Paradigm Capital AG
Südliche Münchner Straße 1
82031 Grünwald, Germany
München HRB: 176685
UStID.: DE263142897
Vorstand: Jan Hummel (Vorstandsvorsitzender), Heinrich von Portatius
Aufsichtsratsvorsitzender: Prof. Bruce C N Greenwald
Paradigm Capital AG is dedicated to providing excellent customer service. Please do not hesitate to contact us, should you be dissatisfied with our services despite all our efforts.
We are committed to being responsive to the needs and concerns of our customers or potential customers and to resolving your complaints as quickly as possible.
Definition of a complaint
A complaint means an expression of dissatisfaction by a customer relating to services provided by Paradigm Capital AG.
Information you will need to provide to us
To help us investigate your complaint quickly and efficiently we will ask you for the following information:
The submission of your complaint is, of course, free of charge to you. You may contact us in the following ways:
by mail
Paradigm Capital AG
Abteilung Beschwerdewesen
Südliche Münchner Straße 1
82031 Grünwald
Germany
by e-mail
Beschwerde@paradigmcapitalpartner.com
We will make every effort to respond to your complaint promptly and without delay. Upon receipt of your complaint, we will immediately send you a confirmation of receipt. If we provide you with a verbal or written response to your complaint on the same day, we will not send a confirmation of receipt.
Responsible supervisory authority
Alternatively, you can submit a complaint to the German Federal Financial Supervisory Authority (BaFin). Complaints should be sent to BaFin by letter, fax or e-mail and should include the facts as well as the reason for the complaint.
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)
Graurheindorfer Straße 108
53117 Bonn
Fax: + 49 (0) 228 4108-1550
E-Mail: poststelle@bafin.de
Background
This Engagement Policy (the “Policy”) has been adopted by Paradigm Capital AG (“the Investment Manager”) to not only demonstrate compliance with the relevant regulatory requirements as prescribed under the Shareholder Rights Directive II (“SRD II”), and relevant local transpositions across the European Union, but to also demonstrate to its clients the approach it has taken with respect to an effective Environmental, Social & Governance (“ESG”) framework.
SRD II aims to promote shareholder engagement and improve stewardship practices across the European Union. The Investment Manager is committed to ensuring that investments made by it are consistent with the needs and objectives of its clients, while ensuring these investments are part of the Investment Manager’s holistic ESG framework.
Definitions
For the purposes of this policy, an “investee company” refers to a company which has its registered office in Germany, Austria, Switzerland, the Nordics and Ireland.
Where it is noted in the policy that the Investment Manager has acquired equity holdings in investee companies, it is to be understood these holdings are for the exclusive benefit of the Paradigm Capital Value Fund SICAV or the Paradigm Capital North America ICAV (the “Funds”) for which the Investment Manager acts as portfolio manager.
Monitoring of Investee Companies
Strategy, financial- & non-financial performance and potential risk
The Investment Manager understands that the ultimate decision making with respect to strategy and decision making will remain with the board of directors and senior management of the investee companies. That being said, prior to the acquisition of holdings in such investment companies, the Investment Manager ensures that the strategy, objectives, and culture of the investee companies are consistent with the interests and values of the Investment Manager and its clients.
Prior to investing in relevant listed securities, the Investment Manager will conduct investment due diligence on the investee companies. Members of the Investment Management team perform quantitative evaluations through deep fundamental review and analysis of the companies’ financials.
In this context, the Investment Manager team members may consider the following to determine the financial performance of investee companies, e.g. publicly available reports, market data providers such as Bloomberg/Capital IQ, press releases and regulatory filings.
However, quantitative evaluations are only a first step in the analysis. Hence, the team may meet with representatives of the prospective investee company and may speak to industry experts in order evaluate the competitive environment and capital allocations policy of the investee company. This way, the team shall ensure that the strategy and the objectives of the prospect are consistent with the objectives of the Investment Manager and its clients.
The Investment Manager continues to monitor its investments with the same diligence and under the same principles.
It is of special interest to the Investment Manager to minimize risk. Hence, the Investment Management team is paying attention to a functioning risk framework within the investee company. Investment cases are constantly challenged, and potential risks, such as departures of senior management, significant business continuity events or potential for regulatory sanctions, are debated.
The Investment Manager may consider the following, but not limited to, with respect to the social and environmental impact of investee companies;
The Investment Manager maintains a list of industries and activities which are not consistent with its objectives nor that of its clients and thus will consider periodic assessment of the above factors to ensure investee companies are operating in line with the Investment Manager’s own framework.
Through its initial investment due diligence and ongoing engagement with investee companies, the Investment Manager will develop a detailed understanding of the way in which each investee company operates and the policies, procedures and forums it has enacted to ensure effective corporate governance. The Investment Manager may consider the board composition and committee structures which have been enacted in investee companies as an effective way of monitoring investee companies in relation to corporate governance.
Voting Rights
The Investment Manager has adopted a voting policy which ensures that any voting rights acquired generally in its activities are conducted in a manner consistent with the best and long-term interests of the clients for which it acts.
Where the Investment Manager acts as portfolio manager with respect to the Funds, all voting rights will be carried out in a manner which is consistent with the investment objectives and policy the Funds as well as ensuring that any potential conflicts of interest are appropriately identified and mitigated.
The Investment Manager may attend the General Meetings and also introduce points to the agenda.
The decision whether to exercise the voting rights depends on the circumstances. This may in particular be the case, if there are critical issues or important items on the agenda, which could have a long-term effect on the value of the investee company.
When deciding whether to exercise voting rights, the Investment Manager always weighs up the costs and benefits. If the exercise of voting rights is not in the interest of the clients, for example due to disproportionately high costs or disproportionate effort, the Investment Manager will refrain from exercising the voting rights.
We focus on the following upcoming topics at Annual General Meetings:
Monitoring important matters of the portfolio companies and Exchange of ideas with the company's governing bodies and stakeholders
The Investment Manager is specialized in investments in listed small and mid-cap companies. We are therefore committed to maintaining an efficient dialogue with the portfolio companies.
It is of importance to the Investment Manager to maintain an ongoing and regular dialogue with the Management of the investee companies in order to evaluate the investment case continuously. Investee companies are followed closely by the investment team in order to monitor their potential and risks and to be able to act swiftly.
In this context, the regular analyses of the portfolio companies and the deep fundamental research where an in-depth analysis of historical financial data, business strategy, customers, suppliers and the management team is involved automatically ensure a focus on the relevant issues.
Co-Operation with Other Shareholders
In acquiring equity holdings in investee companies, the Investment Manager understands that it may be appropriate to engage with other shareholders to promote and effect positive change with respect to the operations and governance of these investee companies. The Investment Manager, as appropriate, is willing to engage and collaborate with other shareholders in the pursuit of promoting positive change in investee companies.
This engagement with other shareholders shall be exclusively in the best interests of its clients and not violate any rules
Conflicts of Interest
The Investment Manager has adopted a comprehensive conflicts of interest policy, which is also available on our website and which governs the approach the Investment Manager has taken with respect to the identification, mitigation and monitoring of any potential conflicts of interest. In adopting this policy, the Investment Manager is placing additional focus with respect to its engagement with investee companies.
The Investment Manager is committed to ensuring that no unmitigable conflicts of interest arise between its interests in investee companies the interests of its own clients.
Annual Transparency Obligations
On an annual basis, the Investment Manager shall publicly disclose on its website how this policy has been implemented which will consider the following –
Policy Governance
This Policy is subject to an annual review.
Shareholder Rights Directive Annual Disclosure for the calendar year ending 31 December 2022
Reference is made to Paradigm Capital’s Shareholder Engagement policy including a general description on how voting rights are carried out.
Successful capital allocation of the investee companies’ management and board is one of our main pillars in the research process. Paradigm Capital AG only invests in companies whose management has a proven track record. Consequently, we must have significant confidence in the management’s decisions before we invest in any company. Therefore, in most cases Paradigm Capital AG votes with management.
We will, however, vote against management if we believe it is our clients’ best long-term interests.
In 2022 the Paradigm Capital Value Fund SICAV voted in all AGMs with management.
In general, Paradigm Capital AG does not use the services of any proxy advisers.
The following disclosure is made by Paradigm Capital AG in its capacity as Portfolio Manager of the Paradigm Capital Value Fund SICAV and the Paradigm Capital North America ICAV (the “Funds”) in order to comply with the regulatory requirements as prescribed under the EU Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”). Consequently, we will demonstrate in more detail the manner in which an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investments made by the Funds (“Sustainability Risks”) are integrated into our investment decision-making process and outline the expected adverse impacts of investment decisions on Sustainability Factors.
Integration of Sustainability Risks in our investment decision-making process
Paradigm Capital’s investment approach is based on an earnings power evaluation over a long-term investment horizon. By applying a proprietary valuation model to a company’s earning over the long-term, Paradigm Capital integrates ESG risk factors in its fundamental analysis of a company’s potential long-term value creation.
Paradigm Capital may consider the following, but not limited to, with respect to the social and environmental impact of investee companies:
Paradigm Capital believes in generating long term sustainable returns for the investors through identifying business models which can be long-term compounders. For this reason, Paradigm Capital is very specialised and invests in companies that operate in markets which all rank in the top 20 of all metrics in terms of transparency, labour laws, environmental laws and thereby have high ethical standards.
The investment strategy focuses on local service industries, which are built on principles of social and environmental responsibility.
Sound corporate governance is a core component to the Paradigm Capital’s fundamental analysis. The alignment of shareholder interests with management and other stakeholders in the company is a critical component of the Paradigm Capital’s analysis. Paradigm Capital evaluates the management and other key stakeholders on scores of integrity, understanding of business, governance and decisions about capital allocation.
Paradigm Capital, therefore, believes that the Funds can achieve its long-term risk adjusted return goals through conducting an active dialogue with investee companies to address material sustainability issues. This constructive engagement will take into account both the Sustainability Risks and the corresponding opportunities.
The above demonstrates that Paradigm Capital’s investment philosophy leads almost exclusively to companies that offer value added for the whole community and all stakeholders. Hence, Sustainability Risks are not likely to exhibit a material impact on the returns of the Funds.
Adverse impacts of investment decisions on Sustainability Factors
For the purposes of the Regulation (EU) 2020/852 on the Establishment of a framework to facilitate sustainable investment (known as the Taxonomy Regulation), prospective investors are hereby informed that the investments do not take into account the EU criteria for environmentally sustainable economic activities. Paradigm Capital AG has elected not to comply with the principal adverse impact requirements of Article 4 SFDR, as it is still not possible to obtain sufficient data of a strong enough quality to report portfolio wide on the stipulated indicators in table 1 of Annex I of the Regulatory Technical Standards supplementing Article 4 of the SFDR.
Policy Governance
This Policy is subject to an annual review.
Pursuant to Section 63 of the German Securities Trading Act (WpHG), every investment advisory and portfolio management (Wertpapierdienstleistungsunternehmen) company must endeavour to avoid conflicts of interest and disclose to its clients the nature and origin of potential conflicts of interest as well as its policy for dealing with them.
In general, it should be ensured that conflicts of interest are avoided or unavoidable conflicts of interest should be adequately taken into account. We have taken precautionary measures to ensure that potential conflicts of interest do not affect client interests. This document explains the precautionary measures taken by Paradigm Capital AG to identify and manage conflicts of interest.
a) Where can conflicts of interest arise?
Conflicts of interest in connection with our investment services may arise
- between Paradigm Capital AG itself and our clients; and
- between our employees, including management, and our clients;
- between our clients themselves.
Conflicts of interest and the resulting risk of affecting client interests can arise in particular from:
- self-serving interests, in particular the striving for turnover and profit at the expense
of customers;
- performance-related remuneration of board members and employees as well as
granting of cash and non-cash benefits to them;
- personal transactions by directors, employees or persons closely associated with them;
- obtaining information that is not publicly available (insider information);
- through the exchange of information by employees;
- from personal relationships of employees or members of the Executive Board or
persons associated with them;
- in case these persons participate in supervisory or advisory boards.
Paradigm Capital AG has committed itself and its employees to high ethical standards. We expect diligence, honesty, lawful and professional conduct, the adherence to market standards and, in particular, the attention to the interests of our clients at all times.
On this basis, Paradigm Capital AG has adopted internal codes of conduct and detailed regulations that serve to avoid conflicts of interest. These principles, procedures and measures include among others
General organisational measures, for example
- to establish appropriate organisational structures and supervisory functions to protect
clients' interests;
- to establish information barriers, separation of responsibilities and/or physical
separation ("Chinese Walls");
Concrete measures in relation to the identified conflicts of interest are e.g.
- clear rules with regards to employee trading (personal trades of employees) and the
obligation to comply with these rules; regular monitoring by the compliance officer;
- neither granting nor accepting benefits within the scope of our business relationships;
- exclusively dealing with professional clients in accordance with §67, Section 2 of
the German Securities Trading Act (WpHG);
- in the context to financial portfolio management, that the investment selection process
is strictly aligned with the investment criteria of the fund prospectus.
Compliance with the guidelines and measures is monitored by the Compliance Officer. The Compliance Officer examines and decides in accordance with the legal requirements. The Compliance Officer reports directly to the Executive Board and otherwise acts independently of instructions and interests of third parties.
This policy is subject to an annual review.
January 2023