Compliance2018-08-21T14:50:53+00:00

As a German investment management company (Kapitalverwaltungsgesellschaft, KVG), R.I. Vermögens­betreuung AG is obliged to solely pursue the interests of its investors, to conduct its business with diligence, conscientiousness and honesty and to act in the best interest of the managed investment funds, their investors and the integrity of the market.

Possible conflicts of interests:

Conflicts of interests in investment management cannot be ruled out entirely for investors and clients. Conflicts of interests may arise between:

  • RIV, its directors, employees, third party companies and persons which directly or indirectly are linked to RIV through control, which are linked to RIV by contracts, other third parties and investment funds managed by RIV, the investors of these investment funds or
  • the investment funds, the investors and other clients of RIV,
  • investors of the investment funds managed by RIV,
  • different investment funds managed by RIV,
  • RIV and appointed outsourcing companies or the custodians.

Conflicts of interests which may harm the interests of the investment funds or their investors may arise in the following settings:

  • incentive systems for directors or employees of RIV or third party companies which contractually are entrusted with providing services to enable the collective portfolio management;
  • personal transactions in assets that are eligible for the investment funds managed by RIV made by directors or employees or by directors or employees from third party companies which contractually are entrusted with providing services to enable collective portfolio management;
  • Securities lending
    To increase their income and that of the investment funds, many investment management companies lend securities from their investment funds to other financial institutions (without informing investores explicitely). Following risks result from this behaviour:
  • The obscure exchange of real asset equities for claims (repayment entitlements against financial institutions) changes the asset allocation in a mostly unfavourable way and increases counterparty risk at the same time.
  • The lending fee is the price for the risk the lender enters into. The investment management company usually keeps about half the lending fee. The investment fund carries all of the risk but is not compensated for it appropriately.
  • Even if the investment management company enters into a contract which complies with legal and supervisory requirements, is vigilant about a sufficient creditworthiness of the counterparty and only accepts sound assets as collateral, then this counterparty can still lend the securities to another counterparty whose creditworthyness is not known. The lent securities will ultimately allow speculants to sell these securities short, against the long position of the lending fund – mostly with negative consequences for the investors of the investment fund.
  • inducements
  • rebalancing within the investment funds
  • transactions between RIV and the investment funds managed by RIV or individual portfolios, or transactions between the investment funds managed by RIV and/or individual portfolios
  • transactions to improve the appearance of fund performance on specific dates (window dressing)
  • the combination of orders (block trades)
  • mandating of closely related companies and individuals
  • large individual orders
  • market timing and frequent trading
  • the definition of the cut-off time
  • IPO allocations
  • the outsourcing of one or more functions to another company
  • the execution of voting rights in the portfolio
  • the activities of the custodian
  • investors seeking to redeem their investment shares and investors who want to keep their investment in the investment funds
  • from other contractual partners that offer services which are required
  • the relationship between RIV and related companies or investment officers or asset managers with issuers of financial instruments and investable assets
  • from performance fees
  • from obtaining information which is not publicly availible
  • from personal relationships of employees or the directors or related persons
  • from the execution of private securities transactions and transactions in investable assets of directors or employees
  • from directors or employees exercising roles on supervisory boards or advisory boards
  • from taking on positions on supervisory boards of other financial institutions or listed companies by employees.

Measures to prevent, manage and monitor these conflicts of interests

The entire structure of RIV is organized to avoid conflicts of interests with clients. To avoid conflicts of interests from harming the interests of the investment funds and their investors, RIV has not only implemented organisational and administrative provisions to identify, prevent, solve, manage and observe/monitor conflicts of interest but has also given itself restrictions in its investment policy.

  • The investment funds managed by RIV are organized and constructed in such a way that the risk of conflicts of interests between the investment funds and all persons and institutions which are connected directly or indirectly to the activities of the investment funds are as low as possible.
  • Especially for this reason, a compliance organization has been established which monitors the provisions against conflicts of interests business segment independently and furthers the education of all employees through regular trainings with regard to statutory requirements and in-house guidelines. Every RIV employee has to provide in writing that he has received this information and is in agreement with the compliance provisions.
  • By preventively establishing divisional confidentiality and information barriers with regard to third party companies which perform outsourced services to RIV, and by separating business areas and responsibilities as well as organizational guidelines, RIV implements highest standards in dealing with investors, clients and business partners. From its business partners, RIV expects similar high standards. The independent risk controlling is subject to protective measures against conflicts of interests.

Specific measures:

RIV has taken the following specific measures to address conflicts of interests:

  • performance fees which may encourage speculative investment policies are prohibited.
  • the compensation system for employees does not provide any incentive to put personal interests ahead of the interests of the investment funds managed by RIV or investors and clients.
  • as RIV does not sell external investment products or act as a broker, no sales commissions or follow-up commissions are received.
  • if investment products are bought for the investment funds or individual clients, for which RIV receives any kind of commissions, it is ensured that all commissions are credited to the investment funds or the individual clients in their entirety.
  • RIV has implemented provisions for personal transactions which apply for all employees and which are monitored by the directors in their compliance function continously. RIV maintains a restricted list which prohibits transactions with securities on this list.
  • Provisions are implemented to disclose the handling of accepting and awarding inducements. Kickbacks from income, which banks or brokers generate from transactions with our clients are prohibited. With our cooperation partners we negotiate the best possible terms and conditions for our clients. Kickbacks do not only increase current costs and custody fees of clients, they also encourage churning, which is the collection of commissions due to unnecessary trading. Non-monetary inducements are allowed if they solely exist to improve the investment management (financial analyses, information material, education).
  • RIV monitors transaction costs of the managed investment funds to keep the fund costs low for investors.
  • unavoidable conflicts of interests connected with transactions are counteracted by best execution principles.
  • the individual client accounts managed by RIV are not charged with any management fee with regard to shares of RIV investment funds held in the account. The same is applicable within investment funds, when shares of other RIV investment funds are held (cross-shareholding). In this way a hidden doubling of the management fee is avoided.
  • transactions between investment funds managed by RIV are only executed if they are in the interest of all affected investors and no involved investment fund is put at a disadvantage.
  • combined orders (“block orders”) are based on a uniform allocation principle.
  • if activities are outsourced to closely connected companies and persons (especially the owners of RIV) e.g. with functions within portfolio management, investment advisory, brokers or custodians, this fact is disclosed to investors.
  • to avoid a negative market impact from large individual investments in securities, markets are monitored closely and if necessary orders include pricing limits.
  • to avoid frequent trading from investors, directors and employees a redemption fee of 0,5% is charged.
  • to avoid speculation (“market timing”) against the investment funds managed by RIV, fixed cut-off times have been set and are published in the sales prospectuses.
  • IPO-transactions are prohibited in the investment funds.
  • outsourcing one or more functions to another company solely serves the purpose of increasing the quality of the investment management.
  • the execution of voting rights is based on RIV voting rights guidelines.
  • the custodians act independently from RIV and are obligated to solely act in the interest of the investors.
  • the interests of investors who want to redeem their shares and investors who want to keep their investment in the investment funds are considered in the internal liquidity management.
  • conflicts between the aim of better performance through investment in illiquid assets and the investment fund share redemption policy does not exist, due to the investment policy restriction of only to invest in listed securities.
  • securities lending is prohibited in the investment funds.
  • appropriate risk management systems and internal controlling systems.
  • ensuring a fair information policy towards investors as well as equal treatment of investors (safeguarding of investors’ interests).
  • RIV employees are not allowed to accept positions on supervisory boards or advisory boards of competing companies.
  • the employee responsible for risk controlling is not allowed to be a member of the fund management.

Disclosure

According to § 27 KAGB in connection with § 3 KAVerOV, RIV is obliged to record conflicts of interests with clients that arise while offering its services and to disclose these to the client.

As far as organizational provisions are not appropriate to avoid conflicts of interests, RIV is obliged to record the general type and origin of the remaining conflicts of interests and to search for provisions that might provide relief.

Review

These provisions are reviewed in regular intervals and disclosed by RIV. Actual conflicts of interests that have occured are documented and the directors are informed about these at least once a year.

Statisfied clients are of utmost importance to RIV. Clients have the opportunity to voice criticism within the framework of our complaints management. Complaints can be sent to following address:

R.I. Vermögensbetreuung AG
Ottostraße 1
76275 Ettlingen
Fax: +49 72 43 21 58 59
E-Mail: briefkasten@riv.de

The receipt of your complaint will be confirmed immediately and processed swiftly, appropriately and as stipulated. The processing of the complaint is free of charge. Since its foundation, RIV has not received a single complaint from its clients.

In case of disputes with regard to investment funds, consumers may call upon the arbitration body/ombudsman established by the German Financial Supervisory Authority BaFin. The right to take action before a court is not affected by calling upon the ombudsman. The form to call upon the arbitration body as well as further information on this topic can be found on the homepage of BaFin, under www.BaFin.de.

Arbitration requests as well as the required documents are to be sent to the following address, either per post, fax or e-mail:

Schlichtungsstelle bei der Bundesanstalt für Finanzdienstleistungsaufsicht

Referat ZR 3

Graurheindorfer Straße 108

D-53117 Bonn

Fon: 0228 / 4108-0

Fax: 0228 / 4108-62299

E-Mail: schlichtungsstelle@bafin.de

The best execution principles are determined by the directors and are reviewed at least once a year and customized if necessary. The best execution principles of the banks of clients are reviewed annually. The analysis of transaction execution quality takes place regularly with help of random samples and is documented on a yearly basis. As far as indications can be found that significant changes were made to the best execution principles which do not ensure the best execution in the interest of the investor then a review is made within an appropriate timeframe. Investors are informed by RIV in case of significant changes to the best execution principles.

Best Execution

Within wealth management, all orders are made to the respective bank of the client. For our investment funds, all orders are made to Hauck & Aufhäuser Privatbankiers KGaA Frankfurt which is the custodian of our investment funds.
RIV has taken all appropriate measures to achieve the best possible result when buying or selling securities for its clients and takes following aspects into account: price, costs, speed and probability of order execution and settlement, amount and type of order as well as all other relevant aspects regaring order execution.

In order to guarantee best execution, the executing bank has to implement internal best execution principles that take the previously mentioned aspects into account.

Combination of orders

RIV is allowed to combine orders for its investment funds and for other clients and in general to combine orders as far as this is consistent with legal and contractual obligations. RIV will only combine orders, if order volume, type of security, market segment, current market liquidity and price sensitivity of the security are deemed to be in the best interest of an investment fund or the affected investor. A combination of individual orders may be disadvantageous. However, a combination of orders will only proceed if a disadvantage to an investment fund or investor is not to be expected.

Allocations are set in advance by RIV according to the “BVI-Wohlverhaltensregeln”. Generally this occurs pro rata. Exceptions may arise if a block order is not executed entirely and if certain minimum denominations have to be complied with. RIV is not allowed to put investment fund clients at an advantage or disadvantage to other clients.

RIV may, under certain circumstances, not be in the position to execute orders of certain securities for all clients at the same time or at the same price.

RIV is subject to the applicable regulatory provisions governing the establishment of remuneration systems for investment management companies. RIV has set out detailed provisions in remuneration guidelines, the aim of which is to ensure a sustainable system of remuneration, while preventing misplaced incentives for taking on excessive risks.

The remuneration system of RIV is based on the directive for sound remuneration policy (ESMA/2013/232), which takes the AIFMD directive for investment management companies into account, as far as is possible and reasonable due to the size of the company.

The supervisory board determines the general principles of the remuneration policy and ensures that it is consistent with the strategic aims of RIV and no incentives are provided to take on excessive risk. The supervisory board reviews the policy regularly, at least once a year and is responsible for its implementation. The remuneration arrangement of directors is reviewed at least once a year with respect to appropriateness. In addition, the internal audit determines at least once a year, whether the remuneration principles and -processes are implemented.

The total compensation of every employee consists of an appropriate fixed component, the fixed salary and a variable compensation component. Fixed and variable components of the total compensation are in an appropriate relation to each other. The variable component will never exceed double the fixed component. As RIV declines any share of investment gains obtained for its clients, the variable component does not give any incentive to take on excessive risk within the investment policy and thereby avoids conflicts of interests. The variable compensation component is especially not tied to the performance of investment funds managed by RIV. The calculation of the variable component includes the result of RIV as a factor. The personal performance of an employee can also be included as a factor. The individual performance assessment puts most weight on sustainable business development and safeguarding the company from excessive risks. The aim of the remuneration system is a controllability of operational risk components in combination with an increased efficiency and quality of work.

The allocation of the variable compensation component is ultimately decided upon by the supervisory board or the directors.

For directors and employees of RIV, whose activity has significant influence on the total risk profile of RIV and the investment funds managed by RIV (so called “risk takers”) special rules apply. To ensure that the assessment of these risk-relevant employees is focused on the long-term performance and that current as well as future risks are considered, the directors are obliged to yearly invest at least 25% of their gross variable compensation component in investment funds managed by RIV until the value of all owned shares of RIV investment funds amount to at least one year worth of the fixed salary. This is to be verified in writing to RIV. The investment fund shares have to be held 5 years after leaving RIV.

RIV exercises shareholder and creditor rights in the investment funds in the interests of investors and sound corporate governance to meet its responsibility of safeguarding investors interests.

The basis for the voting rights policy are found in German language in the “RIV principles on exercising voting rights at annual general meetings”. If in an individual case it is in the interest of the investors, the integrity of the market and in the interest of an investment fund, RIV may deviate from the principles.

Details on voting rights which were execerised on basis of the RIV principles on exercising voting rights at annual general meetings will be made availible to affected investors upon request and free of charge.

RIV does not accept any monetary inducements from third parties. Non-monetary inducements are generally also not accepted. Minor non-monetary inducements may only be accepted, if they improve the quality of investment services or ancilliary services for customers and are reasonable and justifiable with regard to extent and type of inducement.

RIV does not receive any reimbursements of any form of expenses incurred in the context of transactions attributable to the investment funds it manages. RIV has no soft commission arrangements with brokers. Nor has RIV arranged, either for its own account or for the account of investment funds it manages, for any commissions for the benefit of investment funds which invest in investment funds managed by RIV.

Any commissions which RIV receives for holding investment funds in its investment funds are credited to the respective investment fund in their entirety and disclosed under “Other income” in the profit and loss account in the annual report of the investment fund. Commissions paid in aggregate amounts for multiple investment funds are distributed on a pro rata basis to the relevant investment funds.

RIV will provide investors with additional details regarding inducements upon request.