Full name of the Article 8 fund: 

AMX Master – Systematica – Equity Factor (the "Fund"), a sub-fund of Asset Management Exchange Master ICAV, an umbrella fund with segregated liability between sub-funds.

Legal entity identifier: 

635400B139MIMF8OMC23

Summary

AMX Feeder – Systematica – Equity Factor operates as a feeder fund which invests exclusively through the Fund and therefore does not promote environmental or social characteristics.

The Fund is classified as an Article 8 financial product for the purposes of Regulation (EU) 2019/2088 ("SFDR"). 

The Fund promotes environmental and social characteristics by seeking to be "overweighted" in companies which outperform their peers on emissions reduction, energy and water consumption reduction (i.e. environmental factors) as well as companies that apply good corporate governance and employee related considerations (i.e. social factors). As a priority there is a greater focus on environmental issues.

More generally, the Fund seeks to achieve its investment objective primarily through the implementation of a systematic trading model comprised of a portfolio of systematic trading models, which are computer-based models which select investments based on mathematical algorithms. Each of the systematic trading models select investments in equities, currencies and financial derivative instruments ("FDIs") as described in the supplement for the Fund. In order to obtain an optimal position for each instrument, the recommendations of each systematic trading model are then aggregated. The systematic trading models employed by the Fund seek to design a portfolio of investments comprising a collection of "Risk Premia" (i.e., the reward to an investor generated by tolerating the risks inherent in a particular strategy or asset class). The Risk Premia in which the Fund will invest in comprises "Equity Market Neutral Risk Premia" which focuses on maintaining neutral equity market exposure by attempting to hedge against overall movements in equity markets and to capture systematic mispricing in such markets. Equity market neutrality is attained by offsetting the aggregate risk weighted long positions in equities against the aggregate risk weighted short positions in equities, as set out below. The Investment Manager periodically improves the systematic trading models as new data or research techniques become available.

The systematic trading models are under constant supervision by the Investment Managers and may be updated periodically as new data or research techniques become available. There is two-fold oversight of the performance of the trading models on a daily basis. The execution team of the Investment Manager actively monitors the trades placed by the models. Separately, an independent risk function monitors risk levels and reviews the outputs of the trading models and the portfolio composition for any errors or anomalies. In addition, the performance of the systematic trading models themselves are periodically evaluated by the Investment Committee of the Investment Manager and new systematic trading models may be designed and implemented, while under-performing systematic trading models may be removed.

The Investment Manager's systematic trading model incorporates a wide array of ESG factors ("ESG Factors") into the overall trading model.

The type of ESG Factors that are assessed as part of the investment process for the Fund include:

• Environmental factors including climate change: emissions reduction, energy and water consumption
• Social factors including employee training, injuries, and casualties
• Governance factors including policies, committees and board independence.

The Investment Manager makes assessments on these ESG Factors on a regular basis, and may expand upon these factors from time to time.

No reference benchmark has been designated for the purpose of attaining the environmental or social characteristics promoted by the Fund.

This Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.

The Fund selects investments through the implementation of its systematic trading model and it trades in a number of equity instruments, and derivatives relating to those instruments, including swaps. Investments are selected in accordance with the ESG scoring system detailed above. The Fund's positions and ESG classification of stocks can vary on a daily basis. Accordingly, there is no binding element of the Fund's investment strategy which requires it to invest a minimum proportion of its investments to meet environmental or social characteristics.

Owing to the implementation of the systematic trading model which selects investments based on mathematical algorithms, engagement is not part of the investment strategy of the Fund. 

The Investment Manager and relevant Sub-Investment Managers utilise a proprietary ESG scoring system. An ESG scoring is completed for all investee company /corporate issuers in the Fund and ESG weightings are customised based on specific industry criteria identified by the research analysts. These ESG weightings are automatically integrated into the investment process meaning that the Fund will be "overweighted" in companies that score highly and "underweighted" in companies that have a low score in the ESG scoring system

The data sources that are used to attain the environmental and social characteristics promoted by the Fund are from SASB, Bloomberg and Refinitiv Asset4. The Investment Manager also uses data from sell-side research, index membership, holdings data and data from non-profit organizations in its thematic ESG strategy.

We realise that there are limitations to the methodologies and data sources, such as reliance on industry-wide standards, calculation of look-through exposure, and reliance on sell-side estimates. However, the process is systematic and allows full transparency in the methodology and data used, and E/S characteristics are stated on a reasonable efforts basis along with transparency in the limitations of the data and methodologies.

No sustainable investment objective

The Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment. 
 

Environmental or social characteristics of the financial product

The Fund promotes environmental and social characteristics by seeking to be "overweighted" in companies which outperform their peers on emissions reduction, energy and water consumption reduction (i.e. environmental factors) as well as companies that apply good corporate governance and employee related considerations (i.e. social factors). As a priority there is a greater focus on environmental issues.

As noted above, the Investment Manager's systematic trading model incorporates a wide array of ESG Factors into the overall trading model.

The type of environmental and social factors that are assessed as part of the investment process for the Fund include:

• Environmental factors including climate change: emissions reduction, energy and water consumption
• Social factors including employee training, injuries, and casualties

The Investment Manager makes assessments on these ESG Factors on a regular basis, and may expand upon these factors from time to time.

These ESG Factors form part of a proprietary ESG scoring system utilised by the Investment Manager and the relevant Sub-Investment Managers. An ESG scoring is completed for all investee company /corporate issuers in the Fund and ESG weightings are customised based on specific industry criteria identified by the research analysts. These ESG weightings are automatically integrated into the investment process meaning that the Fund will be "overweighted" in companies that score highly and "underweighted" in companies that have a low score in the ESG scoring system.

The sustainability indicators used to measure the attainment of the environmental and social characteristics promoted by the Fund include:

1. key figures on climate change and other environmental issues, such as water and energy used; waste or green house gas emissions including CO2, nitrous oxide, sulphur oxide and volatile compounds; and
2. management of other sustainability risks: in addition to climate and environmental figures, several key performance indicators are taken into account to measure negative impacts on social and employee matters such as employee training, injuries and fatalities, workforce diversity and human rights such as policies on child and forced labour or the fight against corruption.

Investment strategy

The Fund seeks to achieve its investment objective through the implementation of a systematic trading model or portfolio of systematic trading models. Such model(s) trade in a number of equity instruments, and derivatives relating to those instruments, including swaps. The instruments in which the Fund invests may be listed or unlisted and rated or unrated with no specific geographical focus or spread. Derivative instruments may be exchange-traded or over-the-counter.

The following procedures are implemented in the Fund’s investment process on a continuous basis:

(a)          Exclusions

The criterion of sustainability is defined by exclusion criteria in addition to ESG key performance indicators. The issuers of a security are excluded if the issuer produces, distributes or maintains outlawed weapons, such as landmines and cluster munitions.

(b)          ESG Integration

The aim of ESG integration is to improve the risk/return profile of the Fund by integrating sustainability aspects into the traditional investment analysis process. The assessment of an issuer's sustainability is carried out by the Investment Manager using published information from the issuers.

Subject to data availability, most issuers of equities are subject to sustainability analysis before their securities are purchased or shorted. This includes key figures on climate change and other environmental issues, negative impacts on social and employee matters, human rights, as well as governance indicators such as the fight against corruption, the independence of the board and of the remuneration committee.

The Investment Manager's research and investment team has formalised a systematic approach to the task of identifying companies that are "best in class" and "worst offenders" per industry at incorporating ESG Factors into their governance and management. The focus is on selecting a small set of material measures in each industry, and ranking each company on their level and improvements along these dimensions. The Investment Manager licenses and applies the SASB Materiality Map® General Issue Categories in its investment approach.

(c) Engagement

Engagement is conducted through collaborative efforts, typically with other signatories to the UN Principles for Responsible Investment. As the Fund trades via derivative exposure to issuers, the Fund has no voting rights.

Proportion of investments

The Fund selects investments through the implementation of its systematic trading model and it trades in a number of equity instruments, and derivatives relating to those instruments, including swaps. Investments are selected in accordance with the ESG scoring system detailed above. The Fund's positions and ESG classification of stocks can vary on a daily basis. Accordingly, there is no binding element of the Fund's investment strategy which requires it to invest a minimum proportion of its investments to meet environmental or social characteristics. 

The Fund does not commit to investing in sustainable investments or investments aligned with the Taxonomy Regulation.

Monitoring of environmental or social characteristics

As noted above, the Investment Manager's systematic trading model incorporates a wide array of ESG Factors into the overall trading model. These ESG Factors form part of a proprietary ESG scoring system utilised by the Investment Manager and the relevant Sub-Investment Managers. An ESG scoring is completed for most investee company /corporate issuers in the Fund and ESG weightings are customised based on specific industry criteria identified by the research analysts. These ESG weightings are automatically integrated into the investment process meaning that the Fund will be "overweighted" in companies that score highly and "underweighted" in companies that have a low score in the ESG scoring system.

In addition, the Investment Manager will exclude the issuers of a security if the issuer produces, distributes or maintains outlawed weapons, namely anti-personnel landmines banned under the relevant international conventions and cluster munition. The Investment Manager's exclusion list is derived from industry recognised sources and applied at the investment decision making level in respect of the Investment Manager’s systematic trading model.

Within Environmental, Social and Governance there are identifiable metrics and polices alongside targets (the "ESG Metrics").

• Environmental: 10 metrics, 9 policies and targets. These are mainly related to GHG emissions, water utilization and recycling, and waste management. Thematic investing is also used. The Fund targets its positions towards companies providing climate solutions (e.g. Hydrogen, EVs, renewables) and away from companies contributing to the climate problem (oil and coal).
• Social: 8 metrics, 13 policies and targets. These are related to employee wellbeing, product safety and gender diversity.
• Governance: 2 metrics, 5 policies. These are related to board independence, governance structure and management compensation.

Methodologies for environmental or social characteristics

The Investment Manager makes assessments on the ESG Factors on a regular basis, and may expand upon these factors from time to time.

As noted above, these ESG Factors form part of a proprietary ESG scoring system utilised by the Investment Manager and the relevant Sub-Investment Managers. An ESG scoring is completed for most investee company / corporate issuers in the Fund and ESG weightings are customised based on specific industry criteria identified by the research analysts. These ESG weightings are automatically integrated into the investment process meaning that the Fund will be "overweighted" in companies that score highly and "underweighted" in companies that have a low score.

The Investment Manager uses the ESG Metrics referenced above to measure how the social and environmental characteristics promoted by the Fund are met.

Data sources and processing

The Investment Manager's approach to selecting investments for the Fund is process-based. It formulates hypotheses about market dynamics, tests them scientifically and then, if applicable, implements automated models to profit from those hypotheses. The data sources that are used to attain the environmental and social characteristics promoted by the Fund are from SASB, Bloomberg and Refinitiv Asset4 in its sector neutral ESG integration model. The Investment Manager also uses data from sell-side research, index membership, holdings data and data from non-profit organizations in its thematic ESG strategy.

In ensuring data quality, the Investment Manager follows the same set of data check processes as it applies to the rest of the market, financial and alternative data flowing into its automated models. 

Depending on the nature and quality of data, the Investment Manager either uses data “as reported” data or it relies on estimated data to fill the coverage gap. 
 

Limitations to methodologies and data

1. Limitations
   1. to methodologies
      1. The product relies on industry-wide standards such as Task Force on Climate-Related Financial Disclosures (TCFD) and Partnership for Carbon Accounting Financials (PCAF) and measures portfolio exposures to ESG factors computed from corporate sustainability disclosures. However one limitation is proxy risk as to whether the indicators correctly reflect the environmental and social characteristics. 
      2. The product also measures exposure to issuers involved in climate change or its mitigation and adaptation. Some issuers might be involved in high emissions activities such as coal-fired electricity generation and invest a lot in renewables. As such, trying to increase exposure to renewables conflicts with trying to reduced the level of financed emissions in the portfolio.
      3. The product looks through derivative exposure. This methodology is not codified in standards, however there seems to be some agreement that some look-through is required at least when it comes to sustainability risk computations.
      4. The product nets long exposure with short exposure in its consideration of ESG factors. This methodology is not codified in standards, however there seems to be some agreement that some netting is required at least when it comes to sustainability risk computations.
   2. to data sources
      1. The data used by the product originates from a data collection process that could introduce errors in the data.
      2. The product relies on company disclosures that can contain errors (a typical one is quoting the numbers in the wrong units).
      3. The product relies on sell-side research which can potentially be inaccurate.
2. Why those do not affect the characteristics promoted
   1. The claims with respect to environmental or social characteristics promoted by the product are stated on a reasonable efforts basis and with transparency in the limitations of the data and methodologies 
   2. The process is systematic and allows full transparency in the methodology and data used.

Due diligence

Not applicable – since the trading strategy of the Fund is such that it trades derivative products, the Fund does not invest directly in underlying companies. As such, there is no due diligence conducted in respect of such underlying companies. However, the single swap derivative positions taken by the Fund are treated on a look through basis for the purpose of sustainability risks. As such these positions are subject to a range of internal governance scores which influence the positioning. 
 

Engagement policies

The Investment Manager conducts engagement activities with industry bodies, the broad market and policy makers through collaborative platforms and public consultations. However, engagement is not part of the investment strategy of the Fund. The Fund only invests in derivative products and seeks to achieve its investment objective primarily through the implementation of a systematic trading model comprised of a portfolio of systematic trading models, which are computer-based models which select investments based on mathematical algorithms. Accordingly, owing to the implementation of the systematic trading model which selects investments based on mathematical algorithms that trades derivative products, engagement does not form part of the investment strategy of the Fund. 
 

Designated reference benchmark

Not applicable, the Fund does not reference a benchmark.