Corporate governance for investment companies

Corporate Governance at Asset Managers and Investment Companies

DUFAS Asset Manager Code of Conduct

On 1 October 2014, the Dutch Fund and Asset Management Association (DUFAS) published a code of conduct (Code) that explains what clients can expect of their asset managers. This Code applies to all DUFAS members. As a DUFAS member and co-author of this Code, Kempen Capital Management (KCM) applies this Code and reports on how it has applied its principles. Its annual report contains KCM’s report on this over 2017.


General Principles

1. Asset managers shall act in the interests of their clients
At KCM, the client’s objectives always form the starting point for the type of asset management to be provided. If we cannot provide a service, there are no incentives for KCM employees to offer this service anyway. We even encourage our employees to be slightly stubborn and not provide a service if we genuinely believe it is not in the client’s interest.

2. Asset managers shall know their clients

It is KCM practice to be in regular touch with our clients, their advisors and ALM (Asset Liability Management) consultants with respect to the clients’ financial positions. This includes assessing or reconfirming objectives and risk appetite.

3. Asset managers shall conduct business fairly
The agreements we make with clients and the guidelines we agree with clients are laid down in contracts. Our clients receive very frequent, unambiguous reports on these. Our investment fund clients can of course access the prospectuses, Key Investor Information and recent annual reports on our website. Monthly reports on portfolio activity and investment results are also compiled for most investment funds.

4. Asset managers shall act ethically
Acting ethically has to be in the DNA of all KCM employees. Pre-employment screening is conducted before an employee can start working at KCM. All Kempen & Co employees have to attend an in-house ethics course and subsequently take an exam. Furthermore, we believe it is important to have an open office culture, one in which people can challenge each other on their conduct, in which people can make mistakes and be encouraged to talk about them. Finally, regular awareness sessions are held on compliance-related issues.

5. Asset managers shall manage conflicts of interest
With a view to managing potential conflicts of interest, as mentioned above we first make unambiguous agreements with our clients. KCM and its employees also invest in its own funds and this is the ultimate expression of interests coinciding. Equal mandates are given equal treatment at KCM. To this end, a central trading unit has been set up to execute buy and sell transactions and this unit executes transactions (where possible combined) for and on behalf of all our clients. This has been laid down in an order processing policy document that is available to clients. 

6. Asset managers shall act professionally and prudently
Our investment funds and services are generally not complicated; we ensure that those that are complicated are only sold to professional parties that possess the requisite knowledge. Moreover, our employees attend training courses that deal with both specialist aspects (via e.g. CFA/VBA) and more conduct-oriented aspects.

7. Asset managers shall communicate clearly and unambiguously
We provide our clients with reports on an individual basis. The content and frequency of these reports is laid down in the contract between the two parties. Our investment fund clients have access to the detailed, clear and often monthly reports published on our website.

8. Asset managers shall be open about their remuneration policy
KCM is transparent about the remuneration policy it applies. A summary of how this policy is applied can be found in the annual report. More detailed information on the remuneration policy can be found here.

9. Asset managers shall be transparent about fees
KCM provides clear information about costs and is always open about the fees its clients pay. 

10. Asset managers shall comply with the DUFAS codes of conduct
KCM complies with the DUFAS Principles of Fund Governance and the DUFAS Principles of Fiduciary Management. KCM complies with the Principles of Fund Governance via a Supervisory Committee for all KCM investment funds under supervision. This Supervisory Committee’s regulations are published on our website. KCM is co-author of the Principles of Fiduciary Management and complies with these principles.  

DUFAS Principles of Fund Governance

In February 2008, the Dutch Fund and Asset Management Association (DUFAS) published its Principles of Fund Governance by way of self-regulation. These Principles are a more detailed elaboration of the legal principles governing ethical business practices for fund managers. 
Not only do these Principles contain several options for efficiently structuring the organisation to include an independent ‘oversight’ figure, they also include tangible topics for which organisation-specific policy needs to be formulated in order to prevent conflicts of interest. The basic legal principle that fund managers must act in the interests of the investors in their funds is also anchored in compliance with these DUFAS Principles.


Corporate Governance Code

The Dutch Corporate Governance Code, which lays down the principles of good corporate governance and best practices established by the Tabaksblat Committee, came into effect on 1 January 2004. The Code was updated by the Frijns Committee in December 2008. The amended Code came into effect on 1 January 2009. The Code contains 21 principles that have been worked out further to form 113 best practice provisions. Kempen Capital Management (‘KCM’) conducts the management of various investment companies, including the Kempen funds, and in this capacity views the Code positively.

The Code formulates a number of provisions on the responsibilities of institutional investors. Below we provide a further explanation to shareholders of Kempen funds on how these funds anchor the Code in their policy.

The investment companies will always actively exercise their voting rights if, directly or indirectly, they jointly hold at least 5% of the outstanding share capital in one or more listed Dutch company. The threshold of 5% has been chosen as a practical rule because:
• it is only above this percentage that voting rights have any power; 
• a case-by-case approach is worth adopting if over 5% is held;  
• the investment company holding is then truly institutional in size. 

In such cases, voting rights will be exercised following individual assessment of the agenda points. If one or more investment company together holds less than 5% of the outstanding share capital, marginal testing of the AGM’s agenda will be deemed sufficient and subsequently voting rights may or may not be exercised.

The annual reports of Kempen Orange Fund N.V. and Kempen Oranje Participaties N.V. will render minimum account of the execution of the above policy. The (semi-)annual reports are published on Kempen & Co’s website and are accessible to all. In addition, quarterly reports are published on the votes cast at the AGMs of those companies in which these investment companies (jointly) hold at least 5%.

The investment companies attach great importance to the companies in which they invest indicating the extent to which they comply with the Code. In the event of non-compliance, the companies must explain why and indicate the extent to which they do not comply. As an institutional investor we will not always test and challenge companies individually on all 113 best practices. We have selected the 27 best practices which we see as most relevant (see box). We will test and where necessary challenge companies on these best practices and, where applicable, actively exercise our voting rights in relation to these. 

Best practices selection 

Click here to see the 27 best practices selected from the Dutch Corporate Governance Code which are applied as criteria for the Kempen funds.

Exercising voting rights at AGMs 

The document pages of the Kempen Orange Fund and Kempen Oranje Participaties contain reports on how the funds have exercised their voting rights at AGMs under 'Voting Records’.