Managing conflicts of interest

1.1 Introduction

The provision of indices is inherently subject to certain types of conflicts of interest, which implies the existence of opportunities and incentives to manipulate indices. Such risk factors are common to all indices and should be made subject to adequate governance and control requirements.Avoiding and managing conflicts of interest at Robeco Indices B.V. is an important element in ensuring that the interest of clients, the financial markets and the integrity and reputation of Robeco Indices B.V. is protected. Conflicts of interest can arise between Robeco Indices B.V., and its directors, employees, clients, users and suppliers. Conflicts of interest (or perceived conflicts of interest) may also arise from the ownership and control of Robeco Indices B.V., as it is part of the Robeco organization, which focuses on active asset management.

1.2 Objective

Robeco Indices B.V. has a Conflicts of Interest Policy in place that ensures that (potential) conflicts of interest are adequately identified, disclosed, managed and avoided. The policy describes the key conflicts of interest that may arise at Robeco Indices B.V., as well as the measures that have been implemented by Robeco Indices B.V. to manage these conflicts of interest adequately. This document is an outline of the Conflicts of Interest Policy.

1.3 Identification of (potential) conflicts of interest

Robeco Indices B.V. maintains an overview of identified (key) conflicts of interest relating to its activities and its ownership and control structure. If a new conflict of interest is identified on an ad hoc basis, it is ensured that it is included in the overview of identified conflicts of interest. In addition, an annual analysis is conducted to determine whether new conflicts of interest can be identified.

1.4 Measures to avoid or manage (potential) conflicts of interest

Subsequent to the identification of (potential) conflicts of interest, it is assessed whether adequate measures are in place to avoid or manage these. If such analysis shows that a potential conflict of interest is not being managed effectively, additional (or other) measures will be taken.
If an employee working for Robeco Indices B.V. identifies a conflict of interest that has not been or appears not to be appropriately managed, the employee must report this conflict of interest to his/her superior and to Compliance.
Employees working for Robeco Indices B.V. are subject to several policies and measures addressing potential conflicts of interest, such as:

• Code of Conduct

• Segregation of functions and duties

• Handling confidential and inside information

• Chinese Walls

• Private investment transactions policy

• Ancillary functions, gifts and other inappropriate stimuli

• Equal treatment of clients

• Remuneration policy

• Oversight and governance

Code of Conduct

Employees working for Robeco Indices B.V. are trained on the Code of Conduct and other compliance polices upon joining and periodically thereafter. All employees certify that they will comply with the Code and the related Compliance policies.

Segregation of functions and duties

Conflicts of interest may arise within Robeco Indices B.V. and between Robeco Indices B.V. and other entities of the Robeco organization as a result of combining different tasks and responsibilities. Robeco Indices B.V.’s clear organizational structure with well-defined, transparent and consistent roles and responsibilities for all persons involved in the provision of an index aims to prevent such conflicts of interest.
Robeco Indices B.V. has taken appropriate measures to operationally separate the design and calculation of the indices from each other and other parts of business that may create an actual or potential conflict of interest. The calculation of the indices has been outsourced to a third party service provider.

Handling confidential information and inside information

Employees working for Robeco Indices B.V. must exercise due care in dealing with confidential information. Such information may only be used for the specific purpose for which it was obtained. Such information may only be disseminated amongst a very restricted group of insiders on a ‘need-to-know’ basis. Employees are bound by a non-disclosure requirement based on their employment contract.

Chinese Walls

To prevent inside and/or confidential information from being disseminated, Chinese Walls have been established between Robeco Indices B.V. and other entities of the Robeco organization. These Chinese Walls restricts access to potentially price sensitive information related to the indices provided by Robeco Indices B.V. and index changes to staff who have a need to know such information to perform their duties in order to protect such data.

Private investment transactions policy

To avoid any semblance that employees make use of inside information, a private investment transactions policy applies. Employees engaged in the index design and maintenance are generally prohibited from purchasing or selling financial instruments (other than open-end investment funds).

Ancillary functions, gifts and other inappropriate stimuli

Taking on ancillary functions and/or accepting gifts, invitations and other favors in whatever form, can cause an employee to act in their own private interests rather than on behalf of Robeco Indices B.V. and/or the users of its indices. Robeco Indices B.V. does not tolerate this. Rules and procedures on taking on and reporting of ancillary functions and regarding accepting and offering gifts and invitations have been set. These rules are contained in the Regulations on Ancillary Functions, the Gifts, Entertainment & Anti-bribery Policy and the general Code of Conduct.

Equal treatment of clients

Robeco Indices B.V. applies the principle that clients are given equal treatment in equivalent situations. An example of this is that announcements with respect to changes in an index or index methodology are communicated to all clients at the same time. This ensures that one client does not have an information advantage over another.

Remuneration and performance evaluation

The remuneration policy applicable to employees working for Robeco Indices B.V. stimulates a healthy corporate culture, focused on achieving sustainable results in accordance with the long-term objectives of Robeco Indices B.V. and its stakeholders. A link between the remuneration of an employee involved in the provision of an index and the value or performance of that index could offer incentives to manipulation. The risk that this occurs in Robeco Indices B.V. is mitigated by strict risk control measures as laid down in the remuneration policy.

Oversight and governance

Robeco Indices B.V. has established independent functions including Risk Management, Compliance and Internal Audit to monitor and review the index determination and the relevant methodology conducted periodically. Also a permanent Oversight Committee has been established to ensure independent oversight of all aspects of the provision of indices. These independent functions and the Oversight Committee are staffed with members who are not involved in the design, calculation or maintenance of the indices of Robeco Indices B.V.. A member of the Oversight Committee who is also performing activities for Robeco Institutional Asset Management B.V., does not have access to any price-sensitive information resulting from the index rebalancing process, which he can pass on within the Robeco organization for the benefit of actively managed portfolios. In addition, the independence of the Oversight Committee as a whole is ensured through voting rights and the appointment of nondependent members.Where any judgement or discretion in the index determination process is required, Robeco Indices B.V. ensures that it is independently and honestly exercised. Given the methodologies used for the determination of the indices of Robeco Indices, any exercise of judgement or discretion in the determination of a benchmark, the disregard of any input data or other changes in or deviations from standard procedures and methodologies will rarely occur. Should such an event nevertheless occur, then the event will be carefully reviewed by the management and the Oversight Committee of Robeco Indices B.V.