Policy on handling conflicts of interest
SKAGEN AS (SKAGEN) is a management company for mutual funds and manages SKAGEN funds. When managing funds, SKAGEN must always act in the best interests of the funds and the client.
However, instances could arise where the interests of the funds or the client are in conflict, or where a conflict of interest occurs between SKAGEN employees and the funds. The objective of these guidelines is to identify possible conflicts of interest which could arise in SKAGEN's activities and to describe the measures instigated to prevent or handle these potential conflicts of interest.
This policy is based on the guidelines on handling conflicts of interest in the Storebrand Group and the Securities Fund Regulations §§ 2-20 - 2-23.
SKAGEN conducts its business according to the principle that it must identify and manage conflicts of interest fairly.
Conflict of Interest
Conflicts of interest are conflicts that arise because of different interests or priorities. Conflicts of interest can arise between the internal funds, external funds, unit holders, fund managers in the Storebrand Group, Board members and employees.
Conflicts of interest
Identification and measures for handling conflicts of interest
A description of specific potential conflicts of interest which could arise in connection with SKAGEN's activities and SKAGEN's procedures and actions for dealing with them are set out below.
Potential conflicts of interest arising from the management of the funds
SKAGEN manages clients' assets and the company's existence is predicated on delivering the best risk-adjusted returns to clients together with the best service and communication. SKAGEN is a long-term manager and has no incentive to prioritise short-term profits over patient long-term operation. However, a potential conflict of interest lies at the heart of the company, as persons connected with the management company or the Storebrand Group may prioritise the company's earnings over the long-term interests of the funds and their unit holders. To avoid such conflicts of interest becoming a reality, it is important to ensure the independence of a number of functions, and SKAGEN has instigated general measures to achieve this:
- Procedures for determining the fund price (NAV), in which dedicated employees set the fund prices independently of the portfolio managers. Price-setting is thus subject to checks by the company's Compliance function.
- Each fund must have a custodian. A custodian is a financial institution with permission to act as a custodian. The custodian's duties include safekeeping the funds' assets or maintaining accounts of them in a securities register. The custodian must also perform several checks. These relate partly to whether movements in the funds have been performed in accordance with the law, regulations or rules and whether the unit value has been calculated in accordance with the law, regulations or fund rules.
- Procedures for preventing insider trading and market manipulation in the performance of mutual fund management.
- Ethical guidelines for preventing SKAGEN employees from obtaining benefits at the expense of SKAGEN's business.
Potential conflicts of interest between SKAGEN AS and SKAGEN's funds
SKAGEN AS will not normally deal in financial instruments, but may exceptionally make individual strategic investments in companies. Before SKAGEN AS makes such investments, the Managing Director must certify that the investments do not conflict with SKAGEN's obligations under the Norwegian Act on Securities Funds or otherwise with the interests of SKAGEN's funds.
Potential conflicts of interest between persons with direct or indirect ownership in SKAGEN AS and SKAGEN's funds
In certain cases the interests of the owners of SKAGEN AS could potentially differ from that of the funds. The owners could influence the operation of SKAGEN through their representation on the Board. This conflict of interest is handled by ensuring that unit holders represent at least one third of the Board members. The Board members elected by the unit holders are there to uphold the unit holders' interests.
Potential conflicts of interest between SKAGEN employees and SKAGEN's funds
SKAGEN employees are able to trade financial instruments on their own account. This may conflict with the interests of the funds, for instance if the fund and the employee attempt to buy the same security or the employee attempts to exploit knowledge that the fund is about to sell a security by buying it at a reduced price. To avoid employees trading in securities in a way judged to conflict with the interests of the funds, or exploiting information received for their own benefit, or exploiting their position to obtain special advantages, SKAGEN has drawn up internal rules for personal account trading by employees. The rules include advance clearance of buying and selling financial instruments, a ban on trading in funds, a tied period and restriction on permitted intermediaries.
From time to time, SKAGEN employees may be offered gifts or other benefits by SKAGEN unit holders, suppliers or other service providers to SKAGEN or SKAGEN's funds. To avoid a conflict arising between the interests of the employee and those of SKAGEN's funds, the company has established internal rules governing the acceptance of gifts and/or other benefits by employees.
Potential conflicts of interest between SKAGEN's funds
To avoid conflicts of interest arising between the various funds managed by SKAGEN, the company has established comprehensive procedures for the management of securities.
For example, the procedures include:
- Registration and logging of all orders placed and transactions executed
- If several funds intend to buy or sell the same security, the trades must be placed with the broker at the same time. If financial instruments are purchased for several portfolios and the order is partially filled, the shortfall must be allocated pro rata between the funds.
- SKAGEN may only in exceptional cases trade between funds
Potential conflicts when distributing SKAGEN's funds, funds managed by the Storebrand group or other external funds
To avoid conflicts of interest arising when distributing funds managed by SKAGEN, funds managed by the Storebrand Group or other external funds, the company has established detailed procedures for investment advice and execution on digital solutions:
For example, the procedures include:
- Guidelines for how and when SKAGEN funds, Storebrand funds or other external funds are to be offered to the clients
- Information of potential conflicts of interest, for example being both producer and distributor
- Information on how SKAGEN's incentive structure is not solely based on sales volumes or profitability
Information to company management and unit holders
If despite the procedures and measures described above, a situation arises in which there is a risk to the interests of the funds or unit holders, the Managing Director must be informed so that he can take the necessary steps to bring SKAGEN into accordance with the interests of the funds and unit holders.
The unit holders must in this case be informed of the decisions and the reasons for them by some durable medium.
Anyone associated with SKAGEN is covered by these guidelines.
The policy is subject to Board approval. Last updated 25 April 2018.