Research Policy - June 2017

Savings | Planning | Investments

Killik & Co’s Research team aims to provide research which is objective, fair and not misleading to clients. Research is comprised of three sub-teams; Equity Research, Fund Research and Bond Research. This document outlines the types of research issued for equities, funds and bonds (fixed income). It also details the related policies for managing potential conflicts of interest in the production of investment research.

Types of Research

  • Equity Research notes
  • Fund Research notes
  • Bond Research notes
  • Bonds Lists
  • Thematic Research notes

The Research team may regularly publish ‘update’ documents, which may contain comments on investments. Where a comment relates to a Killik & Co Research-covered recommendation, the recommendation will be indicated. The ‘Daily Note’ and ‘ETF Bulletin’ are regarded as updates.

Killik & Co research is produced by analysts within the Research team and the name(s) of the author(s) is/are identified in research publications which represent investment research. The research is produced on the basis of publicly available information, internally-developed data and other sources believed to be reliable. Records are maintained of information relied upon when making a recommendation.

Other departments within Killik & Co may produce commentary on certain stocks. However, this Research Policy only relates to investment research published by the Killik & Co Research team.

The Killik & Co quarterly magazine, Confidant, contains contributions from a number of Killik & Co departments, including Research. The Research team’s contribution to Confidant will typically include comment and valuation information on securities on which the Research team has issued a research recommendation. In addition to comment on securities on which the Research team has issued a research recommendation, the team may provide market commentary, which may include references to securities they do not cover. Killik & Co research recommendations are not initiated or changed via Confidant.

Killik & Co Equity and Fund Research Recommendation Definitions

A recommendation will be opened as a Buy/Accumulate, Neutral/Hold or Sell/Reduce/Switch. It will then be managed through its life-cycle with the publication of updates following the release of material news or in the event of a change in our investment opinion. A recommendation will usually be closed with a final Neutral/Hold or Sell/Switch note, stating that coverage has ceased. Equity and Fund research can also be issued in the Daily Note, in Thematic Notes and in periodic update notes. These notes may contain comments and views on non-covered funds and stocks.
  • Buy
    Funds/equities which the respective Research team believes have the potential to outperform
    their benchmark and their peers over the medium to longer term.
  • Neutral
    Funds/equities which the respective Research team believes are likely to perform broadly in line
    with their benchmark and peers. It also covers funds/equities which the respective Research
    team is keeping under observation before moving to a Buy or Sell recommendation.
  • Sell
    Funds/equities which the respective Research team do not believe have the potential to
    outperform their benchmark and peers over the medium to longer term, or where the Research
    team believes there are better alternatives.
The table below shows the number of Killik & Co Research initiated equity recommendations or changes to equity recommendations over the most recent calendar quarter:

Bond Research Categories


The Killik & Co Bond Research team does not provide Buy, Hold/Neutral or Sell recommendations, except in exceptional circumstances. The Bond Research team produces two Bond Lists; the Covered List and the Preferred List. The Covered List represents a selection of fixed income securities (bonds) identified as potential investment opportunities, depending upon various valuation metrics. The Preferred List comprises those securities which the Bond Research team believes offer the greatest attractions of those on the Covered List. This is judged based upon issuer strength and the relative valuation of the bonds and on the basis that each bond would be bought as part of a wider fixed income portfolio and will be held until maturity. Changes to the Preferred List will be communicated in an email to Investment Managers and via the weekly Fixed Income Note. Note that a bond being on the Preferred List does not represent a recommendation by the Bond Research team.
The Bond Research team may produce research reports on bonds that are on the Bond Lists. These reports may cover one or more bonds of a particular issuer or may be on a specific type of fixed income security which could include a number of issuers. The Bond Research team also produces regular commentary on the bond markets, typically weekly, which may include commentary on bonds that are on the Bond Lists. From time to time a more thematic note may be produced. The Bond Research reports will not typically include a Buy, Hold/Neutral or Sell recommendation.

Security Specific Risk Ratings

All Killik & Co Research recommendations are issued with a security specific risk rating, represented by a number between 1 and 9. The Killik & Co Research team may also assign a risk rating to securities that do not carry a recommendation. Assessing the relative risk of any security (specific risk) is highly subjective and may change over time. The Killik & Co Risk Rating system uses categories which are intended as guidelines to the specific risks involved, as follows:
Securities in this category are what we believe to be lower risk investments such as cash, cash equivalents and short dated gilts, and the collective investment vehicles that invest in those instruments.
Securities in this category are what we believe to be medium and lower risk investments. This includes medium and long-dated gilts, senior or unsubordinated corporate bonds from investment grade issuers or from sub-investment grade or unrated issuers which Killik & Co’s Bond Research team, based upon its analysis, believes to represent medium risk. This category also includes certain collective investment vehicles investing predominantly in these securities.

Securities in this category are what we believe to be higher risk and are drawn from across the United Kingdom and international markets. These include direct equity investment and collective investment vehicles which predominantly hold securities other than those listed in either the Restricted Lower Risk or Restricted Medium Risk categories. Unrestricted risk fixed income securities may be investment grade, sub-investment grade or unrated bonds. This category may include subordinated issues, bonds with conversion features, permanent interest bearing shares (PIBS), preference shares or other fixed income securities which Killik & Co’s Fixed Income team, based upon its analysis, believes to be higher risk.

The vast majority of the Killik & Co Equity and Fund Research recommendations are likely to fall in the unrestricted/higher risk category (4-9) above.

Most of the fixed income securities on the Bonds Lists are likely to fall into the restricted/medium risk (2-3) or unrestricted/higher risk category (4-9) above.

For further detail on the Killik & Co risk rating system please see the Killik & Co terms and conditions.

Publication and Distribution of Killik & Co Research Recommendations

Killik & Co research may be published at any time during the day, and is distributed either by email or in a hard copy format. Killik & Co research notes are initially published via an email to the Killik & Co Investment Manager network. Clients who have provided an email address to Killik & Co may be sent research reports on the securities they hold. In addition, clients may elect to receive research notes on securities which they do not hold, but are of suitable risk profile.

The Killik & Co Bond, Equity and Fund research teams may provide information on new issues to clients based upon the offering documents of the issuer.

Investment Managers have the discretion to send research reports in hard-copy form to clients for whom Killik & Co does not have an email address.

Management of Potential Conflicts of Interest

The Killik & Co Research team operates in a manner that ensures the objectivity of its research, and to help identify and manage potential conflicts of interest which may arise. Research publications will make reference to the existence of this policy and the fact that it is accessible via the Killik & Co website, so that clients are aware of the potential conflicts that may exist and the steps taken to manage them.
Members of the Killik & Co Research team must seek prior approval from either the Head of Research or the Head of Fund Research, and Head of Compliance before entering into outside business interests. The Head of Research, the Head of Fund Research and Head of Compliance will not permit outside business interests that are deemed to conflict with the team member’s provision of unbiased investment research. If the potential conflict relates to the Head of Research or the Head of Fund Research, then approval must be sought from the Head of Compliance and the Executive Board.
Killik & Co does not produce research paid for by issuers of investments nor does it act as corporate broker to any companies. Any gifts received by members of the Killik & Co Research team from clients or companies must be disclosed to the Head of Compliance.
Killik & Co may receive legacy trail commission (rebate of part of a fund manager’s Annual Management Charge) on some of its covered open-ended and closed-ended funds that were purchased before 31 December 2012. However, continuance of legacy trail commission does not influence the recommendations or fund coverage of Killik & Co Research.
Killik & Co may at times be an Authorised Distributor or Sub-Distributor on new issues. As such, Killik & Co may receive a distributor fee from the issuer on the aggregate principal amount of the notes allotted to us under the offer. However, neither the availability nor the size of the distributor fee forms part of the selection process for fixed income investments. Killik & Co will only agree to be a distributor on new retail bond issues if the Fixed Income team, through its analysis, determines that the bonds have merit from an investment perspective.
Certain discretionary client portfolios are managed within the Fixed Income team. Any decision to invest in new issues within discretionary accounts is not influenced by the existence of a distributor fee and only takes place where it is suitable for a particular portfolio or group of portfolios. The management of this potential area of conflict is supported by Compliance monitoring.
Killik & Co may at times be an Authorised Intermediary on new equity or fund issues. As such, Killik & Co may receive an intermediary fee from the issuer on the aggregate amount allocated to us under the offer. However, neither the availability nor the size of the intermediary fee forms part of the decision process for participation as an intermediary.
If one of the named analysts of a Killik & Co recommendation has an interest in a designated investment at the time of publication of the recommendation, this fact will be explicitly disclosed in the relevant research note. For the purpose of this disclosure, transactions in the following are excluded: life policies, units or shares in a regulated collective investment scheme where the employee is not involved in the management of the undertaking, or, a discretionary transaction if there is no prior communication with the employee and the discretion is not exercised by the firm.
Members of the Killik & Co Research team are permitted to invest in securities which are subject to a Killik & Co Research recommendation, subject to the Killik & Co personal account dealing policy and procedures.
Members of the Killik & Co Research team must get permission from the Head of Compliance before conducting a personal account transaction if the trade is contrary to a current Killik & Co Research-issued research recommendation. For personal account transactions that are in-line with a Killik & Co Research recommendation, permission must be obtained from the Head of Research or the Head of Fund Research.
If a member of the Killik & Co Research team has knowledge of the likely timing or content of investment research that contains a recommendation that is not publicly available, (i.e. the recommendation is new or changed), even if the research has not yet been written, then the team member may not trade for his/her personal account or on behalf of another person in that security. Recipients of research need a reasonable opportunity to act on it before any person with knowledge of the timing or the content of the investment research conducts any personal account trade or trades on behalf of any other person. Killik & Co Research team members may not deal for their own accounts in a security which is subject to a new or changed research recommendation for 24 hours after the recommendation has been published, unless the dealing takes place inside a Killik & Co Research-managed discretionary portfolio, along with other Killik & Co Research-managed discretionary client accounts, at the same price and in a manner that does not disadvantage the aforementioned client accounts.
Certain discretionary client portfolios are managed within the Killik & Co Research team. Killik & Co Research considers it reasonable to deal on these portfolios once the research recommendation has been disseminated to the Killik & Co Investment Manager network enabling the Killik & Co Investment Managers to deal for their discretionary clients. In certain circumstances, Killik & Co Research-managed portfolios may include securities on which the Killik & Co Research team does not have a current research recommendation in issuance. If it is decided at a future date that the security is to become the subject of a Killik & Co Research-issued research recommendation, then no further transactions in that security will take place from the point the decision is made until the recommendation is disseminated to the Killik & Co Investment Manager network. It should be noted that the nature of a discretionary service means that discretionary accounts may be transacted upon sooner than advisory accounts.
The Fixed Income team specifically may sometimes retain cash on discretionary portfolios in anticipation of investing in upcoming new bond issues. Although the Fixed Income team may be aware of potential new bond issues from time to time, decisions to invest are only made once full terms of a new bond issue are announced, and are based on a thorough assessment of the merits of that particular bond over other available investment opportunities.
Members of the Killik & Co Research team are permitted to conduct personal account transactions in investments which are held in Killik & Co Research-managed client portfolios, subject to the aforementioned personal account dealing and research disclosure policies.
From time to time, the Fixed Income team may be informed about upcoming new bond issues prior to the Issuer making an official announcement. Where the name of the Issuer is disclosed to the Fixed Income team, this can be ‘inside information.’ Whilst in possession of ‘inside information’ (which is typically for less than one week), the Fixed Income team will not publish any research connected with that Issuer or a competitor. Nor are the Fixed Income team permitted to conduct personal account transactions or deal on Fixed Income team-managed portfolios in the Issuer’s securities during this period.
The Special Situations team is a division of Killik & Co, which is managed autonomously of Killik & Co’s Research team. The Special Situations team may provide broking services to institutional clients, some of whom may be the investment managers of some of the funds in which Killik & Co Research has a recommendation. The Killik & Co Research team’s investment research process is not influenced by the existence or potential existence of a Special Situations team broking relationship.
The Killik & Co Research team is situated on the same floor as some Killik & Co broking teams. However, information barriers exist to prevent access by other staff to research in progress, such as privacy screens, restricted access to research folders, and meetings held in closed environment. Members of the Research team are not permitted to disclose forthcoming recommendations or changes of recommendations outside the Research team ahead of publication.
The Killik & Co Equity and Bond Research teams are managed by the Head of Research and the Funds research team is managed by the Head of Fund Research. The Head of Research reports to the Executive Director of the Branch Network and the Head of Fund Research reports to the Senior Executive Officer of Killik & Co.
The remuneration of Killik & Co Research team members is not linked to specific views or recommendations provided in any Research publication.
Killik & Co produces research based on its own analysis and does not make promises to issuers regarding the content of the research report. From time to time, the named analyst on a research publication may, at his/her discretion, provide a draft of the research report to the company that is the subject of the research. This is solely for the company to check for factual accuracy. The draft will not contain a recommendation or price target. Any comments received from the company are reviewed by the Killik & Co Research analyst who will determine whether any amendments are required to be made to the research report.
Killik & Co is a trading name of Killik & Co LLP, a limited liability partnership authorised and regulated by the Financial Conduct Authority and a member of the London Stock Exchange. Registered in England and Wales No. OC325132. Registered office: 46 Grosvenor Street, London W1K 3HN. A list of Partners is available upon request.