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March 2020 LGIM Best Execution Policy

LGIM Best Execution Policy March 2020


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Legal and General Investment Management Ltd Best Execution policy for professional clients ...................................... 3

Equities ............................................................................................................................................................................... 9

Exchange-traded derivatives and exchange-traded products .......................................................................................... 12

OTC equity and commodity derivatives ............................................................................................................................ 15

Credit ................................................................................................................................................................................. 18

Credit derivatives .............................................................................................................................................................. 21

Government bonds ........................................................................................................................................................... 24

Money market instruments................................................................................................................................................ 28

OTC rate swaps ................................................................................................................................................................ 31

Foreign exchange (FX) outright ........................................................................................................................................ 34

Foreign exchange (FX) swaps .......................................................................................................................................... 37

Private Credit .................................................................................................................................................................... 40

Contents


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LGIM takes all sufficient steps to obtain on a consistent basis, when executing or placing client orders, the best possible outcome for our clients. Client orders refer to transactions in financial instruments which LGIM, in its role as discretionary portfolio manager for client assets, chooses to execute or transmit. It also applies to the extent that LGIM undertakes execution only activity on behalf of clients.

EXECUTION AND PLACEMENT In its role of providing portfolio management services, LGIM both executes client orders with execution venues and places client orders for execution with brokers. The following description differentiates the two.

‘Execution’ is where, as a member or participant in a regulated market, multi-lateral trading facility (MTF) or organised trading facility (OTF), LGIM executes a client order directly on the execution venue. LGIM may also execute orders with a systematic internaliser (SI), market maker or another liquidity provider on a request-for-quote basis. Where LGIM matches liquidity internally without utilising an MTF or broker, this also constitutes executing a client order.

‘Placement’ is where LGIM transmits an order to a broker for it to execute. In these circumstances the broker will choose the venue on which the order is ultimately filled or choose to execute it against its own book.

In both scenarios, LGIM owes its clients best execution and takes all sufficient steps to consistently obtain the best possible result when executing or transmitting orders.

To this effect, LGIM has established a Best Execution Policy and procedures which are designed to obtain the best overall execution outcome, taking into account the execution factors outlined below. This policy provides, in our view, the best balance across a range of factors, which at times may appear to conflict with one another. Subject to any specific instructions, we will apply our market knowledge and skills in determining the factors that need to be taken into account for the purpose of providing best execution. Our Best Execution Policy ensures fair treatment of all clients.

Legal and General Investment Management Ltd Best Execution policy for professional clients This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’), as required by the Markets in Financial Instruments Directive (‘MIFID’) 2014/65/EU. This document applies only to clients classified by LGIM as professional clients.


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The information below sets out general information with respect to our approach to best execution. It is supplemented by sub- policies with detailed information with respect to the following financial instruments:

• Equities – Shares and depositary receipts

• Debt instruments

− Bonds

− Money markets instruments

• Interest rates derivatives

− Futures and options admitted to trading on a trading venue

− Swaps, forwards, and other interest rates derivatives

• Credit derivatives


− Other credit derivatives

• Currency derivatives


− Swaps, forwards, and other currency derivatives

• Equity derivatives

− Options and Futures admitted to trading on a trading venue

− Swaps and other equity derivatives

• Commodities derivatives

− Options and futures admitted to trading on a trading venue

− Other commodities derivatives

• Exchange-traded products (exchange-traded funds, exchange-traded notes and exchange-traded commodities)

EXECUTION FACTORS When deciding how and where best to execute an order, we will take into consideration a range of factors including the following:

• Price

• Size

• Nature

• Costs

• Speed

• Likelihood of execution and settlement

• Or any other consideration relevant to the execution of the order

When determining the relative importance of the execution factors LGIM take into consideration the characteristics of the client, the client order, the financial instrument and the execution venues the order can be directed to. The choice of the venue for the execution will also be dependent upon the characteristics of the financial instrument underlying the order and the functional capabilities of the venue itself. Generally, price will merit a high relative importance in obtaining the best


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execution. However, in some circumstances, LGIM may appropriately decide that other execution factors are more important than price. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.

The execution process and the relative importance ascribed to each factor are set out in more detail in each sub-policy for the relevant financial instrument.

EXECUTION VENUES We have listed below those venues on which we will most regularly seek to execute orders and which we believe enable us to obtain best execution consistently, bearing in mind the execution factors identified above. We reserve the right to use other execution venues where we deem appropriate in accordance with our execution policy:

• LGIM (for internal crossing opportunities)

• Regulated markets – through broker Algorithms and Smart Order Routers (“SORs”).

• Multilateral trading facilities (MTFs)

• Organised trading facilities (OTFs)

• Systematic internalisers (SIs)

• Market makers or other liquidity providers

• An entity that performs a similar function in a third country

Please see the relevant sub-policy for a list of execution venues for each financial instrument that LGIM uses when looking to obtain best execution on a consistent basis as defined by MiFID II. The list is not exhaustive and will be subject to change. We may also use other execution venues where it is deemed appropriate in accordance with the Best Execution Policy.

Each sub-policy contains the factors affecting the choice of execution venues for each financial instrument.

On an annual basis, for each class of financial instruments, we publish information on the top five execution venues where LGIM executed or placed client orders in the preceding year, as required by MIFID.

Regulatory Technical Standard 28 of the Commission Delegated Regulation supplementing MIFID requires investment firms that execute client orders to summarise and make public, on an annual basis and for each class of financial instrument, the top five execution venues (in terms of trading volumes) where client orders were executed in the preceding year, as well as information obtained on the quality of execution.

Additionally, Delegated Regulation Article 65(6) requires investment firms that select other firms to provide order execution services to summarise and make public, on an annual basis and for each class of financial instrument, the top five investment firms (in terms of trading volumes) where client orders were placed for execution with brokers in the preceding year, as well as information obtained on the quality of execution.

USE OF AFFILIATES We have dealing services arrangements in place with affiliated asset management companies in the US and Asia to route orders to local broker/dealers for securities where the primary liquidity is in those regions. No commission is charged to clients with the arrangement operating on a cost recovery basis between the firms. Oversight of these arrangements is exercised through the LGIM Best Execution Committee.


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COUNTERPARTY SELECTION PROCESS As a large institution, we deal with most of the major broking houses, as well as specialist brokers in local markets. All counterparties must satisfy our credit, contractual and best execution standards to qualify for the list of approved brokers. Our counterparty oversight group is responsible for ensuring that the list is monitored and reviewed. Greater frequency of the review is dependent on LGIM’s risk assessment of the counterparty. We do not have commission targets for brokers used. Broker selection is driven only by the quality and cost of execution. In the case of primary market transactions, counterparty selection will be limited to the broker who presents the opportunity.

CLIENT-SPECIFIC INSTRUCTIONS Where we are given a specific instruction from a client we shall to the extent possible execute the order in accordance with that specific instruction. Our obligation of best execution will be satisfied by executing the order in accordance with the clients’ specific instruction, to the extent of the specific instruction or instructions.

It should be noted that any specific client instruction may prevent us from taking the steps needed to obtain the best execution relating to the specific aspect of the order. For all other aspects of the order we will take all sufficient steps to obtain the best possible outcome for our clients.

IMPACT OF LEGAL DOCUMENTATION AND COUNTERPARTY RESTRICTIONS ON BEST EXECUTION A lack of appropriate legal documentation (ISDAs, GMRAs, CDEAs or similar) or other restrictions placed by clients on the counterparties with which LGIM is permitted to trade may impact multiple execution factors, including the best achievable price for the trade and the speed of execution. For these purposes, best execution is deemed to be the best trading result possible using the available counterparties. Clients with a limited set of available counterparties may find that their order is executed after a larger bulk order if that restriction would likely impact other funds in a multi fund trade.

DEALING EFFECTIVENESS MONITORING The LGIM Best Execution Committee (the ‘committee’) has oversight of the Best Execution Policy.

We monitor the effectiveness of the best execution arrangements and execution policies in order to identify and, where appropriate, correct any deficiencies. In particular, we shall assess, on a regular basis, whether the execution venues included in the Best Execution Policy provide for the best possible result for the client or whether we need to make changes to our execution arrangements.

It is our normal practice to carry out post trade analysis to monitor the quality of execution. Depending on the market this may involve systematic comparisons of execution prices with respect to trading benchmarks, opening/closing prices, or periodic high/low prices as appropriate. Along with our own in house Trading Research and Analysis team, we utilise a number of third party providers to monitor our Transaction Cost Analysis (TCA) such as Portware, ITG Analytics, Bloomberg, Tradeweb & MarketAxess,

In addition, we regularly monitor the persistency of the execution quality by analysing the time series of trade execution data broken down by market, counterparty, trade type and size. This enables us to identify, in a timely manner, deterioration in the quality of execution in any particular area.

The committee receives dealing effectiveness monitoring reports and reviews whether enhancements to the policies and/or execution arrangements are required.


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MONITORING AND REVIEW The committee monitors the effectiveness of our execution arrangements on an on-going basis, and reviews our Best Execution Policy annually or when there is a material change. A material change is a significant event that could impact parameters of best execution such as cost, price, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.

COMMISSION SHARING ARRANGEMENTS We do not utilise commission sharing accounts. All of our equity trading is executed at execution-only rates.

We do not receive any remuneration, discount or non-monetary benefit for routing client orders to a particular trading venue or execution venue which would infringe the requirements on conflicts of interest or inducements.

CONFLICTS OF INTEREST Segregation of duties – all trade execution is performed by the Global Trading team, which is staffed by experienced traders and not part of any portfolio management team with the exception of our Money Market and Private Credit desks.

Dealing through associate companies – we have dealing services arrangements in place with affiliated asset management companies in the US and Asia. No commission is charged to clients with the arrangement operating on a cost recovery basis between the firms.

Order priority – orders are instructed to the market in chronological order subject to market conditions and any specific limitation, such as a price limit, or time specific instructions, associated with the order. Orders in the same stock, with identical instructions are aggregated on the arrival of any new order, unless it is deemed to be de minimis.

Trade allocation – orders are pre-allocated by fund managers when they are raised on the order management systems. Partially filled orders are automatically pro-rated by the system with consideration as to economic viability.

Order management and execution – all orders are raised by fund managers on our order management systems which timestamp orders at different stages of the process, from origination to the ultimate booking of the trades. In addition, the systems maintain a full audit trail at all times.

Cross trading – for active funds, internal cross trades identified by fund managers must be approved by an independent team before being executed. Within index funds, documentation of the rationale for trading and evidence supporting the costs and benefits for both buying and selling funds are retained by the respective funds’ managers and independently monitored and reviewed. Internal crosses may also be identified by the Global Trading team.

Gifts and hospitality – all employees are subject to the gifts and hospitality policy. Gifts and hospitality are monitored by the compliance department.

Personal account dealing – all dealing in reportable securities must be pre-cleared by compliance with the exception of L&G Funds (except Fund Managers) and non-UCITS schemes which must be notified within five days. Employees are not permitted to trade in corporate bonds or financial spread bets.

Inducements – LGIM may receive information and services from counterparties which enable enhancement of LGIM’s execution capabilities, provided the information or services meet the FCA definition of acceptable minor non- monetary benefits.


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Close links – LGIM’s Head of Trading is a Director and Board Member for The Plato Partnership. The Plato Partnership is a not-for-profit company comprising asset managers and broker dealers who are collaborating to bring creative solutions and efficiencies to today’s complex equity market place. The Plato Partnership aims to develop and promote improved market structure and efficiency through collaborations with third parties, on its own and through the commissioning of academic research. Whilst those third parties include Trading Venues, the individual Plato member firms have no obligation to utilise those services. Additionally LGIM will only ever send orders to venues or exchanges where we can get the best possible outcome for our clients in line with our Best Execution Policy. Neither our Head of Trading nor LGIM receive any remuneration for their role with The Plato Partnership.

Assessment of controls – the compliance department independently monitors how the business complies with the requirements of all applicable regimes. The results of its reviews are reported to senior management and formal oversight committees.

In addition, Legal & General internal audit provides a further independent review of the systems and controls in the investment management business.

NOTIFICATION TO CLIENT We will notify our clients of any material changes to this policy. Our Best Execution Policy is available at any time on our website.


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LGIM operates a fully unbundled equity execution policy, as such all of our activity can be considered as execution only.

LGIM takes all sufficient steps to obtain on a consistent basis the best possible result for its clients taking into account the below execution factors.


• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the different execution factors, we consider all of the order’s characteristics: the type of instrument to be traded, the trading benchmark (set by the fund manager), the size of the order, liquidity demand of the order and the risk characteristics of the order. Broadly speaking, price will always merit a high relative importance in obtaining the best possible result. However, in some circumstances, we may appropriately determine that other execution factors are as, or even more important than price in obtaining the best possible execution result for the client. Alongside price, we also place a high importance on the cost of trading. We consider that controlling the cost of trading (both explicit and implicit cost) is integral to achieving best execution. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.

The execution process and the relative importance ascribed to each factor are set out below.

Price: This refers to the resulting price at which a security is executed. It will usually be our most important consideration. Alongside price, we also place a high importance on the cost of trading.

Costs: This relates to the explicit and implicit costs such as fees, charges and commissions that are charged for executing the order. After price, costs will usually be our next most important consideration.

Size: This relates to the size of the transaction to be executed and how this affects the price of execution.

Equities This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in equities. It is an appendix to the overarching LGIM Best Execution Policy.


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Speed: This relates to the time it will take to execute an order. All orders transmitted to the trading desk have a trading benchmark attached to them. Broadly these can be split into historical benchmarks (such as arrival price) and future benchmarks (such as market on close). The trading benchmark determines how quickly an order is acknowledged and sent to market.

Likelihood of execution and settlement: This refers to the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the security itself is illiquid.

Nature or any other consideration relevant to the execution of the order: This relates to any other factor not previously listed that we deem to be a factor in the execution of a given order.

EXECUTION PROCESS Generally speaking, as a scale asset manager, we will always search for natural sources of liquidity in order to seek to minimise price impact. To this effect, our execution process starts by identifying possible internal crossing opportunities where a client’s ‘buy’ order may be matched against another client’s ‘sell’ order at a market referenced neutral price (e.g. prevailing mid-market price, VWAP or closing price). In such circumstances, both sides of the transaction are normally placed with an external counterparty with the instruction to cross the orders by referencing the appropriate market price. Typically this price is mid-market or the official close.

Once internal liquidity has been investigated, the next stage in the process is to determine which channel of execution is most appropriate for the order. For cash equities, the channels we would consider are high-touch (HT), program trading (PT) or algorithmic execution (AE). To determine the most appropriate channel, we will examine the order characteristics previously outlined above. As a result, the relative importance of the execution factors could vary on a per-order basis.

If the order is deemed to be appropriate for a high touch channel, we may at this stage consider buy side to buy side crossing venues, indications of interest (IOIs) and broker inventory lists. We may also access the secondary market in a controlled fashion in a bid to source liquidity. In contrast, if the order is deemed more appropriate for a low touch channel, we will then access the secondary market via broker provided algorithms or via a broker’s portfolio trading desk. Here we rely on the brokers’ smart order routers (SOR) to source the best prices and liquidity from a wide range of agreed venues.

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES Once the execution channel has been selected, the next step is to choose an appropriate counterparty. Our counterparty selection framework is based on a number of factors. The most important factor will be execution quality. On a rolling three month basis, we independently measure the execution quality of our brokers, using our third party TCA provider. These scores form a large part of our broker selection framework. Another objective factor we measure is the availability and quality of broker provided liquidity. Alongside these we will also collect and score other more subjective data points. For example we score brokers’ operational capability, general governance of our execution arrangements as well as the quality of their market intelligence.

We believe this principles-based approach offers the best opportunity to meet our best execution obligations.

APPENDIX A – LIST OF EXECUTION VENUES AND COUNTERPARTIES We use the following execution venues which we believe enables us to obtain best execution on a consistent basis. This list is not exhaustive and will be subject to change. We may also use other execution venues where it is deemed appropriate in accordance with the Best Execution Policy.


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Venues


Counterparties

• Bank of America Merrill Lynch

• Citigroup

• Credit Suisse

• Exane Ltd

• Goldman Sachs

• Instinet

• ITG

• JP Morgan

• Morgan Stanley

• UBS


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• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the different execution factors, we consider all of the order’s characteristics: the type of instrument to be traded, the trading benchmark (set by the fund manager), the size of the order, liquidity demand of the order and the risk characteristics of the order. Broadly speaking, price will always merit a high relative importance in obtaining the best possible result. However, in some circumstances, we may appropriately determine that other execution factors are as, or even more important than price in obtaining the best possible execution result for the client. Alongside price, we also place a high importance on the cost of trading. We consider that controlling the cost of trading (both explicit and implicit cost) is integral to achieving best execution. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.


Exchange-traded derivatives and exchange-traded products This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in exchange-traded derivatives and exchange-traded products. It is an appendix to the overarching LGIM Best Execution Policy.


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Price: This refers to the resulting price at which an exchange traded derivative or product is executed. It will usually be our most important consideration. Alongside price, we also place a high importance on the cost of trading.

Costs: This relates to the explicit and implicit costs such as fees, charges and commissions that are charged for executing the order. After price, costs will usually be our next most important consideration.

Size: This relates to the size of the transaction to be executed and how this affects the price of execution. Generally the relative importance of size as a factor is likely to increase as liquidity decreases.

Speed: This relates to the time it will take to execute an order. All orders transmitted to the trading desk have a trading benchmark attached to them. Broadly these can be split into historical benchmarks (such as arrival price) and future benchmarks (such as market on close). The trading benchmark determines how quickly an order is acknowledged and sent to market.

Likelihood of execution and settlement: This refers to the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the security itself is illiquid.

Nature or any other consideration relevant to the execution of the order: This relates to any other factor not previously listed that we deem to be a factor in the execution of a given order.

EXECUTION PROCESS Generally speaking, as a scale asset manager, we will always search for natural sources of liquidity in order to seek to minimise price impact.

Once internal liquidity has been investigated, the next stage in the process is to determine which channel of execution is most appropriate for the order. For exchange traded derivatives and products, the channels we would consider are high-touch (HT) or algorithmic execution (AE). To determine the most appropriate channel, we will examine the order characteristics previously outlined above. As a result, the relative importance of the execution factors could vary on a per-order basis.

If the order is deemed to be appropriate for a high touch channel, we may at this stage consider RFQ mechanisms as well as broker inventory lists. We may also access the secondary market in a controlled fashion in a bid to source liquidity. In contrast, if the order is deemed more appropriate for a low touch channel, we will then access the secondary market via broker provided algorithms or via a broker’s execution desk. Here we rely on the brokers’ smart order routers (SOR) to source the best prices and liquidity.

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES Once the execution channel has been selected, the next step is to choose an appropriate counterparty. Our counterparty selection framework is based on a number of factors. The most important factor will be execution quality. On a rolling three- month basis, we independently measure the execution quality of our brokers, using our third party TCA provider. These scores form a large part of our broker selection framework. Another objective factor we measure is the availability and quality of broker provided liquidity. Alongside these we also collect and score other more subjective data points. For example we will score brokers’ operational capability, as well as the quality of their market intelligence.



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• Citigroup

• Credit Suisse

• Barclays

• Goldman Sachs

• HSBC

• JP Morgan

• Morgan Stanley

• UBS

• SG Securities


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• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the different execution factors, we consider all of the orders characteristics: the type of instrument to be traded, the trading benchmark (set by the fund manager), the size of the order, liquidity demand of the order and the risk characteristics of the order. Broadly speaking, price will always merit a high relative importance in obtaining the best possible result. However, in some circumstances, we may appropriately determine that other execution factors are as, or even more important than price in obtaining the best possible execution result for the client. Alongside price, we also place a high importance on the likelihood of execution and settlement. We consider that these factors are integral to achieving best execution. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.


Price: This refers to the resulting price at which an OTC derivative is executed. It will usually be our most important consideration.

Costs: This relates to the explicit and implicit costs such as fees, charges and commissions that are charged for executing the order.

OTC equity and commodity derivatives This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in OTC equity and commodity derivatives. It is an appendix to the overarching LGIM Best Execution Policy.


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Nature: This relates to the opportunistic timing of an order. Where speed and size are not relevant towards the opportunistic level for a particular order, other orders where these factors are relevant may be given priority

Size: This relates to the size of the transaction to be executed and how this affects the price of execution. Generally the relative importance of size as a factor is likely to increase as liquidity decreases.

Speed: This relates to the time it will take to execute an order. All orders transmitted to the trading desk have a trading benchmark attached to them. Broadly these can be split into historical benchmarks (such as arrival price) and future benchmarks (such as market on cash close). The trading benchmark determines how quickly an order is acknowledged and sent to market.

Likelihood of execution and settlement: This refers to the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the security itself is illiquid. After price, this is generally our most important factor in achieving best execution for OTC instruments.

Any other consideration relevant to the execution of the order: Counterparty selection is limited to those where legal documentation has been put in place which may impact the best achievable price of any trade.

EXECUTION PROCESS Generally speaking, as a scale asset manager, we will always search for natural sources of liquidity in order to seek to minimise price impact.

Once internal liquidity has been investigated, the next stage in the process is efficient price discovery. Generally, this process is conducted electronically via RFQ (request for quote) platforms.

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES Once an RFQ channel has been selected, the next step is to choose the appropriate counterparties. It is important to note that funds may have a limited broker set from which to choose and so the presence of legal documentation is normally an important consideration. Our OTC counterparty selection framework is based on a number of factors. The most important factor will be execution quality (price). By analysing our historical trading data, we are able to determine the most appropriate counterparties to request quotes from, for a given order/underlying. This data driven approach will form a large part of our broker selection framework. Another objective factor we will measure is the likelihood of execution and settlement. Alongside these factors, we will also collect and score other more subjective data points. For example we will score brokers’ operational capability, as well as the quality of their market intelligence.




• Barclays Capital

• Citigroup

• Credit Suisse


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• Goldman Sachs

• Morgan Stanley

• JP Morgan

• HSBC

• Societe Generale

• UBS


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• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the execution factors we take into consideration the characteristics of the client, the client order, the financial instrument and the execution venues to which the order can be directed. The choice of the venue for the execution is also dependent upon the characteristics of the financial instrument underlying the order and the functional capabilities of the venue itself. Generally, price merits a high relative importance in obtaining the best execution. However, in some circumstances, we may appropriately decide that other execution factors are more important than price. The number of counterparties for corporate bonds is often limited. With regard to large orders, or orders of a sensitive nature, we may restrict the number of quotes requested to limit information leakage which may materially damage the quote and move the market. In such circumstances trades may, at the trader’s discretion, be done on a non-competitive basis. In such cases the trader will carry out extensive pre-trade analysis in order to identify the broker that is most likely to provide the best outcome for the client. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.


Price: This refers to the resulting price at which the transaction is executed. It will usually be the most important consideration. After price, size, speed and likelihood of execution are usually the most important considerations.

Credit This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in investment grade, high yield and emerging market cash bonds. It is an appendix to the overarching LGIM Best Execution Policy.


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Size: This relates to the variance in the size of the trade to the normal market size for that security. Where a trade is outside normal market size the market may apply a ‘cost’ to handle the excessive risk relative to normal market size. Our priority is to seek to minimise any potential cost for size, balancing the two factors against other best execution criteria.

Speed: This is the rate at which we are able to progress an order. Where the instructions dictate or imply a rate at which we should progress the order, at market or otherwise, we will follow the instructions unless we see an immediate and substantial conflict with the price. Where the instructions do not refer to timing we will progress the order at a rate which we believe represents a balance between creating market impact and executing the order in a timely fashion so as to reduce execution risk.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the security itself is illiquid or if there is a limit price which is out of current market context.

Nature: This relates to the opportunistic nature of the order. Some orders may be given priority over others regardless of their arrival time. For example, a trade in an issuer where there is news flow that is generating fast price action or immediate market impact, may be executed first, still taking into account the factors above.

Costs: This relates to the costs that are incurred in executing the order. For corporate bonds this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Any other consideration relevant to the execution of an order: This relates to any other factor not previously listed that we deem to be a factor in the execution of a given order.

EXECUTION PROCESS We generally follow a process which considers the points below to determine the relative importance of the execution factors. Market conditions, however, remain a major consideration at all times. For example, two orders with exactly the same characteristics in the same security on two different days may be executed in different ways if the market conditions are different.

• Instrument type: This defines what types of venue and counterparty should be considered

• Fund manager objectives: This could reference a specific price limit, state the urgency of the execution or any other fund manager instruction (e.g. a contingent switch)

• Search for natural sources of liquidity

• Order size (e.g. outside normal market size): This could influence the approach and method of execution

• Pre trade analysis: Market depth/liquidity/spread. Using market data to locate natural broker axes/liquidity, identify best optical pricing, understand which brokers have been active

These enable us to:

• Decide on best method of execution (e.g. internal/external crossing opportunities, telephone or electronic MTF)

• Select appropriate venue(s)

• Identify suitable counterparties from the approved broker list

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES We endeavour to maximise internal crossing at every opportunity by using contrary flows from within the business to mitigate bid-offer for the sole benefit of both clients and reducing footprint in the market. Crosses will either be executed at the official


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closing market MID price for that security or an intraday MID will be calculated by requesting market MIDS from our brokers and using the median level. Both funds must benefit equally. If there is a firm market price that is better than MID then we will either trade at that price in market for the fund that would benefit from that better price, or gain approval from both fund managers internally to cross at that market price if it still proves best execution for both parties.

We make use of electronic trading platforms to obtain bids and offers from a group of approved counterparties in competition with one another. Where appropriate in achieving the best possible outcome for our clients dark pools are also used allowing buy and sell side firms to negotiate and transact on exact contra matches on an anonymous basis. Due to the fragmented nature of different asset class sub sets this is not an exhaustive list and will change as dictated by flows.

Monthly TCA is produced to cover every sub class of bonds. Where possible and where such data exists, trade execution is analysed and compared to cover price (next best firm price), average streaming composite price (provided by banks), other trades in the same security on the same day and official closing prices. Results are given on a trade by trade basis and holistically per asset class.


Venues


• Liquidnet

• MarketAxess

• Tradeweb

Counterparties


• Barclays

• BNP Paribas

• Citigroup

• Credit Suisse

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Morgan Stanley

• Royal Bank of Canada

• Royal Bank of Scotland

• UBS


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• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the execution factors we take into consideration the characteristics of the client, the client order, the financial instrument and the execution venues to which the order can be directed. The choice of the venue for the execution will also be dependent upon the characteristics of the financial instrument underlying the order and the functional capabilities of the venue itself. Generally, price will merit a high relative importance in obtaining the best execution. However, in some circumstances, we may appropriately decide that other execution factors are more important than price. The number of counterparties is often limited. With regard to large orders, or orders of a sensitive nature, we may restrict the number of quotes requested to limit information leakage which may materially damage the quote and move the market. In such circumstances trades may, at the trader’s discretion, be done on a non-competitive basis. In such cases the trader will carry out extensive pre-trade analysis in order to identify the broker that is most likely to provide the best outcome for the client. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.


Price: This refers to the resulting price at which the transaction is executed. It will usually be the most important consideration. After price, size, speed and likelihood of execution are usually the most important considerations.

Credit derivatives This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in Credit derivatives. It is an appendix to the overarching LGIM Best Execution Policy.


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Size: This relates to the variance in the size of the trade towards a trade in normal market size for that security. Where a trade is outside normal market size the market may apply a ‘cost’ to handle the excessive risk relative to normal market size. Our priority is to seek to minimise any potential cost for size, balancing the two factors against other best execution criteria.

Speed: This is the rate at which we are able to progress an order. Where the instructions dictate or imply a rate at which we should progress the order, at market or otherwise, we will follow the instructions unless we see an immediate and substantial conflict with the price. Where the instructions do not refer to timing we will progress the order at a rate which we believe represents a balance between creating market impact and executing the order in a timely fashion so as to reduce execution risk.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the contract itself is illiquid or if there is a limit price which is out of current market context.

Nature: This relates to the opportunistic nature of the order. Some orders may be given priority over others regardless of their arrival time. For example, a trade in an issuer where there is news flow that is generating fast price action or immediate market impact may be executed first, still taking into account the factors above.

Costs: This relates to the costs that are incurred in executing the order. For credit derivatives this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Any other consideration relevant to the execution of an order: Counterparty selection is limited to those where legal documentation in the form of ISDA’s or CDEA’s have been put in place which may impact the best achievable price of any trade.

EXECUTION PROCESS We generally follow a process which considers the points below to determine the relative importance of the execution factors. Market conditions, however, remain a major consideration at all times. For example, two orders with exactly the same characteristics in the same security on two different days may be executed in different ways if the market conditions are different.

• Contract type: This defines what types of venue and counterparty should be considered

• Fund manager objectives: This could reference a specific price limit, state the urgency of the execution or any other fund manager instruction


• Pre-trade analysis: Market depth/liquidity/spread. Using market data to locate natural broker axes/liquidity, identify best optical pricing, understand which brokers have been active

These enable us to:

• Decide on best method of execution




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FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES We always search for natural sources of liquidity in order to seek to minimise price impact, analysing market data to find natural axes from our brokers where possible. However, as noted above, we are driven by the presence of legal documentation and therefore will maximise the level of execution with approved brokers only. Mifid II dictates that all in scope funds must clear certain CDS Index contracts, namely current and last series iTraxx Main and iTraxx Crossover. These trades must occur on venue (although can be executed voice then processed on venue). Our chosen venue for electronically trading CDS is Tradeweb.


Venue

• Tradeweb

Counterparties

• Barclays


• BNP Paribas

• Citigroup

• Credit Suisse

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Morgan Stanley


• UBS


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• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the execution factors we take into consideration the characteristics of the client, the client order, the financial instrument and the execution venues to which the order can be directed. The choice of the venue for the execution will also be dependent upon the characteristics of the financial instrument underlying the order and the functional capabilities of the venue itself. Generally, price will merit a high relative importance in obtaining the best execution. However, in some circumstances, we may appropriately decide that other execution factors are more important than price. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.


Price: This refers to the resulting price at which the transaction is executed. It will usually be our most important consideration. After price, speed and likelihood of execution are usually our most important considerations.

Size: This relates to the variance in the size of the trade to the normal market size for that security. Where a trade is outside normal market size the market will apply a ‘cost’ to handle the excessive risk relative to normal market size.

Nature: This relates to the opportunistic timing of an order. Where speed and size are not relevant towards the opportunistic level for a particular order, other orders where these factors are relevant may be given priority. For example the dynamics and market impact of a delta neutral trade are different to a cash-for cash trade and in a volatile market these could determine the priority of order execution.

Government bonds This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in Government bonds. It is an appendix to the overarching LGIM Best Execution Policy.


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Speed: This is the rate at which we are able to progress your order. Where the instructions dictate or imply a rate at which we should progress the order, at market or otherwise, we will follow the instructions unless we see an immediate and substantial conflict with the price. Where the instructions do not refer to timing we will progress the order at a rate which we believe represents a balance between creating market impact and executing the order in a timely fashion so as to reduce execution risk.

Costs: This relates to the costs that are incurred in executing the order. For government bonds this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the security itself is illiquid or if you provide a limit price which is not marketable.

Any other consideration relevant to the execution of the order: Risk matching rather than crossing is more relevant for this asset class.

EXECUTION PROCESS We generally follow a process which considers the points below to determine the relative importance of the execution factors. Market conditions, however, remain a major consideration at all times. For example, two orders with exactly the same characteristics in the same stock on two different days may be executed in different ways if the market conditions are different.


• Fund manager objectives: This could reference a specific benchmark or set a price limit, state the urgency of the execution or any other fund manager instruction (e.g. a contingent switch)


• Market depth/ liquidity/spread

• Pre-trade analysis to establish portfolio risk characteristics: This is particularly useful to assess the suitability of programme trades

• Search for natural sources of liquidity (e.g. internal/external crossing and risk matching opportunities, broker indications of business flows, liquidity on potential venues)

These enable us to:




• Consider and place appropriate hedge if applicable

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES Risk matching rather than crossing is more relevant for this asset class. A cross is a direct exchange of the asset, whereas risk matching can negate the impact of the size and costs of a trade in addition to the price by netting down any excessive mis-alignment of the tenor and duration position placed upon the market. As such minimal market footprint is key towards providing best execution as well as the ability to aggregate orders to maximize risk matching opportunities.


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We consider indications of interest (IOIs) posted regularly by brokers to determine where most trading in a particular stock takes place.

We make extensive use of electronic trading platforms for price discovery and to obtain bids and offers from a group of approved counterparties in competition with one another.

Counterparty performance is assessed via transaction cost analysis (TCA) no less frequently than monthly to ensure optimisation of pricing to fulfil best execution. In this asset class we use an external TCA provider, Tradeweb.


Venues


• Tradeweb

Counterparties

• Australia & New Zealand Banking Group

• Barclays

• BNP Paribas

• Bank of Nova Scotia


• Calyon

• Commonwealth Bank of Australia

• Citigroup

• Danske Bank

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Lloyds Bank

• Mizuho

• Morgan Stanley

• National Australia Bank

• Nomura

• Rabobank



• Santander


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• Toronto Dominion

• UBS


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For the purposes of this policy money market instruments include time deposits, certificates of deposit, and commercial paper (including asset backed commercial paper).



• Price

• Size

• Nature

• Costs

• Speed



When determining the relative importance of the execution factors we take into consideration the characteristics of the client/portfolio, the client order/trade, the financial instrument and the execution venues to which the order can be directed.

The choice of the venue for the execution will also be dependent upon the characteristics of the financial instrument underlying the order and the functional capabilities of the venue itself. Generally, price will merit a high relative importance in obtaining the best execution. However, in some circumstances, we may appropriately decide that other execution factors are more important than price. Nevertheless, where there is a specific instruction from the client the order shall be executed following the specific instruction.


Price: This refers to the resulting price at which the transaction is executed. It will usually be our most important consideration. After price, secondary liquidity, speed, likelihood of execution and settlement are usually our most important considerations.

Secondary liquidity: This refers to the anticipated ability and willingness of a counterparty to buy back / provide liquidity in a transferable money market instrument.

Money market instruments This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in money market instruments. It is an appendix to the overarching LGIM Best Execution Policy.


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Likelihood of execution and settlement: This is the likelihood that we are able to fill the order/trade, or at least a substantial part of it, in its entirety.

Costs: This relates to the costs that are incurred in executing the order. For transferrable money markets instruments this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Any other consideration relevant to the execution of the order: Counterparty selection is limited to those where legal documentation has been put in place which may impact the best achievable price of any trade.


• Instrument type: This defines what types of counterparty should be considered


• Market depth/liquidity/spread

• Pre-trade analysis to establish portfolio risk characteristics

These enable us to:


• Identify direct issuer opportunities

• Identify direct issuer or suitable counterparties from the approved broker list

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES We consider indications of interest (IOIs) posted regularly by counterparties to determine where most trading in a particular instrument takes place.


Counterparties (Issuing Banks, dealer banks, money brokers)



• Bank of Montreal


• Barclays

• BGC Partners

• BNP Paribas

• Citigroup

• Credit Agricole


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• Credit Suisse

• Goldman Sachs

• HSBC

• ING Bank

• JP Morgan

• Lloyds Bank

• Mitsubishi UFJ

• Mizuho

• Morgan Stanley


• NatWest Markets

• Rabobank


• Santander

• Sumitomo Mitsui Banking Corp

• TP ICAP

• Tradition

• UBS


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• Price

• Size

• Nature

• Costs

• Speed





Price: This refers to the resulting price at which the transaction is executed. It will usually be our most important consideration. After price, size, speed and likelihood of execution are usually our most important considerations.

Size: This relates to the variance in the size of the trade to the normal market size for that security. Where a trade is outside normal market size the market will apply a ‘cost’ to handle the excessive risk relative to normal market size.

Speed: This is the rate at which we are able to progress the order. Where the instructions dictate or imply a rate at which we should progress the order, at market or otherwise, we will follow the instructions unless we see an immediate and substantial conflict with the price. Where the instructions do not refer to timing we will progress the order at a rate which we believe

OTC rate swaps This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in OTC rate swaps. It is an appendix to the overarching LGIM Best Execution Policy.


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represents a balance between creating market impact and executing the order in a timely fashion so as to reduce execution risk.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way. For example, if the security itself is illiquid or if a limit price is set which is not marketable.

Nature: This relates to the opportunistic timing of an order. Where speed and size are not relevant towards the opportunistic level for a particular order, other orders where these factors are relevant may be given priority. For example the dynamics and market impact of a delta neutral trade are different to a cash-for-cash trade and in a volatile market these could determine the priority of order execution.

Costs: This relates to the costs that are incurred in executing the order. For OTC rate swaps this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Any other consideration relevant to the execution of the order: Risk matching rather than crossing are more relevant for this asset class. Counterparty selection is limited to those where legal documentation has been put in place which may impact the best achievable price of any trade.






• Pre-trade analysis to establish portfolio risk characteristics: This is particularly useful to assess the suitability of programme trades

• Search for natural sources of liquidity (e.g. risk matching opportunities, broker indications of business flows, liquidity on potential venues)

These enable us to:




• Consider and place appropriate hedge if applicable

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES Risk matching rather than crossing is more relevant for this asset class. A cross is a direct exchange of the asset, whereas risk matching can negate the impact of the size and costs of a trade in addition to the price by netting down any excessive mis-alignment of the tenor and duration position placed upon the market. Quite often in this asset class, orders are raised to trade over a 1, 2 or even 3 month time frame with 30 times normal market size being the total order. As such minimal market


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footprint is key towards providing best execution as well as the ability to aggregate orders to maximize risk matching opportunities.

We consider indications of interest (IOIs) posted regularly by brokers to determine where most trading in a particular instrument takes place.

We make extensive use of electronic trading platforms for OTC instruments for price discovery and to obtain bids and offers from a group of approved counterparties in competition with one another.

Counterparty performance is assessed via transaction cost analysis (TCA) no less frequently than monthly to ensure optimisation of pricing to fulfil best execution. In this asset class we use a combination of in house analysis and an external provider, Tradeweb.


Venues

• Tradeweb

Counterparties


• Barclays

• BNP Paribas



• Citigroup

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Lloyds Bank

• Morgan Stanley


• Nomura



• Santander


• UBS


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• Price

• Size

• Nature

• Costs

• Speed





Price: This refers to the resulting price at which the transaction is executed. It will usually be our most important consideration. After price, speed and likelihood of execution are usually our most important considerations.

Size: This relates to the variance in the size of the trade to the normal market size for that security. Where a trade is outside normal market size the market will apply a ‘cost’ to handle the excessive risk relative to normal market size. In relation to FX, orders are broken down into smaller pieces as liquidity dictates or alternatively traders may use an algorithm provided by one of our approved brokers.

Foreign exchange (FX) outright This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in foreign exchange (FX) outright. It is an appendix to the overarching LGIM Best Execution Policy.


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Nature: This relates to the opportunistic timing of an order. Where speed and size are not relevant towards the opportunistic level for a particular order, other orders where these factors are relevant may be given priority

Cost: This relates to the costs that are incurred in executing the order. For FX outright this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Speed: This is the rate at which we are able to progress the order. Where the instructions dictate or imply a rate at which we should progress the order, at market or otherwise, we will follow the instructions unless we see an immediate and substantial conflict with the price. Where the instructions do not refer to timing we will progress the order at a rate which we believe represents a balance between creating market impact and executing the order in a timely fashion so as to reduce execution risk.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way.

Any other consideration relevant to the execution of the order: Counterparty selection may be limited to those where legal documentation has been put in place or be constrained by exposure level restrictions which may impact the best achievable price of any trade.

EXECUTION PROCESS We generally follow a process which considers the points below to determine the relative importance of the execution factors. Market conditions, however, remain a major consideration at all times. For example, two orders with exactly the same characteristics in the same currency pair on two different days may be executed in different ways if the market conditions are different.




• Market depth/ liquidity / spread



These enable us to:




FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES The timing of the order, market liquidity and volatility or simply the nature of the instrument itself may dictate the channel of execution by ruling out electronic execution . For examples, some currency pairs may simply not be supported on execution platforms or outside liquid market hours electronic spreads might be too defensive


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Counterparty selection: the most important factor will be execution quality. Counterparty performance is assessed via transaction cost analysis (TCA) to ensure optimisation of pricing to fulfil best execution. In this asset class we use an external TCA provider, ITG to complement our own research. Alongside, we measure the availability and quality of broker provided liquidity, take into account operational capability as well as the quality of their market intelligence. This counterparty analysis will overlay with the counterparty restriction on any given fund at times of order execution.


Venues

• Refinitiv

Counterparties

• Barclays

• BNP Paribas


• Citigroup

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Lloyds Bank

• Morgan Stanley

• Nomura




• UBS

• Westpac


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• Price

• Size

• Nature

• Costs

• Speed





Price: This refers to the resulting price at which the transaction is executed. It will usually be our most important consideration.

Size: This relates to the variance in the size of the trade to the normal market size for that security. Where a trade is outside normal market size the market will apply a ‘cost’ to handle the excessive risk relative to normal market size. In relation to FX, orders are broken down into smaller pieces as liquidity dictates.

Foreign exchange (FX) swaps This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in foreign exchange (FX) swaps. It is an appendix to the overarching LGIM Best Execution Policy.


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Nature: This relates to the opportunistic timing of an order. Where speed and size are not relevant towards the opportunistic level for a particular order, other orders where these factors are relevant may be given priority.

Cost: This relates to the costs that are incurred in executing the order. For FX swaps this relates to the cost for the size of the order relative to the perceived mid / benchmark or outside normal market size.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it, in its entirety. This factor increases in importance in situations where access to liquidity in the relevant instrument is constrained in some way.

Any other consideration relevant to the execution of the order: Counterparty selection is limited to those where legal documentation has been put in place or may be constrained by exposure level restrictions which may impact the best achievable price of any trade.

EXECUTION PROCESS We generally follow a process which considers the points below to determine the relative importance of the execution factors. Market conditions, however, remain a major consideration at all times. For example, two orders with exactly the same characteristics in the same currency pair on two different days may be executed in different ways if the market conditions are different.







These enable us to:




FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES The timing of the order, market liquidity and volatility or simply the nature of the instrument itself may dictate the channel of execution by ruling out electronic execution . For examples, some currency pairs may simply not be supported on execution platforms or outside liquid market hours electronic spreads might be too defensive.

Counterparty selection: the most important factor will be execution quality. Counterparty performance is assessed via transaction cost analysis (TCA) to ensure optimisation of pricing to fulfil best execution. In this asset class we use an external TCA provider, ITG to complement our own research. Alongside, we measure the availability and quality of broker provided liquidity, take into account operational capability as well as the quality of their market intelligence. This counterparty analysis will overlay with the counterparty restriction on any given fund at the time of order execution.


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Venues

• Refinitiv

Counterparties

• Barclays

• BNP Paribas


• Citigroup

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Lloyds Bank

• Morgan Stanley

• Nomura




• UBS

• Westpac


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• Price

• Size

• Nature

• Costs

• Speed



When deciding at what price to best execute capital allocated for investment by clients, we take into consideration client requirements under the Investment Management Agreement (‘IMA’), the credit rating of the transaction, the duration and investment value premium of the deal.

Best execution price is influenced by several factors: the number of investors who compete for the investment opportunity, the additional deal protections added by structuring and the size of the bid that can be made on behalf of our clients given the competitive dynamic and client IMA restrictions. Less competition and ability to bid for the majority of an issuance can increase pricing. Additional structural protection afforded by financial covenants (e.g. low loan to value, interest cover covenants), provision of security, guarantees from strong financial entities that preserve value in the event of default may be negotiated. These, even in combination with a lower credit spread, may result in the client still achieving the best outcome and will be considered when seeking value for clients. Nevertheless, where there is a specific instruction from the client to exceed a minimum pricing, a bid will be attempted at that level.


A credit spread, often tiered across deal size and maturity, is approved by the Investment Committee. The spread that we believe maximises value for our clients while still allowing us to participate in the transaction is communicated to the Agent. The Agent collates bids from other market participants and discusses these with the Borrower who will either accept or reject the bids. On occasion, it is possible, due to changes in terms, that there is opportunity to rebid.

Private Credit This document sets out the Best Execution Policy for Legal and General Investment Management Ltd (‘LGIM’) in relation to dealings in private credit. It is an appendix to the overarching LGIM Best Execution Policy.


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Price: This refers to the resulting price at which the transaction is executed. The price at which a deal is executed is based on willing buyer and willing seller and in the absence of alternative execution platforms represents best execution possible for clients. The value premium will be determined relative to a blended selection of listed comparator bonds. It is recognised that there is no perfect comparator for an unlisted investment and the basket of comparators reflects the range of credit, sector, duration and structural features of a transaction. The investment value premium, size of bid, duration and structural features of the deal are usually the most important considerations. The market clearing price will be determined by the balance between the borrower demand to achieve an acceptable price, the weight of investor competition and the value premium required from the trade to meet client IMAs.

Size: This relates to the scale of the bid and may be constrained by client IMAs and relative competition for the investment opportunity, within the context of the overall transaction size. Client IMAs will prescribe investment criteria, limitations on investment exposures and other considerations to achieve their required portfolios.

Likelihood of execution and settlement: This is the likelihood that we are able to fill the order, or at least a substantial part of it. This factor increases in importance in situations where access to the relevant instrument is constrained in some way. For example, if there is a price limit which is out of current market context.

Nature: This relates to the opportunistic nature of the order. Some orders may be given priority over others regardless of their arrival time. For example, a trade in an issuer where there is a limited deal time may be executed first, still taking into account the factors above.

Any other consideration relevant to the execution of an order: Duration is determined by the commitment period of the investment deal until the repayment date(s). Deals can be tranched with varying repayment profiles which may justify different pricing for each tranche.

Additionally credit ratings are a relevant consideration: All Private Credit investments are either rated by an independent credit analyst team, utilising standard rating methodologies, to determine the credit rating or we apply the rating levels of external agencies (Standard & Poors, Moody’s & Fitch). This credit rating, together with the duration profile and investment sector nature of the investment, is then used to select the basket of comparator listed bonds to help calculate the price premium of the transaction. The credit analyst teams are responsible for assessing the credit-worthiness of investments and assigning an internal credit rating. The criteria used to assess the investments allow for outcomes comparable with, although possibly not equal to, assessments or ratings published by leading rating agencies and other NRSROs (Nationally Recognised Statistical Rating Organisations).

EXECUTION PROCESS We generally follow a process which considers the points below to determine the relative importance of the execution factors. Market conditions, however, remain a major consideration at all times. Pricing can move on the same security on two different days if the market conditions are different.

• Investment opportunity: The platform/broker will offer the possibility to engage in an assessment of a primary transaction allowing time for due diligence to be carried out on the investment opportunity. This will also determine the execution platform.

• Client IMAs: Client IMA restrictions will be reviewed to check if there are constraints on the investment sector, deal size, rating, etc.

• Credit rating: An independent credit analyst team will be requested to undertake a review and formally declare a credit rating for the proposed transaction where one is required. This will influence structuring, deal size and pricing.


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• Comparator bond selection: As per our defined Pricing Methodology, a basket of listed bonds with similar duration profiles at the relevant credit rating will be selected. The derived average spread, together with any necessary adjustments for duration and structuring, will then be compared with the proposed pricing to determine the pricing premium.

• Investment Committee: The Investment Committee will review the rationale for the transaction, the credit rating and any sensitivity in the underlying operating business, the structuring which may either enhance or underpin the rating, the proposed deal size and pricing. After due consideration any amendments (assuming the deal is approved) to the transaction including expectations around acceptable pricing ranges will be noted for the deal captain to attain.

FACTORS AFFECTING THE CHOICE OF EXECUTION VENUES The choice of the venue for the execution is limited by both the nature of primary transactions and the platform/broker who presents the investment opportunity.


Counterparties


• Barclays

• BNP Paribas

• Citigroup

• Credit Suisse

• Deutsche Bank

• Goldman Sachs

• HSBC

• JP Morgan

• Morgan Stanley



• Stifel Nicolaus

• UBS

• Lloyds Bank

• Natixis

• Wells Fargo

• Standard Chartered

• Unicredit

• Mitsubishi UFJ


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Important Information

March 2020

Legal & General Investment Management Limited is authorised and regulated by the Financial Conduct Authority. Legal & General Investment Management, One Coleman Street, London EC2R 5AA

Telephone: +44 (0)20 3124 3124

Fax: +44 (0)20 3124 2526.

To ensure quality of service and for the protection of all parties, telephone calls may be recorded

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