Purpose and Scope
Winton is a research-based investment management company that uses statistical and mathematical inference to invest in financial markets. The firm’s investment decisions are driven by the empirical analysis of data, rather than intuition. Conducting business in a responsible and ethical manner is core to Winton’s values. This firmwide Responsible Investment Policy, which complements the firm’s Corporate Social Responsibility Statement, explains Winton’s commitment to responsible investment and the application of the policy to its business and investment strategies.
Winton’s investment strategies are implemented by computer programs but are designed and managed by people. The firm places significant emphasis on its investment professionals acting with the highest legal, ethical and professional standards.
These professionals − who include Winton’s co-CIOs, strategy managers and investment operations staff, under the oversight of the Investment Committee − are responsible for ensuring that: 1) the firm acts responsibly in the markets; 2) the firm is making investment decisions that comply with clients’ investment mandates; and 3) any trades are in line with expectations for each investment strategy.
To that end, a key aspect of Winton’s monitoring programme is measuring its market impact, and that of other market participants operating similar strategies. In doing this, Winton aims to identify risk factors, such as evidence of crowding, which it can take steps to mitigate.
Winton has a history of engaging with other participants in the industry in order to improve industry practices and promote high standards, evidenced in its status as a founding signatory of the Standards Board For Alternative Investments (SBAI) and as a signatory of the United Nations Principles for Responsible Investment (UNPRI).
The SBAI (known as the Hedge Fund Standards Board until 2017) was established in 2008 to develop standards related to disclosure, valuation, risk management, governance and shareholder conduct. Winton is also represented on SBAI’s Responsible Investment Working Group, which was formed in early 2020 to help institutional investors and asset managers better understand how responsible investment can be applied to different investment strategies, as well as to address specific challenges in the application of responsible investment approaches.
In March 2014, Winton (Winton Capital Management Ltd.) became a signatory to the UNPRI. The UNPRI initiative is an international network of more than 2,400 signatories representing global asset owners and asset managers. The UNPRI signatories publicly commit to adopting and implementing an aspirational set of investment principles for incorporating Environmental, Social and Governance (ESG) issues into investment practice.
The six principles are:
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
As a UNPRI signatory, Winton is required to report on its responsible investment activities annually by 31 March. From 2020, the UNPRI reporting will also include several climate change indicators based on the Task Force on Climate-related Financial Disclosures (TCFD).
Winton is also a member of industry groups Alternative Investment Management Association (AIMA) and the Managed Funds Association (MFA). Winton is also represented on MFA’s ESG Working Group, which provides a forum for peer to peer discussion on existing practices, challenges, and regulatory developments.
Much of the early focus on responsible investment has concerned the application of ESG considerations, with a particular focus on single-issuer securities. This has led to certain investment strategies emerging as more obvious candidates for the incorporation of ESG considerations – long-only equity portfolios, for example. Integrating ESG considerations in other types of strategies – such as those that trade multiple asset classes − is at an earlier stage of maturity.
Winton sees the evaluation of ESG considerations as an opportunity to develop existing models, improve risk management and identify new trading signals, as the firm seeks to maximise risk-adjusted returns for its investors. As such, Winton is committed to applying appropriate ESG considerations to its investment strategies, where such actions are aligned with the firm’s investment mandates and fiduciary duty.
The remainder of this policy sets out the measures Winton has taken to incorporate ESG considerations to date and to which investment strategies they apply.
Integration of Investment Signals
Most of Winton’s investment signals are generated by its internal research team. The firm’s research process is designed to discover profitable investment strategies, while mitigating selection bias. Every hypothesis is tested, with the results assessed on the statistical strength of their expected improvement to both returns and portfolio diversification. Only those that meet Winton’s standards are integrated into its strategies.
Winton’s fundamental equity research, which assesses how a company’s performance is influenced both by external factors and by the company’s own characteristics, may uncover investment signals associated with environmental, social or governance themes. These signals are subjected to the same rigorous testing as the firm’s other investment signals.
Winton has for many years offered negative screening reflecting investor preferences to managed accounts and single-investor funds where Winton acts as the investment adviser or sub-adviser, subject to investment management and operational considerations. In addition, Winton systematically screens its investment universe for companies that have any ties to cluster munitions, landmines, biological and chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, and/or non-detectable fragments.
As a quantitative investment manager with a total investment universe spanning 8,000 stocks globally, Winton does not typically hold concentrated equity positions or invest in a company with a view to actively intervening in its management. As a result, the firm does not have direct contact with the companies in which its strategies invest.
Winton recognises, however, the importance of playing an active role in corporate governance. The firm has therefore partnered with a leading corporate governance research service, ISS Europe (ISS), to provide proxy voting guidelines and to vote proxies on its behalf.
ISS’ Global Voting Principles guide its work to assist institutional investors in meeting their fiduciary requirements with respect to voting, by promoting long-term shareholder value creation and risk mitigation at their portfolio firms through support of responsible global corporate governance practices. Winton has instructed ISS to conduct its proxy voting activity based on a sustainability framework that generally takes its frame of reference from recognised sustainability initiatives (both in the US and internationally). These initiatives have regard to:
- stewardship of the environment
- fair labour practices
- protection of human rights.
While Winton will generally rely on the recommendation of the proxy advisor, it reserves the right to exercise discretion in voting proxies.
Winton’s Proxy Voting Policy and a record of all proxy votes cast on behalf of its clients are available to investors and potential investors on request.
Winton’s Stewardship Code Disclosure is available here.
Responsible Investment Policy Summary
The table below sets out which aspects of this responsible investment policy apply to which Winton products.