New England Asset Management, Inc. (“NEAM”) specializes in offering investment
management services primarily to the insurance industry.
NEAM was founded under the name of New England Asset Management in 1984. NEAM
is a wholly owned subsidiary of General Re Corporation, which is wholly owned by
Berkshire Hathaway Inc.
Types of Services Offered
Asset Management Services
NEAM provides asset management services primarily to insurance company clients. The
services provided are specified in a written Investment Management Agreement (“IMA”)
between NEAM and each client. Clients authorize NEAM to monitor and direct the
investment of securities on a discretionary or non-discretionary basis in the IMA in
accordance with written client investment guidelines and/or other written client
instructions or restrictions. NEAM provides clients with periodic market commentary and
investment research pieces at no additional charge.
Fixed Income Mandates
The majority of discretionary NEAM client portfolios are investment grade fixed income
mandates. These portfolios are actively managed on a separate account basis relative to
either a broad market or customized benchmark.
High Yield Strategy
NEAM offers, through a sub-advisory arrangement, the following strategies: (1) U.S.
Opportunistic High Yield (primarily B & CCC rated bonds and bank loans); (2) Upper Tier
U.S. High Yield (primarily BB & B rated bonds) and (3) a customized strategy tailored for
clients based on their desired exposures to the leveraged credit markets.
Clients who invest in these strategies will receive the sub-adviser’s Form ADV Part 2A
from NEAM and should review it for more information about the sub-adviser’s strategies,
risks and potential conflicts of interest.
Preferred Securities Strategy
NEAM’s Preferred Securities strategy seeks to generate high levels of after-tax investment
income and competitive, risk adjusted total returns through the use of preferred stocks.
Structured Products Yield Enhancement Strategy
NEAM’s Structured Products Yield Enhancement strategy is a specialized income-driven
total return strategy aimed at higher yielding fixed income opportunities within the
structured securities sector.
Form ADV Part 2A March 11, 2020 Page 5
Equity Mandates
NEAM offers the Focused Value Equity Management strategy (“FVEM”), the Dividend
Select equity strategy (“Dividend Select”) and ETF strategies that provide equity exposure
to specific sectors, markets and/or geographic regions.
Investment Accounting and Reporting Services
In addition to providing asset management services, NEAM offers investment accounting
and reporting services to insurance company advisory and non-advisory clients. This
includes assistance in Schedule D data preparation on an annual and quarterly basis.
Enterprise Capital Return and Risk Management® Services
NEAM’s Enterprise Capital Return and Risk Management (ECRRMTM) services provide
a framework and the analytics to support insurance company clients in achieving their
capital management financial goals and enterprise risk management objectives. The
primary deliverable within ECRRMTM is an asset allocation analysis customized to the
unique needs of insurance companies, called Enterprise Based Asset AllocationTM
(EBAATM).
Capital and Risk Analytic (CARA®) Platform
The CARA platform is a web-based investment risk management platform that allows
clients to monitor and evaluate their investment portfolios on a daily basis.
Pooled Investment Vehicles/Private Funds
NEAM serves as collateral manager for three collateralized debt obligations (which are no
longer offering interests to new investors). The interests in these funds are privately placed
security offerings that are exempt from registration under the Securities Act of 1933, and
the funds are exempt from registration under the Investment Company Act of 1940.
Tailored Advisory Services
NEAM tailors its advisory services to meet the unique needs of its clients. Assets are
managed on a separate account basis and investment strategies are developed within
guideline constraints unique to each client.
Clients may impose restrictions on investing in certain securities or types of securities by
specifying in their investment guidelines and/or by notifying NEAM in writing.
NEAM’s Assets Under Management (“AUM”) as of 12/31/2019
Discretionary $70,814,377,971
Non-Discretionary $17,813,337,495
Total Assets Under Management $88,627,715,466
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Fees charged by NEAM are specified in a fee schedule within an IMA signed with each
client. All fees are subject to negotiation.
Form ADV Part 2A March 11, 2020 Page 6
Fixed Income Mandates
The standard advisory fees vary and generally range up to 25 basis points for fixed income
institutional mandates, and can be subject to an annual minimum fee which varies based
on the agreed upon fee schedule and the amount of the client’s AUM.
High Yield Strategies
The standard fee schedules for managing high yield portfolios are based on strategy as
specified below:
Sub-advised Upper Tier U.S. High Yield Strategy
40 basis points of the market value of asset managed.
Sub-advised U.S. Opportunistic High Yield Strategy
50 basis points of the market value of assets managed.
Preferred Securities Strategy
The standard fee is 35 basis points on the first $25 million and 30 basis points thereafter.
Structured Products Yield Enhancement Strategy
The standard fee is 25 basis points on the first $250 million and 20 basis points thereafter.
Equity Mandates
NEAM’s standard fees for managing equity portfolios are based on strategy as specified
below:
Focused Value Equity Management (FVEM) Strategy
70 basis points on the first $25 million of market value of assets managed;
55 basis points on the next $25 million of market value of assets managed; and
40 basis points above $50 million of market value of assets managed.
Dividend Select Strategy
50 basis points of market value of assets managed.
ETF Strategies
Fees are negotiated depending on the composition and the size of mandate.
Enterprise Capital Return and Risk Management® Services
Additional fees for ECRRMTM services are assessed depending on the level of complexity
and scope of the assignment.
Capital and Risk Analytics (CARA®) Platform
Fees are inclusive of access to the CARA® platform for managed assets. There is an
additional fee subject to negotiation for client’s unmanaged assets on the CARA® platform
that is fully agreed upon and disclosed to the client. The amount of the fee depends on the
size of the portfolio, the nature of the unmanaged assets, the frequency of data being loaded
Form ADV Part 2A March 11, 2020 Page 7
into the CARA platform and if NEAM provides investment accounting services on the
unmanaged assets.
Investment Accounting Services
The standard fee is 1 basis point on the market value of assets managed by NEAM and
accounted for, and 2 basis points on unmanaged assets but accounted for, and is, on
occasion, included in the overall asset management fee. The investment accounting
services can also be subject to a minimum annual fee which varies, based on the agreed
upon fee schedule. Depending on data quality and the date that investment accounting
services begin, a one-time flat fee for conversion of the investment data into NEAM’s
accounting system could be charged.
Additional Fee Considerations
NEAM's fees are billed to clients one month in arrears of quarter end, unless other billing
cycle terms are agreed to in writing with the client. NEAM sends quarterly invoices directly
to clients for payment of fees, based on the market value of the assets as of the close of
business on the last day of each month, unless other valuation sources are agreed to in
writing with the client.
Accounts initiated or terminated during a calendar quarter are charged a prorated fee. Upon
termination of the IMA, since fees are billed in arrears, clients will not receive a refund of
advisory fees and any earned, unpaid fees will be due and payable. If the IMA is terminated
prior to month end, the fees for the final partial month are prorated and calculated based
on the prior month end valuation.
NEAM abides by a client’s written directive to have NEAM’s fees paid directly from their
custodian account. For such arrangements, NEAM sends the quarterly invoice to the
client's custodian with a copy to the client. The fees are deducted from the client's custody
account by the custodian and sent to NEAM.
NEAM receives no additional fees other than those documented in writing with its clients.
However, in addition to NEAM’s fees, clients will incur custodial fees, brokerage
commissions for equity transactions, fixed income trading costs (included in net price of
bonds) and other costs and expenses related to securities transactions.
Mutual funds may have conditions or restrictions regarding the purchase or holding of fund
shares, including minimum purchase requirements and fees for redemption of shares within
a specified period. Clients should carefully review the fund’s prospectus for details
pertaining to fees and expenses. The management fees and other expenses associated with
mutual funds and ETF’s are exclusive of and in addition to NEAM’s fee, and NEAM does
not receive any portion of such fees.
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costs.
Form ADV Part 2A March 11, 2020 Page 8
Item 6 - Performance-Based Fees and Side-By-Side Management
Clients should be aware that performance-based fee arrangements create an incentive to
recommend investments that might be riskier than those which would be recommended
under a different type of fee arrangement.
NEAM serves as collateral manager for three CDOs that provide for the payment of
performance-based fees subject to certain criteria or targets under the terms of the
transactions. NEAM is not currently receiving any performance fees, nor does it expect to
receive such fees in the future. Currently, no other clients pay performance-based fees.
NEAM addresses the conflict of having different client fee arrangements through an order
allocation methodology that is designed to provide equal access to investments regardless
of fee schedule. For further detail on NEAM’s trading and allocation procedures, see Item
12.
Item 7 - Types of Clients
NEAM provides investment management services primarily to insurance companies
(affiliated and unaffiliated with NEAM). NEAM also provides investment management
services for governmental entities, a pension/profit sharing plan account, pooled
investment vehicles and high net worth individuals. NEAM manages assets of an insurance
company client that includes a charitable organization account.
Minimum Account Size
Certain strategies are subject to the following minimum account size, which may be waived
at NEAM’s discretion:
Sub-advised U.S. Opportunistic High Yield Strategy - $25 million
Sub-advised Upper Tier U.S. High Yield Strategy - $10 million
Structured Products Yield Enhancement Strategy - $50 million
Dividend Select Equity Strategy - $10 million
Item 8 - Methods of Analysis, Investment Strategies and Risk of Loss
Investment Process
NEAM’s fixed income investment process consists of four components:
1) Investment Policy - NEAM’s Policy Committee establishes investment policy for our
client mandates. The Committee meets formally once a month to ratify the firm’s
consensus conclusions on key fixed income strategy parameters such as portfolio duration
position, yield curve exposure, sector weighting and credit risk profile.
2) Client Strategy - The Client Strategy function, led by the Client Strategist assigned to
each specific client, applies the investment policy conclusions to the individual client
portfolio while also incorporating unique client considerations such as client
Form ADV Part 2A March 11, 2020 Page 9
goals/objectives, guidelines, benchmarks and operating needs. Coming out of the Client
Strategy function are high level portfolio directives that dictate portfolio action.
3) Execution - Asset Class Specialists aggregate the high level directives coming out of
the Client Strategy function and match those directives with individual securities. This is
done by applying our relative value and credit processes on an individual security basis,
selecting securities and conducting trade execution in the marketplace.
4) Controls – The overall investment process is managed through trading, compliance,
and risk workflows and controls.
Other Investment Strategies
Preferred Securities Strategy
NEAM’s Preferred Securities strategy seeks to generate high levels of after-tax investment
income and competitive, risk adjusted total returns through the use of preferred stocks.
Structured Products Yield Enhancement Strategy
NEAM’s Structured Products Yield Enhancement strategy, offered as a separately
managed account, is a specialized income-driven total return strategy aimed at higher
yielding fixed income opportunities within the structured securities sector. The NEAM
Structured Products Yield Enhancement strategy seeks to capture the premium associated
with non-benchmark ABS asset types and subordinate tranches in relation to their relative
value and market yield attractiveness. The Structured Products Yield Enhancement
strategy is suitable for Qualified Institutional Buyer (“QIB”) investors with a tolerance for
potential volatility and/or limited liquidity.
Equity Mandates
NEAM’s Focused Value Equity Management strategy (“FVEM”) and Dividend Select
equity strategy (“Dividend Select”) combine quantitative analysis and qualitative
judgments within a controlled risk framework. NEAM’s ETF strategies provide equity
exposure to specific sectors, markets and/or geographic regions.
Focused Value Equity Management Strategy
NEAM’s FVEM strategy applies a value-driven approach to seek to outperform a broad
market benchmark with less volatility over full market cycles
Dividend Select Equity Strategy
NEAM’s Dividend Select Equity Strategy seeks to enhance income through the purchase
of higher dividend yielding equity investments in stable, quality companies.
Passively-Managed Equity ETF Strategies
NEAM’s passively-managed Equity ETF Strategies seek to provide generic equity
exposure to specific sectors by investing in ETFs on a discretionary or non-discretionary
basis.
Form ADV Part 2A March 11, 2020 Page 10
Sub-Advisory Arrangement – NEAM has entered into a sub-advisory arrangement to
delegate portfolio management for high yield strategies to a sub-advisor to provide day-to-
day investment management services for the sub-advised mandates.
U.S. Opportunistic High Yield Strategy
The sub-adviser seeks to outperform the broader high yield market by employing a bottom-
up, fundamentally oriented investment process that primarily targets middle market issuers
in the lower tier (i.e., rated single B and below) of the non-investment grade credit markets.
Upper Tier U.S. High Yield Strategy
The sub-adviser seeks to outperform the BB/B rated segment of the U.S. high yield bond
market by employing a bottom-up, fundamentally-oriented investment process that focuses
heavily on downside protection.
Description of Risks
Investing in securities involves risk of loss that clients should be prepared to bear. No
investment process is free of risk; no strategy or risk management technique can guarantee
returns or eliminate risk in any market environment. There is no guarantee that our
investment strategies will be profitable. Past performance is not indicative of future
performance. The value of investments, as well any investment income, is not guaranteed
and can fluctuate based on market conditions. Diversification does not assure a profit or
protect against loss.
Our discretionary investment management strategies are subject to some or all of the risks
described below.
General Securities Risks
Securities Investment Risk: All securities investments involve the risk of loss of capital.
Market Risk: For securities, market risk is the risk that the markets on which an account's
investments trade will increase or decrease in value. Prices may fluctuate widely over short
or extended periods in response to company, market or economic news. Markets also tend
to move in cycles, with periods of rising and falling prices. If there is a general decline in
the securities, bond and other markets, an account may lose value, regardless of the
individual results of the securities and other instruments in which an account invests.
Sector Risk: The value of securities focused in a specific sector or sectors can be adversely
impacted by developments specific to that sector compared to accounts that do not have
concentrated holdings. Examples of developments that might cause adverse outcomes on
a sector’s valuations include legislative actions, regulatory changes, tax or accounting
changes and technical conditions specific to that market segment.
Currency /Country Risk: Investments in securities of non-U.S. companies involves special
risks and considerations not typically associated with investing in U.S. companies, and the
Form ADV Part 2A March 11, 2020 Page 11
values of non-U.S. securities may be more volatile than those of U.S. securities.
Investments in foreign currency-denominated securities are subject to the risk that those
currencies will decline in value relative to the U.S. dollar. Currency rates in foreign
countries may fluctuate significantly over short periods of time for a number of reasons.
This includes changes in interest rates, intervention (or the failure to intervene) by U.S. or
foreign governments, central banks or supranational entities such as the International
Monetary Fund, or by the imposition of currency controls or other political developments
in the United States or abroad. Additionally, investments in non-U.S. markets in general
may carry a high degree of risk, particularly those in “emerging” markets that may not have
the depth and liquidity of markets in the U.S. or Western Europe. The value of securities
of non-U.S. companies are subject to economic and political developments in countries
and regions, particularly where the securities are traded.
Fixed Income Risks
Investment in fixed income securities is integral to NEAM’s investment strategies. NEAM
focuses on credit risk, interest rate risk, pre-payment risk, liquidity risk, reinvestment risk
and structural risk when analyzing fixed income securities.
Credit Risk: The risk that an issuer of a security will fail to pay interest and or principal in
a timely manner, or that negative perceptions of the issuer’s ability to make such payments
will cause the price of the security to decline. Fixed income securities rated below
investment grade are especially susceptible to credit risk.
Interest Rate Risk: The value of fixed income securities is directly related to the level of
interest rates. Consequently, fluctuations in rates will cause market prices to fluctuate.
Declining interest rates generally increase the value of fixed income securities, and rising
interest rates generally decrease the value of fixed income securities. Securities with the
longest maturities (and/or “durations”) will exhibit the most price volatility. Changes in
value usually will not affect the amount of interest income but will affect the value of the
fixed income securities. Floating rate or variable rate instruments are less susceptible to
price volatility vs. fixed rate securities since their coupon (cash flows) will adjust up or
down periodically based on the general level of rates.
Pre-Payment Risk: This is the risk that a security's cash flows deviate from those originally
anticipated due to a change in interest rates or due to structural characteristics (optionality)
of the security.
Liquidity Risk: In some circumstances, the markets for fixed income securities can become
“illiquid.” In other words, the spread between the “bid” (level where a market participant
would buy) and the “ask” (level at which one would sell) becomes very wide. In these
instances, it may become difficult or even impossible to transact in the affected securities.
Certain fixed income securities may be substantially less liquid compared to other
securities.
Form ADV Part 2A March 11, 2020 Page 12
Reinvestment Risk: This is the risk that future cash flows from existing investments may
have to be reinvested at lower rates of return than the rates originally achieved. This risk is
amplified in the case of securities which have embedded optionality which may cause
prepayments to accelerate as rates decline.
Structured Securities Risk: For structured securities, this is the risk that adverse
developments in the collateral pool supporting the structured transaction jeopardize
payment of interest and principal for one or more classes of the structured transaction. This
may result in a loss due to a reduction in the value of the structured security. Early payoffs
in the loans underlying structured securities may result in receiving less income than
originally anticipated.
Non-Investment Grade Securities (“High-Yield”) Risk: Strategies investing in high yield
fixed income securities where instruments are below investment grade credit quality
(below BBB-) or unrated and in certain cases in default are considered speculative and may
involve greater risk than that of securities of investment-grade credit quality (BBB- and
higher). The lower rating of securities in the high yield sector reflect a greater scenario for
absorbing changes in the financial condition of a position and/or general economic
conditions which could hinder the payment of principal and interest. The prices of high-
yield securities are sensitive to changes of an issuer’s credit worthiness. Issuers of lower-
rated debt securities may have increased difficulty making their payment obligations and
securing additional financing.
Senior Secured Loan Risk: Strategies investing in bank debt are subject to certain risks in
addition to those present in high yield bond portfolios. Clients are bound by contractual
obligations established under the bank debt’s loan documentation and the transfer
agreements executed when purchasing and selling bank debt. Bank debt investments are
often subject to certain resale restrictions. Purchases and sales of bank debt can involve
extended and delayed settlement times, which can result in increased counterparty and
liquidity risk. Bank debt is not registered or regulated under federal securities laws.
Equity Securities Risks
Market Risk – Equity securities include common stocks, preferred stocks, convertible
securities and mutual funds that invest in these securities. Equity markets can be
volatile. Stock prices rise and fall based on changes in an individual company’s financial
condition and overall market conditions. Stock prices can decline significantly in response
to adverse market conditions, company-specific events, and other domestic and
international political and economic developments.
Exchange Traded Fund (“ETF”) Risk – ETFs are pooled investment vehicles that hold
portfolios of securities, commodities and/or currencies that commonly are designed, before
expenses, to closely track the price and yield performance of (i) a specific index, (ii) a
basket of securities, commodities or currencies, or (iii) a particular commodity or
currency. ETF shares are traded on exchanges and are traded and priced throughout the
Form ADV Part 2A March 11, 2020 Page 13
trading day. Because ETFs trade on an exchange, they may not trade at NAV. Sometimes,
the prices of ETFs may vary significantly from the NAVs of the ETFs’ underlying
securities. Additionally, if redeeming ETF shares rather than selling them on a secondary
market, the investor may receive the underlying securities which must be sold in order to
obtain cash.
Business Continuity/Operational and Cyber Security Risks
NEAM depends on telecommunication, information technology and other operational
systems, whether its own or those of others (e.g., custodians, financial intermediaries, and
others that we or our service providers use). These systems may fail to operate properly or
become disabled as a result of events wholly or partly beyond NEAM's or their control.
While NEAM uses risk management and security measures, its information technology
and other systems, and those of others, could be subject to physical or electronic break-ins,
unauthorized tampering or other security breaches, resulting in a failure to maintain the
security, availability, integrity and confidentiality of data assets. Technology failures or
cyber security breaches, whether deliberate or unintentional, including those arising from
use of third-party service providers or client usage of systems to access accounts, could
delay or disrupt NEAM's ability to do business and service its clients, harm its reputation,
result in a violation of applicable privacy and other laws, require additional compliance
costs, subject NEAM to regulatory inquiries or proceedings and other claims, lead to a loss
of clients and revenues or financial loss to its clients or otherwise adversely affect its
business. NEAM will seek to notify affected clients of any known cybersecurity incidents
posing a risk of harm to clients as required by law or regulation.
NEAM has developed a business continuity plan that provides for the availability of critical
personnel and systems in the event of a business interruption, including preparations in the
event of a pandemic outbreak. The plan is designed to address specific types of events that
could impact NEAM’s ability to continue active management of their clients’ portfolios
and to provide for services contracted for by their clients. NEAM’s policy is to consider
the events that it might reasonably face given its business and location and to have
procedures in place to allow NEAM to resume providing service to its clients as soon as
possible. The head of NEAM’s Investment Technology Group is responsible for the
recovery effort and various departments participate in both the updating and testing of the
plans.
Item 9 - Disciplinary Information
Neither NEAM nor its management personnel have any disciplinary information to report.
Item 10 - Other Financial Industry Activities and Affiliations
Neither NEAM nor any of its employees are registered, or have an application pending to
register, as a broker-dealer or a registered representative of a broker-dealer, as a futures
commission merchant, commodity pool operator, a commodity trading advisor, or an
associated person of the foregoing entities.
Form ADV Part 2A March 11, 2020 Page 14
NEAM has the following relationships or arrangements with related persons that we
consider to be material to our investment advisory services and /or clients:
Other Investment Adviser
NEAM Limited, located in Dublin, Ireland, is a wholly owned subsidiary of NEAM and is
regulated by the Central Bank of Ireland. NEAM Limited also operates a branch office in
London, UK. NEAM Limited is not registered with the SEC.
NEAM has entered into several services agreements with NEAM Limited. NEAM Limited
acts as a sub-adviser to NEAM for certain non-US dollar mandates on behalf of NEAM's
clients. NEAM also serves as a sub-adviser to NEAM Limited for certain US dollar
mandates on behalf of NEAM Limited clients.
If NEAM recommends or selects NEAM Limited to manage assets for NEAM clients on a
sub-advisory or non-sub-advisory basis, both NEAM and NEAM Limited will receive
advisory fees.
Due to the additional economic benefit to NEAM from recommending or selecting NEAM
Limited, a conflict of interest exists between the interests of our clients and the interests of
NEAM. NEAM addresses this conflict through disclosure to clients.
Item 11 - Code of Ethics, Participation or Interest in Client
Transactions and Personal Trading
NEAM has adopted a Code of Ethics (the "Code"), which sets forth standards of business
and personal conduct for all NEAM employees, officers and/or directors as well as
temporary workers, interns, and/or consultants who have access to NEAM’s network, have
access to client trading activities, and/or who provide investment advice on behalf of
NEAM. (“Supervised Persons”). The Code includes provisions relating to the
confidentiality of client information, a prohibition on insider trading, a prohibition on
rumor mongering, restrictions on the acceptance and giving of gifts, reporting requirements
for gifts and business entertainment, reporting of outside business activities and personal
securities trading and reporting procedures.
NEAM’s clients or prospective clients may request a copy of the firm's Code by contacting
its Chief Compliance Officer at 860-676-8722 or
[email protected].
NEAM’s Supervised Persons are required to follow NEAM’s Code and certify that they
read, understand and will comply with the terms of the Code on an annual basis, or sooner
if the Code is amended.
The Code incorporates general principles, such as placing the interest of clients first and
conducting personal securities transactions to avoid conflicts of interest, which all
Supervised Persons are expected to uphold and apply to all of their conduct.
Form ADV Part 2A March 11, 2020 Page 15
NEAM’s Code is designed to prevent personal securities transactions, activities and
interests of NEAM’s Supervised Persons from interfering with (i) making decisions in the
best interest of advisory clients and (ii) implementing such decisions, while at the same
time, allowing employees to invest for their own accounts.
NEAM’s procedures allow Supervised Persons to buy, sell or hold the same securities in
their personal accounts that NEAM buys, sells or holds in client accounts. Because this
presents a conflict of interest, NEAM Supervised Persons cannot buy or sell securities for
their own personal account until after transactions of securities in clients’ accounts are
completed. This is controlled by requiring pre-clearance for personal trades and
disallowing pre-clearance approval if the security is on the restricted list.
NEAM’s ultimate parent company, Berkshire Hathaway Inc (“BRK”), is a publicly traded
company. To manage the conflict of interest that arises, NEAM refrains from investing
client assets in BRK unless directed to do so by a client.
The Compliance Department monitors reported personal securities trading activities. This
includes a quarterly review of the reported trading activities of all Supervised Persons
compared to the pre-approval records.
NEAM’s Asset Class Specialists are primarily responsible for the transactions of securities
in client accounts and their actions are subject to NEAM’s policies and practices including
gifts and entertainment activities which are subject to review and approval by NEAM’s
senior management.
If in the course of providing its services, NEAM and its Supervised Persons come into
possession of material, non-public information, NEAM and its Supervised Persons are
prohibited from improperly disclosing or using such information for their personal benefit
or for the benefit of any other person, including NEAM's clients.
It is NEAM’s policy that NEAM will not effect any principal or agency cross securities
transactions for client accounts. Principal transactions are generally defined as transactions
where an adviser, acting as principal for its own account or the account of an affiliated
broker-dealer, buys from or sells any security to any advisory client. An agency cross
transaction is defined as a transaction where a person acts as an investment adviser in
relation to a transaction in which the investment adviser, or any person controlled by or
under common control with the investment adviser, acts as adviser to one side of the
transaction and broker for both the advisory client and for another person on the other side
of the transaction. Agency cross transactions arise where an adviser is dually registered as
a broker-dealer or has an affiliated broker-dealer; NEAM has no such affiliations.
NEAM does not engage in cross transactions, where NEAM causes one client to buy a
security from another client.
Form ADV Part 2A March 11, 2020 Page 16
Best Execution Policy
NEAM’s Policy Committee is responsible for implementing the Firm's best execution
policy and monitoring NEAM’s trading practices.
NEAM’s best execution policy includes the determination of “approved” broker-dealers
which the Asset Class Specialist can use when trading securities on behalf of clients (“the
Approved List”). The broker-dealers on the Approved List are reviewed and approved by
the Policy Committee at least annually.
When NEAM places orders for its clients, NEAM seeks to obtain the best execution
available. In selecting a broker-dealer for client transactions, the Asset Class Specialist
considers not only the available spreads, prices and commission rates, but also other factors
it deems relevant, such as: NEAM's knowledge of the nature of the security or instrument
being traded; cost (by comparing the yield or price of bonds of comparable quality, coupon,
maturity and type quoted by various broker, dealers or banks), the size and type of the
transaction; the desired timing of the transaction; the activity existing and expected in the
market for the particular security or instrument; and the execution, clearance, and
settlement capabilities of the broker, dealer or bank.
Transactions that involve specialized services on the part of the broker, dealer or bank
involved, often justify higher commissions or their equivalents than would be the case with
other transactions requiring more routine services. For certain secondary market
transactions where the execution capability of two broker-dealers is judged to be of
substantially similar quality, the NEAM Asset Class Specialist is authorized to transact
with either one.
NEAM utilizes a third-party vendor to provide quarterly execution comparisons of NEAM
trades versus benchmarks and/or comparable securities. Execution prices of each
transaction are reviewed relative to broadly available transaction price data. Transactions
with execution prices farthest from the vendor’s derived or observed valuation levels based
on dollar amount and market impact are identified. Members of the investment group
provide reasoning for these trades along with any available back-up documentation. The
CIO reviews the explanations, documents approval and the Policy Committee prepares a
Corporate Resolution evidencing review and approval.
NEAM does not participate in soft dollar arrangements.
If NEAM agrees, a client may instruct NEAM to direct brokerage for a client's account to
a particular broker, dealer or bank. When a client directs NEAM to use a particular broker,
dealer or bank, NEAM may not be in a position to freely negotiate commission rates or
spreads, or to select brokers, dealers or banks on the basis of best price and execution. In
addition, transactions for a client that directs brokerage would not be aggregated for
execution with transactions in the same securities for other clients. As a result, directed
brokerage transactions could result in higher commissions, greater spreads or less favorable
Form ADV Part 2A March 11, 2020 Page 17
net prices than would result if NEAM were authorized to choose the brokers, dealers and
banks through which to execute transactions from the client's account.
As a general matter, NEAM’s Asset Class Specialists strive to aggregate individual account
orders into larger orders in order to improve speed and efficiency of execution.
When aggregating orders, each client participating in the aggregated order receives the
same execution price. NEAM will allocate bonds purchased among eligible clients (which,
at times, could include clients affiliated with NEAM) on a basis which NEAM believes to
be fair and equitable. In instances where the orders are partially filled, NEAM uses a
random allocation process to allocate bonds across participating accounts. In the case of
equity transactions, orders are allocated on a pro rata basis, using each account’s order size
relative to that of the total order.
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