about us

# we are a global systematic
investment manager

Empathy transformation is a global systematic investment manager. Our centralized research focuses on the development of advanced quantitative techniques for uncovering market opportunities and employs them within a disciplined framework that results in efficient exposures.

With a robust infrastructure and talented investment professionals, Empathy transformation offers clients the scale of a large asset management firm, with the benefits of a versatile investment platform – flexibility and customization. Our firm is able to offer institutional and retail investors the essential building blocks for today’s changing investment landscape.

### Our principles and ambitions

#### We approach sustainability from three perspectives: an asset owner, an asset manager, and as a company in our own right

While our responsibilities and obligations in each of these three roles may differ, as we discuss below, our approach in all three is united by a common set of principles and ambitions, set out in the box at the bottom of the page.
We serve as an asset owner on behalf of Prudential With-Profts policyholders, and our pensions and annuity customers. This means we make decisions about how to allocate money to different asset classes and which asset manager should manage our money.
We also have the important responsibility of deciding the financial outcomes we want our asset managers to deliver for us, and the sustainability considerations we require them to apply.
For example, if we think that a certain industry does not have a sustainable future, we may require that the asset manager does not invest in that industry. Our responsibility as an asset owner is to create the best customer outcome in terms of general well-being in line with our fiduciary duty, taking into consideration financial security.
We also invest as an asset manager on behalf of individual savers and asset owner clients. As at 31 December 2020, we manage over £233.4 billion for external clients and £133.8 billion on behalf of our internal client.
As an asset manager, we must aim to deliver the financial outcomes and any sustainability requirements set out in the objectives of each of our mutual funds, or in the mandates we receive from institutional clients.
Sometimes there may be differences in the sustainability criteria that external clients mandate, and in turn these may differ from the requirements of our internal client.
While our values of care and integrity inform all our sustainability work, the asset manager and asset owner are separately regulated businesses with independent Boards and governance processes, and their policies may diverge on occasion.

### Sustainability principles and ambitions across our business

Our sustainability commitments, principles and ambitions apply across the investments we make as an asset manager and asset owner, and to our own business operations

### Our sustainability principles:

– We will consider sustainability and ESG factors when determining our corporate strategy and new business initiatives
– We will embed sustainability considerations throughout our business
– We identify and incorporate ESG risk factors into our general risk management process
We consider the interests of all our stakeholders and ensure our views on sustainability are consistent with our longterm approach
– We will manage our businesses to the same principles of acting responsibly that we hold our investee companies to account on
We review our sustainability thinking regularly in order to align with scientific and technological improvements, and changes in the global economy, ethics and consumer preferences
– We aspire to be a thought leader, to innovate, and to advance understanding of sustainability issues
We aim to use our influence as a global investor and asset owner to drive positive change in sustainability policy and corporate standards
– We believe in active asset ownership and management which encourages companies to transition towards a sustainable future

### CORE PRINCIPLES

We are a trusted fiduciary of client assets.

Our priority is always to act in the best interests of our clients.
No one will ever outwork or outhustle us for business.
We conduct business with the highest level of honesty and integrity.
We strive to generate superior returns in our chosen markets.
Creativity is at the core of our investment approach.
We work collaboratively, intelligently and judiciously.
Our most important asset is our people.
We strive to recruit and retain the best talent.
We stress teamwork in everything we do.
We value the opinion of every member of the firm and seek consensus across all investment decisions.

We give back to the communities in which we work and live.

## OUR SUSTAINABILITY STRATEGY: UNDERPINNED BY CONSTANT EVOLUTION AND A LONG-TERM APPROACH

### ESG INTEGRATION

We integrate environmental, social and governance information into our analysis and decision-making across our investment teams and business lines.

### STEWARDSHIP

We are active stewards of the entities in which we invest; this goes hand-in-hand with our active investment approach.

### CORPORATE RESPONSIBILITY

ESG is ingrained in our business activities through our corporate responsibility program. This includes our Barings Social Impact philanthropic program, as well as our focus on diversity, equity and inclusion across our business.

## OUR SUSTAINABILITY GOVERNANCE, RESOURCES AND PARTNERSHIPS

### DEDICATED RESOURCES

Our dedicated resources help develop and deliver our sustainability and ESG strategy, policy, partnerships, research, training and reporting.

### INDUSTRY PARTNERS

We are a signatory to the Principles for Responsible Investment, a member of the United Nations Global Compact and Climate Action 100+, and public supporters of the Task Force on Climate-related Financial Disclosures. We work to advance the missions of these industry partnerships.

### FORMAL GOVERNANCE

Our Sustainability Committee consists of senior business leaders and is tasked with supporting sustainability strategy execution.
Our Sustainability Working Groups focus on long-term strategic projects and regularly meet and report to the Sustainability Committee.

## $649B AUM

We continue to build on our track record to innovate into new strategies, drive growth, and serve our investors.

## HOW WE WORK

## Outstanding team

Empathy transformation is a tightly knit group working together with management teams toward common goals. We have more than 70 investment professionals, including 24 partners with an average tenure at Empathy transformation of more than a decade. This allows us to devote substantial time to the companies in which we invest.

## Collaborative style

Our objective is to work with portfolio company leadership and create a backdrop in which companies can thrive. We encourage management teams to invest alongside us, and our forward-thinking approach and philosophy to leave companies better than when we found them also means that portfolio company employees often choose to invest alongside Empathy transformation as well.

## Alignment of interest

We believe that people thrive when they are working toward a common and focused goal. We are proud of our transparency and alignment of interest with our portfolio companies and investors. We believe our focus and significant skin in the game allows us to build true, successful partnerships.

### Investment Criteria

Empathy transformation seeks to make investments in companies that meet the following investment criteria:
Led by managers with an established track record of achievement
Participate in economically attractive, fragmented, niche industries with strong fundamentals
Demonstrate a sustainable competitive advantage, including an ability to grow, innovate and withstand economic downturns
Possess strong market positions, attractive cash flow attributes and high return on investment enabling them, inter alia, to service a leveraged capitalization
Enjoy excellent organic or acquisitive growth prospects
Empathy transformation has experience executing the following transaction types:
Management buyouts of public and privately held companies and divisions of larger companies
Recapitalizations of closely held businesses in order to provide additional financing or liquidity for existing investors
Acquisitions of companies seeking the financing required to execute consolidation strategies in fragmented but attractive industries
Selected equity financings of growth companies that have demonstrated significant potential Equity investments in growth companies
Investments in companies participating in industries in which Empathy transformation has extensive investment experience

### OUR VALUES

At the heart of our business are our partners: the entrepreneurs and management teams we back; the investors in our funds; the advisers and intermediaries we work with; and the banks and other lending institutions to our deals.

### Highly Ambitious

We strive to build world-class businesses to generate superior returns for our partners.

### Winning

We are here to win. We are constantly improving, and are committed to out-thinking and out-executing our competitors. We take on what others dismiss as impossible, and solve the hard problems that others walk away from. This is why we hire the best.

### Integrity

We do things the right way, without compromise, the first time – every time. We are direct, decisive and, above all, accountable. We practice sound judgment and common sense in our actions that conforms to the letter and spirit of the law at all times. We win on the merits, with integrity.

### Learning

We are driven by a thirst for knowledge. We are constantly learning – from each other and from inspired thinkers around the world. We passionately pursue new ideas, new innovations and new strategies that will strengthen our competitive advantage

### Our Purpose

This means supporting our colleagues, customers and clients, and the communities and environment in which they operate, for the benefit of all our stakeholders. It means helping people and businesses unlock their potential and plan for the future with confidence, building relationships that stand the test of time. And it means that we continue to be there for the long-term, whatever the climate, making decisions that are right for today and for generations to come.
To achieve this, our long-term strategic approach place exceptional service at the heart of everything we do. Each of our diverse, specialist businesses have a deep industry knowledge, so they can understand the challenges and opportunities that our customers and clients face. We support the unique needs of our customers and clients to ensure that they thrive, rather than simply survive, whatever the market conditions.
We believe in putting our customers and clients first. Our cultural attributes bring out the very best of our people, skills and strong reputation that we have built with our stakeholders over many years. A combination of expertise, service and relationships with teamwork, integrity and prudence underpins our approach and gives us the tools to thrive over the long term.
And we recognise that to help the people and businesses of Britain thrive, we also have a responsibility to help address the social, economic and environmental challenges facing our business, employees and clients, now and into the future.

### Responsible Investing at Empathy transformation

We have always believed that we can make a difference in the world through our investments.
As a signatory to the United Nations Principles for Responsible Investment (UN PRI), we are committed to the aspirational principles for incorporating ESG considerations into our investment approach.

### Our Approach to ESG and Responsible Investing

We believe markets to be largely efficient and strive to provide systematic exposure to certain risk-based and behaviorally driven factors that can be combined intelligently to deliver results for investors.
Our ongoing investment in the research and design of our investment strategies, including ESG-related approaches, seeks to ensure style and returns consistency, while continually evaluating new data, statistics, investment ideas, and quantitative methods.

We have a long history of accommodating client-specific requests and exclusions of certain securities from an investment universe, such as those deemed socially or environmentally undesirable, or operating in regions where human rights abuses are prevalent.
In addition, we are responsible for voting proxies on behalf of clients that have granted the authority to us. We have engaged Institutional Shareholder Services, Inc. (ISS), a third-party proxy voting agent, to provide proxy voting research and execution services on behalf of our clients, while we reserve directive control over ultimate proxy voting. Typically, we follow the ISS Socially Responsible Investing (SRI) Proxy Voting Guidelines.

### Risk management at the center

We seek to manage risk in order to capitalize on opportunities and improve our performance. Disciplined risk estimation and management are deeply integrated components of the investment process across each one of our strategies.
We believe a well-constructed portfolio upfront will outperform in good markets and protect our client’s capital in difficult markets. For this reason, Empathy transformation has spent over a quarter of a century establishing risk management as a core discipline. This approach begins with a dedicated governance group that oversees risk management. An emphasis on liquid markets, proprietary risk models and a diversified funding structure seeks to further strengthen our approach.

### The Empathy transformation way

## A dedicated risk management team

Operating independently of the investment businesses, and reporting to the CEO, the Portfolio Construction and Risk Group (PCG) guides the allocation of risk capital. It is supported by a dedicated R&D team to create custom tools and technologies.

## The Risk Management Center

Empathy transformation Risk Management Center provides a comprehensive view of the various investment portfolios and how they fit within pre-established guidelines. Built in 2014, its front-end consists of a 27’ by 8’ interactive touchscreen designed to visualize data in ways that allow for rapid comprehension. Its back-end systems, which connect to every Empathy transformation office worldwide, continuously run a wide range of operational readiness, risk, and stress test monitors.

## Run rigorous processes

In pre-trade discussions, the Portfolio Construction and Risk group works to identify the impact of potential trades on a portfolio’s risk and stress exposures. In the ex-post analysis, the group evaluates the skill, infrastructure, investment universe, risk and working capital utilization of each business, and uses this information as a part of the risk capital allocation process.

## Reinforce the culture

A solid framework is important, but successful risk management can only be accomplished when it becomes a central part of the portfolio manager’s analysis of potential trades and portfolio construction. Continuous communication and collaboration with the investment teams, combined with an in-depth understanding of the portfolios, play a critical role in maintaining and strengthening our risk culture.
As we work as a community to prepare for the impact of COVID-19, we wanted to share assure you Empathy transformation is adhering to the current situation. The health and safety of our employees, customers, and communities are our primary concern.
We are taking all measures to ensure we manage to safely get through this fluid situation while continuing to serve our customers, partners, and employees effectively.

See Covid-19 Update