Hamilton Lane (Germany) GmbH (“Hamilton Lane” or the “Firm”) is under an obligation to identify, manage and monitor any actual or potential conflicts of interest that may arise between the Firm and its clients or between one client and another, that may arise in the course of the Firm providing services. The Firm must comply with the rules set out in the Markets in Financial Instruments Directive 2014/65/EC (“MiFID II”).
The Firm must establish, implement and maintain an effective Policy and it must be set out in writing and be appropriate to the size and organisation of the firm and the nature, scale and complexity of its business. This document sets out the Conflicts of Interest Policy (the “Policy”) and constitutes a summary of the approach taken by Hamilton Lane in identifying, managing and preventing potential and actual conflicts of interest.
This policy sets out the principles and guidelines for identifying, managing, recording and, where relevant, disclosing existing or potential conflicts and protecting the interests of its clients. All employees and relevant persons are responsible for identifying actual or potential conflicts of interest between the Firm and managing as well as mitigating those conflicts fairly and in accordance with this Policy.
Hamilton Lane’s parent, Hamilton Lane Advisors L.L.C (“HLA”) does not, directly or indirectly through affiliated entities, provide services to the limited partnerships or companies in which its clients have invested or to their general partners or management. Consequently, the Firm does not face the potential conflicts of interest faced by many investment advisers whose affiliates offer brokerage, underwriting or other services.
Conflicts of interest arise when individuals or organisations have interests, of a personal or business nature, that may interfere with, or appear to interfere with, the independent exercise of judgment in business dealings and hinder the firm’s obligation to act in the client’s best interest. Hamilton Lane is committed to taking all reasonable steps to identify any conflicts of interest that might arise between the Firm and our clients and or investors, and any client or investor and another during our provision of any designated financial service and or activity.
For the purposes of identifying the types of conflicts that arise, or may arise, while providing a service and or an activity and whose existence might result in a material risk of damage to the interest of our clients and or investors, we, as a minimum, consider whether we meet the following criteria:
- Is likely to make a financial gain, or avoid a financial loss, at the expense of our clients and or investors.
- Has an interest in the outcome of a service and or an activity provided to a client and or investor, or of a transaction carried out on behalf of a client and or investor, which is distinct from the client’s and or investor’s interest in that outcome.
- Has a financial or other incentive to favour the interest of another client and or investor or groups of clients and or investors over the interests of the specific client and or investor.
- Carries on the same business as the client and or the investor.
- Receives or will receive from a person other than a client and or an investor an inducement, gift or benefit in relation to a service provided to the client and or investor, in the form of monies, goods or services, other than the standard commission or fee agreed by us for that service.
- Other circumstances that we will consider as giving rise to a conflict of interest include where there is a conflict of interest between our interests or certain persons connected to us and the duty we owe to our clients and or investors; or between the differing interests of two or more of our clients and or investors, to whom we owe in each case a duty.
The Firm has taken steps to ensure that circumstances which could give rise to Conflicts and may pose a material risk of damage to the interests of its clients are identified, managed and documented.
The identification is governed mainly by two core aspects:
- Each Hamilton Lane employee must consider whether their activities may give rise to a conflict of interest, and to report any instances to senior management and our Compliance Department.
- Conflicts of Interest procedures and controls are managed by the Compliance Department.
Types of Conflict
The Firm may find occasions where the interests of one client may conflict with (i) those of another client; or (ii) the interests of the Firm; or (iii) a Firm employee. The following is a non-exhaustive list
of examples of situations where a conflict of interest may arise:
- Access to confidential information – Individuals with access to confidential information may potentially misuse the information obtained during the course of their employment;
- Investment Allocation – The Firm may provide investment advisory services for more than one client or fund and issues of allocation and aggregation between the clients and funds may arise;
- Employees engaged in outside financial interests and/or activities;
- Corporate Opportunities (“business opportunities for personal investment that come to the attention of any employee that in any way relate to the Firms’ business”); Personal account dealings by employees; and
- An employee receives a gift of more than a nominal value which may influence the employee to behave in a way that conflicts with the interests of the clients of the Firm.
Hamilton Lane follows certain procedures and measures which are designed to ensure that relevant persons engaged in different business activities involving a conflict of interest carry on those activities at a level of independence appropriate to the size and activities of the firm and of the group to which it belongs, and to the materiality of the risk of damage to the interests of clients.
To ensure that the firm satisfies the requisite degree of independence. These procedures and measures include the following:
- Effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients;
- The separate supervision of relevant persons whose principal functions involve carrying out activities on behalf of, or providing services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the firm;
- The firm has in place remuneration policies and procedures which prevent remuneration structures that may incentivise an employee to act contrary to their responsibility to act in the client’s best interest;
- Measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out services or activities;
- Measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate services or activities where such involvement may impair the proper management of conflicts of interest;
- Employees must obtain pre-approval for gifts and entertainment provided and received. The firm will not provide approval unless the gifts and entertainment, provided or received, are deemed reasonable, proportionate and for a legitimate business purpose;
- All employees of the Firm are obliged to disclose personal accounts, trading details associated to those accounts and obtain pre-approval for new trades they wish to place. Employees are regularly reminded of the Personal Account Dealing rules; and
- Any conflicting duties are properly segregated.
It is of vital importance that conflicts of interest are identified and managed appropriately, both to comply with the Regulator rules and our wider duties to our clients, and also to ensure that the integrity of our services is not eroded.
MiFID II requires a firm only to use disclosure as a measure of last resort where the arrangements it has put in place to prevent or manage its conflicts of interest from adversely affecting clients’ interests are not sufficient to ensure, with reasonable confidence, that the risk of damage to the interests of one or more clients will be prevented.
In these circumstances a firm must, before undertaking MiFID Business for the client:
- Disclose the general nature and/or source of the conflict of interest;
- Provide a specific description of the conflict of interest that arises in the provision of the MiFID Business; or
- Explain the risks to the client that arise as a result of the conflict of interest and the steps which the firm has undertaken to mitigate these risks.
The Firm will make such disclosure in a durable medium and include sufficient detail, taking into consideration the nature of the client and or investor, to enable that client and or investor to take an informed decision with respect to the service in the context of which the conflicts of interest arises.
In the event that the Firm considers that the conflict of interest cannot be prevented or managed in any other way, the firm will give due consideration to declining to act for the client or no longer carry on a particular activity or offer a particular service.
Record of Conflicts
Hamilton Lane must keep and regularly update a record of the kinds of service or activity carried out by or on behalf of the firm in which a conflict of interest entailing a material risk of damage to the interests of one or more clients has arisen or, in the case of an ongoing service or activity, may arise.
The potential or materialized conflict will be reported to the Compliance Officer. The Compliance Officer is responsible for keeping records of conflicts of interest in strict accordance with legal and regulatory requirements. Where Conflicts are identified, these are documented in the Firm’s Conflicts Register.
Reviewing the Policy
The Firm will monitor, assess and periodically review (at least annually) the effectiveness of these arrangements and implement any necessary changes to our Conflicts of Interest Policy.