ORDER EXECUTION POLICY
(PROFESSIONAL CLIENTS)
1. Introduction
Impax Asset Management Limited and Impax Asset Management (AIFM) Ltd (“Impax”) manages undertakings for collective investment in transferable securities (“UCITS”), segregated accounts and alternative investment funds (“AIFs”). In this policy the UCITS, segregated accounts and AIFs are referred to as “Clients.” Both Impax entities are jointly regulated by the Financial Conduct Authority (FCA) and the Securities and Exchange Commission (SEC). Impax Asset Management (Hong Kong) Limited is a registered institution with the Hong Kong Securities & Futures Commission (SFC). This policy applies to all clients of Impax.
2. Our Best Execution Obligations
Impax is required by the EU Markets in Financial Instruments Directive (MiFID) and COBS 11.2 of the FCA Handbook to act in accordance with the best interests of its clients when placing orders with brokers for execution and to take all reasonable steps to obtain the best possible result for its clients and funds when directly executing orders with an Execution Venue on behalf of its clients.
3. Execution Factors & Venues
In seeking to provide a client with best execution, we are required to take into account certain execution factors and decide on their relative importance when executing client orders.
price;
cost or commissions; speed of execution;
the current liquidity for the relevant security; the size and nature of the order;
the potential market impact of the transaction; likelihood of execution;
responsibility and solvency of the counterparty; quality and efficiency of the settlement process;
characteristics of the execution venues to which that order can be directed;
characteristics of the client order.The relative importance of these execution factors will be judged on an order by order basis in line with our commercial judgement, in light with current market information. While price is often an important execution factor, there will be situations when this is not the priority when executing an order, examples include:
smaller capitalized equities and less liquid stocks, the likelihood of execution and provision of liquidity may be more important than price;
when raising cash to fund redemptions, speed may take priority over price;
when executing a large order, being able to transact the whole order at a less favourable price may be more important than executing part of the order at a better price;
the volatility of price may make timeliness a greater priority;
the choice of execution venues may be limited for certain instruments;
For our UCITS funds, the objectives, investment policy and risks specific to the UCITS scheme as indicated in the prospectus;
where a portfolio manager gives a specific instruction for the execution of a client / fund order, then the order will be executed in accordance to those instructions. The portfolio managers when acting for our clients and funds should be aware that providing such instructions will prevent Impax from taking some of the steps above to obtain the best possible result for the execution of that transaction.
All brokers Impax use are authorised by the competent authority in their home state and have been contracted to provide us with best execution when dealing on our behalf. The approved brokers are reviewed on a regular basis at Impax by the portfolio managers and the dealing function.
4. Crossing between funds
Should there be an opportunity to cross stock between funds, and where a market quote is available, the stocks will be crossed in the market at a mid-market price within VWAP/TWAP range to demonstrate best execution.
Prior to any cross trade transaction, the trading desk will supply all relevant information relating to the trade to the Compliance Department for review. The Compliance team will consider whether all parties to the cross are being treated equitably, that no investment guidelines will be contravened, that there are no conflicting interests between the parties before approving or rejecting any request.
Other factors considered include evidencing that the trade is not a means of providing improper liquidity support between funds. Such activity represents a conflict of interests between funds and is disallowed. Impax will also take into account any delays to trade and whether at any point up to actual execution it is beneficial for one fund to trade independently ahead of another.
5. Trade allocation
Some orders may be aggregated where we have reasonable grounds to believe that this will work to the advantage of each of our clients concerned, for example, by achieving a more advantageous price through benefits of scale, or by achieving processing efficiencies at no disadvantage to clients. If we aggregate an order, the subsequent allocation will not give unfair preference to any client for whom we have dealt. Our trade allocation process ensures the fair allocation of aggregated orders between clients. When orders are aggregated from more than one client, the executed trades will be allocated in accordance with the company’s trade allocation standard.
Trade allocation must be determined on a basis that is fair, reasonable and equitable to all clients based on Impax’s policies and client investment objectives and to avoid favouritism or discrimination among clients in favour of a preferred client or group of clients.
Impax’s trade allocation is in accordance with FCA requirements including: • Timely allocation
• Fair allocation • Re-allocation
Combining two or more accounts in one trade regardless of the portfolio manager involved will be allocated on a pro rata basis for all outstanding orders at the time of the fill. Each account involved will receive a percentage of the executed portion of the partially filled order based upon each account’s percentage of the entire order. The allocations will be made at the average execution price where there is more than one fill.
Transactions are allocated promptly, on the trade date, and no reallocations are permitted from one account to another except where the original allocation was done in error. Re-allocation is subject to the approval of the Head of Compliance and reasons should be documented within one business day.
A revised allocation may be made where an order is only partially executed resulting in an uneconomic allocation to some clients; in such a case we will take reasonable steps to ensure that a re-allocation is in the best interests of the clients for whom we have dealt. Stock would not be allocated to a client if it would be uneconomic or prohibitive, from a dealing cost point of view, for the client. An allocation would be regarded as uneconomic or prohibitive if the administrative cost of the transaction was disproportionate to the value of the stock allocated.
6. Commission Sharing Agreements – CSAs
Impax does acquire research from providers with no links to the executing broker. This is paid for via the use of commission sharing arrangements. Under such an arrangement, Impax instructs the broker to pay a part of the full commission to a third party research provider for research services that have assisted the portfolio managers in investment decisions for client portfolios. Impax will only pay for research that supports the portfolio managers’ decision process. This process enables us to accurately track expenditure on research services and identify the best providers of the research services we receive.
The quality of all research received is analysed by the portfolio managers and our research teams as part of our investment process. An online voting session is then organized by portfolio
managers on the quality of the financial research and the value of the services they received in relation to our strategies.
The CSA Committee which comprises the Head of Compliance, the Head of Listed Equities and the Head of Trading. Other attendees can include Portfolio Managers and Operational team members as appropriate.
The Committee meets quarterly to examine the results of the vote and to ensure they are correctly understood. The CSA Committee validates rankings which allow it to monitor against the budgets set for the research services.
7. Monitoring & Review
Impax will monitor the effectiveness of its Order Execution Policy and its execution arrangements to identify any shortcomings in execution quality. We use the services of a third party to provide us with quarterly transaction cost analysis (TCA). Their findings, broker performance and selection of brokers are discussed quarterly by the Best Execution Committee which comprises of Head of Listed Equities, Head of Dealing, Head of Compliance and the Chief Operating Officer of Listed Equities.
On CSA arrangements, the Compliance function maintains oversight over the voting and allocation process.
8. Client Consent, Unexecuted Limit Orders and Modifications to the Order
Execution Policy
Under the FCA regulations, Impax requires your prior consent to this Order Execution Policy, and for Impax to deal in un-regulated or non-EU markets or MTFs. By appointing Impax as your discretionary portfolio manager, you are deemed to have provided such prior express consent. Where we are unable to execute Limit Orders under prevailing market conditions, we are required to make such Orders public. This is not in your best interests and we will use our discretion as to whether or not we make such orders public unless otherwise notified.
Appendix A – List of commonly used execution venues
The brokers or dealers that we have execution arrangements with include: UBS
Liquidnet
Merrill Lynch & Co Inc Credit Suisse Group ITG
Robert W. Baird & Co Morgan Stanley
CLSA Asia-Pacific Markets SEB Group
Liberum Capital
Goodbody Stockbrokers Panmure Gordon UK Ltd National Bank Financial Standard Chartered Bank KBC Peel Hunt
Arden Partners
Libertas Capital Securities Ltd Berenberg Bank
Instinet Europe Ltd Russell Investments
Our policy for order execution will be reviewed regularly and any material changes notified to our clients via our website.
