets are invested in leveraged Liability Driven Investment (LDI) funds managed by BlackRock. The funds used are:

 

·            BlackRock LMF Leveraged 2032 Index Linked Gilt Fund

·                    BlackRock LMF Leveraged 2068 Index Linked Gilt Fund

·            BlackRock LMF Leveraged 2040 Index Linked Gilt Fund

·                    BlackRock LMF Leveraged 2040 Gilt Fund

·            BlackRock LMF Leveraged 2050 Index Linked Gilt Fund

·                    BlackRock LMF Leveraged 2052 Gilt Fund

·            BlackRock LMF Leveraged 2062 Index Linked Gilt Fund

·                    BlackRock LMF Leveraged 2068 Gilt Fund

 

The current allocation to LDI funds is expected to hedge approximately 65% of funded liabilities in terms of interest rate and inflation exposures (noting that this analysis is approximate and due to be refreshed in the near future). The Trustees expect the LDI allocation (and hence level of hedging) to increase over time as the Scheme matures.

 

Cash

The Trustees may invest in the BlackRock ICS - Sterling Liquidity Fund.

Appendix 1: The Trustees' Investment Strategy (continued)

 

LDI Leverage Management Policy

In an environment of rising yields, a recapitalisation payment may need to be paid into one or more of the LDI funds. This will ensure that leverage within the LDI funds remains within a permissible range.

 

The Trustees have provided BlackRock with authority to meet a recapitalisation contribution by selling assets in the following order:

 

  1. BlackRock ICS - Sterling Liquidity Fund
  2. BlackRock Sterling Short Duration Credit Fund
  • BlackRock Dynamic Diversified Growth Fund
  1. BlackRock ACS World ESG Equity Tracker Fund
  2. BlackRock Institutional Equity Funds – Emerging Markets
  3. Liability Matching fund(s) which require the recapitalisation contribution

 

If the leverage of a BlackRock LDI fund falls below a minimum threshold, BlackRock will make a cash payment from the relevant fund to raise the leverage. The Trustees have provided BlackRock with authority to invest any such cash proceeds in the BlackRock Sterling Short Duration Credit Fund.

 

Cashflow Management Policy

Any investments or disinvestments will be made at the discretion of the Trustees, but the Trustees will maintain a Cashflow Management Policy which will record how such payments should be structured. The Cashflow Management Policy will be designed to ensure the allocation of the Scheme’s assets remains closely aligned with the strategy described in this statement.

 

To ensure the Scheme operates efficiently, the Trustees may share the Cashflow Management Policy with the individual(s) responsible for processing payments from the Scheme.

 

The Cashflow Management Policy will be reviewed from time-to-time by the Trustees and, as a minimum, at least every three years in line with a review of this statement. Given that the Cashflow Management Policy is designed to keep the Scheme’s asset allocation aligned with the investment strategy and investment principles described in this statement, the sponsoring employer is satisfied that the Cashflow Management Policy can be amended by the Trustees without consulting the sponsoring employer.

 

Additional Voluntary Contributions

The Scheme’s AVC arrangements are held with Royal London and Utmost Life and Pensions (Utmost) formerly Equitable Life.

 

Appendix 2: Fund Details

This Appendix provides a summary of the funds used to implement the Scheme’s investment strategy. The details provided below were correct as at March 2021

The following points should be noted:

  • AMC: The Annual Management Charge applicable to each fund represents the fee payable to the fund manager.
  • Additional expenses: These are third party costs associated with the operation of a fund such as fees paid to the administrator, the custodian and the auditor and the costs associated with the use of third-party funds where these are used. The level of the additional expenses may vary over time.
  • Legal Structure: An explanation of the different types of fund legal structures is provided in the Trustees' Investment Risk Policy
  • T: Trade Date

Allianz Global Multi-Sector Credit Fund

Objective

The Allianz Global Multi Sector Credit Fund invests in a wide variety of credit assets including investments grade bonds, high yield bonds, emerging market credit and securitised debt, aiming to outperform LIBOR by 3% p.a. over 3 years, gross of fees.

Legal Structure

Investment Company with Variable Capital

Trading Frequency

Daily

Notice Period

T

Settlement Period

T+3

Fee

AMC:

0.42% p.a.

Additional Expenses (approx.):

0.00% p.a.

 

 

 

Appendix 2: Fund Details (continued)

BlackRock Dynamic Diversified Growth Fund

Objective

This fund targets capital growth by investing in a diversified portfolio of equities, bonds, property and cash. Derivatives (exchange traded and over-the-counter) may be used for efficient portfolio management and to hedge underlying positions. The fund's performance objective is to outperform cash (3 month LIBOR) by 3% p.a. (net of fees) over rolling 3 year periods.

Legal Structure

Investment Company with Variable Capital

Trading Frequency

Daily

Notice Period

T

Settlement Period

T+3

Fee

AMC:

0.55% p.a.

Additional Expenses (approx.):

0.12% p.a.

 

BlackRock Institutional Equity Funds – Emerging Markets

Objective

The BlackRock Institutional Equity Funds - Emerging Markets will seek to maximise the long-term total return by investing in emerging economies (directly or indirectly). Investments will be made in Latin America, Eastern and Southern Europe, Asia and Africa.

Legal Structure

Unit-linked insurance policy

Trading Frequency

Daily

Notice Period

T-1

Settlement Period

T+3

Fee

AMC:

0.75% p.a.

Additional Expenses (approx.):

0.20% p.a.

 

 

 

Appendix 2: Fund Details (continued)

Partners Fund (Guernsey)

Objective

The Fund aims to deliver 8-12% p.a. over a full economic cycle.

Legal Structure

Unit Trust

Trading Frequency

Monthly

Notice Period

T – (1 Month plus 1 business day)

Settlement Period

T+24

Fee

1.5% of NAV plus unfunded commitments plus performance fee of 12.5% over a high watermark.

 

Aviva Lime Property Fund

Objective

The Aviva Lime Property Fund aims to achieve investment returns in excess of 1.5% (net of costs) p.a. above gilts over the medium to long term by investing in lower risk property assets with secure long term income streams.

Legal Structure

Unit Trust

Trading Frequency

Monthly priced. Redemptions are annual as at 31 December. The manager has the ability to defer payment for up to 12 months.

Notice Period

6 months

Fee

AMC:

0.40% p.a.

Additional Expenses (approx.):

0.12% p.a.

 

 

 

Appendix 2: Fund Details (continued)

BlackRock Sterling Short Duration Credit Fund

Objective

To generate income returns, with the prospect of capital growth, through an actively managed portfolio of predominantly corporate bonds with durations less than 5 years. The target of the fund is to return cash (LIBOR) +1.5% p.a., gross of fees, over a rolling 3-year period.

Legal Structure

Unit-linked insurance policy

Trading Frequency

Daily

Notice Period

T-1

Settlement Period

T+3

Fee

AMC:

0.15% p.a.

Additional Expenses (approx.):

0.05% p.a.

 

BlackRock ACS World ESG Equity Tracker Fund

Objective

The Fund aims to provide a return by tracking the performance of the MSCI World ESG Focus Low Carbon Screened Index, the Fund’s benchmark, to within 0.5%, by investing in shares of companies that make up the benchmark.

Legal Structure

Unit-linked insurance policy

Trading Frequency

Daily

Notice Period

T-1

Settlement Period

T+3

Fee

AMC:

0.14% p.a.

Additional Expenses (approx.):

0.03% p.a.

 

 

 

Appendix 2: Fund Details (continued)

BlackRock LMF Leveraged Gilt and Index Linked Gilt Funds

Objective

To provide leveraged exposure to the appropriate Treasury Gilt or Index-Linked Gilt. The funds are designed to be held until maturity and aim to provide a single payment on the specified maturity date of the underlying reference gilt. Due to the leveraged nature of the Funds, every £1 invested in the Funds provides more than £1 worth of exposure to the underlying reference gilt.

Legal Structure

Unit Trust

Trading Frequency

Daily

Notice Period

T-1

Settlement Period

T+3

Fee

AMC:

0.15% p.a.

Additional Expenses (approx.):

0.00% p.a.

 

 

[1] In particular, the Pensions Act 1995, the Occupational Pensions (Investment) Regulations 2005 and the Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018 and the Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019.

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