Global Investment Management Policies

Global Investment Management Policies

Vanguard Investment Management Group

Vanguard: A client-focused company by design

Vanguard is owned by its clients*, not by outside investors or stockholders looking to maximize their quarterly profit. That means you never need to question whose agenda is more important to us--our clients' interests are the only interests we serve.

Fast facts

? Vanguard serves institutional and individual investors, 401(k) and 403(b) plan sponsors, nonprofits, consultants, and financial professionals across four continents.

? We have more than 14,000 crew in the United States and worldwide (as of December 31, 2015). ? Crew development is part of our culture. Vanguard University? employs 150 specialists dedicated

to training and development to ensure our clients are served by the most exceptional people in the industry. ? Our corporatewide continuous improvement effort is called Vanguard Unmatchable ExcellenceTM. It's part of what we do every day and is a key tool for delivering value to you. Our global investment management policies support our firm's mission of taking a stand for all investors, treating them fairly, and giving them the best chance for investment success.

* The Vanguard Group is owned by Vanguard's U.S.-domiciled funds. Those funds, in turn, are owned by their investors. 1

Contents

1. Global policy statement

3

1.1. Purpose of policies

3

1.2. Overview of regulatory requirements

3

1.3. Notification and escalation of breaches

3

2. Global investment management policies

4

2.1. Authorized Trader Policy

4

2.2. Allocation and Aggregation Policy

5

2.3. Best Execution Policy

7

2.4. Venue and Counterparty Approval and Monitoring Policy

9

2.5. Derivatives Usage Policy

10

2.6. Interfund Transactions Policy

11

2.7. Model Risk Policy

12

2.8. Order Handling Policy

13

2.9. Trade Error Correction Policy

14

3. Governance

16

4. Review by the Risk Management Group

16

5. Oversight by the regional Compliance Departments

16

6. Recordkeeping

16

2

1. Global policy statement

Vanguard Investment Management Group's global investment management policies apply to all internally managed equity and fixed income funds and separately managed accounts (collectively, "clients") for which The Vanguard Group, Inc. (VGI), and Vanguard Global Advisers, LLC (VGA), in the United States and its affiliates Vanguard Asset Management, Limited (VAM), in the United Kingdom, and Vanguard Investments Australia Ltd (VIA) in Australia (collectively, "Vanguard") provide portfolio management and trade execution services. Vanguard Investment Management Group (IMG) is the organizational group of the portfolio managers, traders, and risk personnel involved in the front line of the investment management process.

1.1 Purpose of policies

Vanguard believes that the establishment and maintenance of these policies and monitoring to ensure compliance is good business practice that helps ensure sound risk management and protection of client assets.

In addition, the policies serve to demonstrate compliance with applicable regulatory requirements around the globe.

Each Vanguard entity provides portfolio management and trade execution services to its respective clients across investment strategies and geographic markets. Vanguard has adopted an operating model whereby portfolio managers based in one location are able to send trade orders for execution to another Vanguard

"Vanguard believes that the establishment and maintenance of these policies and monitoring to ensure compliance is good business practice that helps ensure sound risk management and protection of client assets."

entity located elsewhere so the financial instruments that are to be bought or sold may be traded in the time zone closest to the market in which the transaction will occur. With the exception of foreign exchange instrument transactions, Vanguard does not operate a separate trading desk and, as such, portfolio managers may also act as traders.

1.2 Overview of regulatory requirements

These policies reflect the regulatory requirements to which Vanguard is subject. Our portfolio managers, traders, and risk professionals work closely with our Legal and Compliance Departments to ensure that regulatory requirements are understood, incorporated into policies, and monitored. Vanguard is regulated in each country in which it provides portfolio management services. The regulatory agencies include the U.S. Securities and Exchange Commission (SEC) in the United States, the Financial Conduct Authority in the United Kingdom (FCA), and the Australian Securities and Investments Commission (ASIC) in Australia. These agencies oversee regulation and impose rules that, in general, place a fiduciary duty on investment advisors and managers to, among other things, provide fair and equitable treatment of all clients. As an investment advisor/manager to funds domiciled in Ireland, Canada, and Hong Kong, Vanguard is also cognizant of rules imposed in those countries requiring the fair and equitable treatment of clients. As a fiduciary, an investment advisor owes its clients a duty of loyalty and must act in each client's best interest. An investment advisor recognizes that it may be subject to conflicting duties and loyalties with respect to managing client assets. To meet its fiduciary obligations, an investment advisor must avoid including the appearance of, among other things, investment or trading practices that systematically advantage or disadvantage select client accounts.

1.3 Notification and escalation of breaches

Vanguard requires crew members to escalate actual or suspected incidents, issues, concerns, and/or breaches of policies and procedures to their supervisor, the IMG Operational Risk Group, and their regional Compliance Departments.

3

2. Global investment management policies

2.1 Authorized Trader Policy

This policy applies when, in the course of providing portfolio management and trade execution services to clients, IMG personnel place orders for, and/or execute transactions in, financial instruments. The policy specifies that only authorized crew members can make investment decisions and create orders and/ or execute trades on behalf of clients. Such authorization requires certain competencies and qualifications related to the respective roles to be met and, in some cases, for the crew member to be licensed with an applicable regulator.

This policy also restricts the placing of orders and trading activity to be carried out during standard market hours in the specific region and to be performed only at Vanguard premises within the country in which the authorized crew members are employed using only approved trading platforms and trading desk phone systems.

"Only authorized crew members can make investment decisions and create orders and/or execute trades on behalf of clients."

Authorization

The board of directors of VGI, VIA, VGA, and VAM have delegated overall authority to appoint and remove crew members to portfolio manager and trader roles for their respective clients to VGI's chief executive officer, chief investment officer, and global heads of equities and fixed income as well as regional heads of investments for the U.K. and Australia.

Authority is based upon these criteria:

? The region in which the role is based.

? The role (portfolio manager and/or trader) and asset class (equity, fixed income, or foreign currency exchange trading).

? The trading platform(s) that may be used.

? In certain circumstances, client requirements.

Approved trading platforms

IMG uses multiple systems and tools in providing portfolio management and trade execution services. In each instance, access to platforms may provide the ability to view portfolios, create orders (including their cancellation or amendment), and/or execute transactions on behalf of clients. Platforms may be administered internally or by a third party, but in either case, the IMG Operational Risk Management Group must give prior approval of each platform to ensure appropriate controls are implemented to mitigate risk based on the type of activity.

Exceptional circumstances and regional holidays

Vanguard may be required from time to time to generate orders and/or execute transactions in a manner that diverges from this policy because of systems failures, market disruptions, or other reasons that are unavoidable or beyond Vanguard's reasonable control. These situations are categorized as "contingency events," and the actions must be authorized by formal declaration of a contingency event and approved as policy exceptions by the IMG Operational Risk Management Group. Vanguard will limit exceptions to this policy to the duration of the contingency event. Such activity will be monitored by the IMG Operational Risk Management Group.

4

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download