General Description of Firms
Longview Partners is a specialist asset management company, focused entirely on the management of
Global Equity portfolios.
Longview Partners (Guernsey) Ltd (Longview Guernsey) is an investment advisor. The company is a
Guernsey limited company with its principal place of business in St. Peter Port, Guernsey. The company
commenced operations on November 1, 2001 and has been registered as an investment advisor with
the SEC since December 2007. In addition, Longview Guernsey is licensed and regulated by the
Guernsey Financial Services Commission (“GFSC”).
Longview Partners LLP (Longview London) is an investment advisor. It is an English limited liability
partnership, with its principal place of business in London, England. Longview London commenced
operations in the UK as Longview Partners LP on November 1, 2001. With effect from 3 July 2012, the
business of Longview Partners LP was transferred to a new legal entity, Longview Partners LLP. The
UK entity, either as Longview Partners LP or Longview Partners LLP, has been registered with the SEC
since April 2006. In addition, Longview London is also authorized and regulated by the Financial
Conduct Authority (“FCA”) of the United Kingdom. The managing member of Longview London is
Longview Partners (UK) Limited (the “Managing Member”), which is wholly owned by Longview
Guernsey.
The primary role of Longview Guernsey is to provide account management, administration and reporting
functions in addition to overall risk and compliance oversight. The Board of Longview Guernsey
comprises six Directors, two executives and four non-executives. Since June 2014, Northill Longview
Holdings (Guernsey) Limited (formerly Northill Pallas Holdings (Guernsey) Limited), part of the Northill
Capital Group (“Northill”), has owned a majority shareholding in Longview. Ultimate ownership of Northill
rests with entities associated with Ernesto and Donata Guichard-Bertarelli of Switzerland. For further
background details on Longview’s Directors please refer to the Longview Partners’ website.
In its investment management agreement with each client, Longview Guernsey delegates its investment
management responsibilities to Longview London while retaining reporting and administrative functions,
as well as oversight of Longview London. Longview Guernsey remains jointly and severally liable for
any actions by Longview London. This Brochure may also refer to Longview Guernsey and Longview
London collectively as “Longview Partners”, “Longview” or the “Firm”.
Description of Advisory Services (including any specializations) Longview Partners provides investment management services, almost exclusively to Institutional Clients
and all on a discretionary basis. Investment management services are provided to corporate pension
plans, government owned funds, insurance companies, pension plans of UK local authorities, sub-
advisory accounts, US states, superannuation schemes, charities, foundations and endowments, as
well as pooled investment vehicles. Longview Partners offers its portfolio management services to
sophisticated and experienced investors through both separately managed accounts and a private
investment vehicle, being Longview Partners Investments Sicav (“the Fund”), which is not available to
US investors. Longview Partners is focused entirely on the management of a single Global Equity
strategy. This can be accessed via a separately managed account or the Fund, but Longview Partners
does not offer any pooled investment vehicles for subscription by US investors. The investment objective
of the Global Equity strategy is to consistently generate alpha through investing in a concentrated
portfolio of global companies within an absolute return framework. Longview Partners’ bottom-up
approach invests in high quality companies with strong business fundamentals and attractive cash-
based valuations. The process is disciplined, robust and rigorous, and bound by strict criteria. The
portfolio is concentrated, typically investing in 35 companies whilst maintaining a focus on diversification
and the avoidance of overexposure to common business drivers.
Longview Partners’ assessment of valuation is focused on cash-based metrics and the intrinsic value of
a business, not relative valuation. Longview Partners takes a long-term view of the prospects of a
company and is index agnostic.
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Availability of Tailored Services for Individual Clients Longview Partners is able to tailor its advisory services to suit particular client objectives, performance
benchmark requirements and investment restrictions. For example, clients with segregated mandates
may impose restrictions on investing in certain securities or certain types of securities, such as tobacco
or securities from a specified country. These restrictions should not be able to have a material effect on
the construction of the client’s portfolio relative to other client portfolios in the Global Equity strategy.
Client Assets under Management As of December 31, 2019, Longview Partners had approximately $31,888 million of client assets under
management, all managed on a discretionary basis.
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Advisory Fees and Compensation In return for investment management services performed, Longview Partners may charge either (a) a
management fee or (b) a combination of a management fee and a performance-based fee.
Under (a), the management fee rate is based on the tiered fee schedule as laid out below:
0.75% on the first $50 million of assets under management;
0.65% on the next $50 million;
0.60% on the next $150 million;
0.50% on the next $250 million; and
0.40% on the remainder of assets under management.
The management fee is generally payable quarterly on the average month end net asset value of the
account.
Under (b), the management fee rate is a fixed percentage per annum of the portfolio net asset value,
which is smaller than the percentage charge under (a). The management fee is generally payable
quarterly on the average month end net asset value of the account. In addition, an annual performance-
based fee percentage is applied to the amount by which the account outperforms an agreed benchmark
over a designated period.
There are opportunities to discuss the structure of these performance-based fee arrangements.
However, the standard management fee schedule under (a) is non-negotiable.
Payment of Fees With regard to all US and most non-US clients with separately managed accounts, Longview Partners
does not deduct any fee, whether management fees or other expenses, from client accounts. Instead,
Longview Partners bills each client directly.
For some non-US separately managed accounts, Longview Partners deducts the management fees
from client accounts by instructing the client’s custodian, as directed by the client.
Other Fees and Expenses In addition to paying management fees and, if applicable, performance-based fees, client accounts will
also be subject to other investment expenses such as broker commissions relating to the execution of
trades; interest expenses; taxes, duties and other governmental charges; transfer and registration fees
or similar expenses; costs associated with foreign exchange transactions; other portfolio expenses; and
costs, expenses and fees associated with services that may be necessary or incidental to such
investments or accounts. Please refer to Item 12 of this Brochure for a discussion of Longview Partners’
brokerage practices.
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Longview Partners and its investment personnel provide investment management services to multiple
portfolios for multiple clients. As discussed above in Item 5, Longview Partners is paid performance-
based compensation by some of its clients. Longview Partners has adopted and implemented policies
and procedures intended to address possible conflicts of interest relating to the management of multiple
accounts.
Longview Partners reviews investment decisions for the purpose of ensuring that all accounts with
substantially similar investment objectives are treated equitably. No consideration will be given to the
client’s underlying fee arrangements. The performance of similarly managed accounts is also regularly
compared to determine whether there are any significant unexplained discrepancies. In addition,
Longview Partners’ procedures relating to the allocation of investment opportunities require that similarly
managed accounts participate in investment opportunities pro rata based on asset size and require that,
to the extent orders are aggregated, the client orders are price-averaged. These areas are monitored
by Longview London’s Compliance team.
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Clients of Longview Partners consist almost exclusively of Institutions; corporate pension plans,
government owned funds, insurance companies, pension plans of UK local authorities, sub-advisory
accounts, US states, superannuation schemes, charities, foundations and endowments, as well as
pooled investment vehicles.
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Methods of Analysis and Investment Strategies Longview Partners is a specialist asset management company focused entirely on the management of
Global Equity portfolios. Longview Partners utilizes a variety of methods, primarily fundamental
research, to make investment decisions on behalf of our clients. The primary focus of Longview’s
investment process is to understand the quality of the business and the value of the cash flows that it
can generate. Longview uses its own in-house models to conduct this analysis. A stock must pass all
three of the Longview investment criteria, being Quality, Fundamentals and Valuation, to be considered
for investment.
Longview’s definition of Quality is the focal point of Longview’s investment process and a key
distinguishing feature. Critical factors which are evaluated are; the framework within which management
allocates capital and its appropriateness for the business, the structure of the industry within which the
company operates, and the recurring nature of the revenues and their sustainability. The Fundamentals
criteria evaluates the company’s ability to hit or beat earnings targets, improving orders, increasing
market share, improving return on invested capital, improving free cash-flow and improving credit profile.
Valuation is driven by discounted cash flow analysis which is used to calculate a fair market value for
the business. Within the analysis, there are constraints imposed by the process which ensures
consistency of inputs.
The consideration of risk is incorporated into our investment process as described below.
Equity investments are exposed to both market (systematic) and stock specific (non-systematic) risk
and performance may go down as well as up. Such risks are expanded further in the section below
entitled “Material Risks (Including Significant, or Unusual Risks) relating to Investment Strategies”.
At Longview Partners, our risk philosophy is to incorporate risk management principles within the whole
investment process, rather than just as an adjunct. The process is extremely disciplined and well
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structured. The discipline is enforced through regular research meetings and tight implementation
procedures. All portfolios are reviewed daily, and all positions and watch list positions are constantly
monitored throughout each day. Longview Partners’ sell discipline is very strict and independent from
buy decisions. A stock is sold immediately if it reaches its price target, or if a stock ceases to meet our
stock selection criteria of Quality, Fundamentals or Valuation.
Longview Partners sees that one of the greatest tools for the management and control of absolute risk
is adequate diversification. Diversification is ensured by recognizing and identifying any concentration
in “risk clusters”. Risk clusters are the portfolio’s aggregated exposure to real business risks, such risks
often cutting across industries, geographies or certain investment themes. These risk clusters are
grouped under various categories such as macroeconomic factors, end-market exposure, business
drivers, company leverage and geopolitical developments. This analysis is produced and updated by
the Research team on a quarterly basis, as these groups and their sub-categories may change over
time to reflect changing global macroeconomic conditions. Additionally, Longview Partners strives to
invest in predictable companies and to avoid investing in companies that are sensitive to external forces
beyond their control, such as macroeconomic events, since these factors are viewed as risks rather
than opportunities.
Longview also uses the Style Research product. Style Research allows for the monitoring of inadvertent
style biases in the portfolio as well as volatility, beta and tracking error. Longview uses internal systems
to monitor and identify any commonality in risk drivers and style biases between different securities from
a quantitative basis. This supplements the fundamental approach taken by the Research team.
Material Risks (including Significant, or Unusual Risks) relating to Investment Strategy Below is a brief discussion of the risks that are most relevant to the investment strategy of Longview
Partners:
• Issuer-Specific Changes. Changes in the financial condition of an issuer or counterparty,
changes in specific economic or political conditions that affect a particular type of issuer and
changes in general economic or political conditions can affect a security's or instrument's value.
The value of securities of smaller, less well-known issuers can be more volatile than that of
larger issuers. Smaller issuers can have more limited product lines, markets, or financial
resources.
• Non-U.S. Securities. Foreign securities, foreign currencies and securities issued by U.S.
entities with substantial foreign operations can involve additional risks relating to political,
economic or regulatory conditions in foreign countries. These risks include fluctuations in foreign
currencies; withholding or other taxes; trading, settlement, custodial and other operational risks;
and the less stringent investor protection and disclosure standards of some foreign markets. All
of these factors can make foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments. In addition, foreign markets can
perform differently from the U.S. market.
• Equity Securities. The value of equity securities fluctuates in response to issuer, political,
market, and economic developments. Fluctuations can be dramatic over the short as well as
long term, and different parts of the market and different types of equity securities can react
differently to these developments. Issuer, political, or economic developments can affect a
single issuer, issuers within an industry or economic sector or geographic region, or the market
as a whole. Changes in the financial condition of a single issuer can impact the market as a
whole. Geo-political risks have led, and may in the future lead, to increased short-term market
volatility and may have adverse long-term effects on world economies and markets generally.
Investing in securities involves the risk of loss that clients should be prepared to bear.
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There are no legal or disciplinary events that are material to a client’s or prospective client’s evaluation
of Longview’s advisory business or the integrity of its management.
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As noted above, Longview is majority owned by Northill and Northill is represented on the Board of
Directors of Longview Partners (Guernsey) Limited, the group’s holding company. Longview has no
other arrangements with Northill or its affiliates that are material to Longview’s business or its advisory
clients.
The Fund is a client of Longview’s but Longview as a firm has no ownership interest in the Fund.
Longview is represented through two of five Directors on the Board of the Fund and so does not control
the Board of the Fund. Longview Partners’ policy is to treat the Fund fairly and accord it the same
treatment received by any separate account client using the same strategy.
Subject to internal compliance policies and approval procedures, members, officers and employees of
Longview may engage, from time to time, in personal trading of securities and other instruments,
including securities and instruments in which our clients may invest. Further information regarding
Longview Partners’ Personal Account Dealing Policy (which is included within the Code of Ethics) is
provided below in Item 11.
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Trading Code of Ethics Longview Guernsey and Longview London have both adopted a Code of Ethics (the “Code”) which,
along with each entity’s compliance manual, collectively outlines supervisory procedures, codes of
practice and guidelines expressing the firm’s commitment to ethical conduct. The Code describes the
firm's fiduciary duties and responsibilities to clients, and sets forth each firm’s practice of supervising
the personal securities transactions of supervised persons with access to client information. See below
for further provisions of the Code as they relate to the personal account dealing.
Members and employees of Longview Partners may from time to time have an ownership interest in the
Fund or a related entity. Each new member or employee is provided with an electronic version of the
Code and the relevant compliance manual, which are regularly updated. The Code, along with the
compliance manual, outlines a list of guidelines, principles, policies and procedures which all members
and employees must follow. It is the expressed policy of Longview Partners that no member or employee
shall place his or her own interests ahead of those of an advisory client or make personal investment
decisions based on the investment decisions made for advisory clients.
Longview Partners claims compliance with the CFA Institute Asset Manager Code of Professional
Conduct. This claim has not been verified by CFA Institute.
Clients or prospective clients may upon request obtain a copy of the Code by contacting Client Services
by email at clientservices@longview-partners.com or by telephone at +44 1481 712 414 or +44 207 809
4100.
Client Transactions in Securities where Longview Partners has a Material Financial Interest Directors, members and employees, together with their related parties, hold interests in the Fund.
Longview Partners recognizes that a potential conflict of interest may exist because Longview Partners
has an incentive to buy or sell securities on behalf of clients based on its own financial interests and
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those of the client, rather than solely the interests of a client. As stated within Item 10, Longview Partners’
policy is to treat the Fund fairly and accord it the same treatment received by any separate account
client using the same strategy.
With respect to Personal Account dealing, Longview Partners has a procedure in place to protect the
interests of its clients. The prior consent of either the Guernsey or London Compliance team (as
applicable) is required for all personal account transactions involving reportable securities. Once the
relevant Compliance team is satisfied that no conflict/potential conflict of interest exists, permission is
granted and the member or employee is free to trade within 24 hours of approval. In addition, initial,
quarterly and annual reports of relevant securities owned and/or transactions undertaken are submitted
to and reviewed by the relevant Compliance team. This procedure is applicable to all members and
employees, regardless of position, including Directors, and all members and employees sign to accept
the terms upon commencement of contractual arrangements with Longview Partners.
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Factors Considered in Selecting or Recommending Broker-Dealers for Client Transactions Longview Partners is granted and accepts discretionary authority to determine the brokers used and the
commissions paid. Initial broker selection criteria include a broker’s execution capabilities. This
comprises an analysis of their quality of execution, ability to source quality liquidity, anonymity,
differentiation, innovation and the breadth of the markets covered by them.
In addition to execution capabilities, Longview evaluates the broker’s key personnel, looking at the
feedback they provide pre-trade, during the trading process itself and also once after the trade has been
executed. Longview will also consider the reliability, integrity and financial stability of the broker.
On an ongoing basis, Longview’s goal when executing orders is to minimise market impact whilst also
minimising the time it takes to complete the order. To ensure that Longview takes all sufficient steps to
obtain the best possible result for its clients, it has considered and seeks to balance the relative
importance of the following execution factors:
Price: Achievement of the best possible price for the order.
Implicit costs (market impact): The impact the order has on the price of the security during trading. There
are sub-factors that must be considered when trying to minimise this impact:
• Information leakage – external knowledge of this order that could affect the price; and
• Footprint – leaving a ‘trail’ in the market that could affect the price.
Speed: The length of time to execute the order and the determination of the appropriate level of
participation.
Likelihood of execution: The potential opportunity cost of using one broker versus another.
Size of order: The size of the order as a percentage of the average daily volume traded of that security.
Explicit costs: The execution commission costs agreed with the broker.
Likelihood of settlement: Assessment of the broker’s operational capability and credit risk in order to
maximise the likelihood of the order settling on time.
Order Aggregation Longview Partners is required to have a trade allocation policy to ensure the fair aggregation and
allocation of transactions between clients. Longview may place trades on behalf of its clients but is not
authorized to deal on its own account. The Dealing and Trade Allocation Policy is designed to ensure
that when Longview aggregates a client order with another client’s order and subsequently allocates the
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executions, this is carried out consistently and in accordance with regulatory requirements, providing
prompt, fair and expeditious execution of client orders.
Longview allocates executions within one business day of the transaction. All allocations are intended
to be fairly distributed amongst clients and in adherence with relevant investment objectives. Longview
may revise an allocation of an aggregated order if an error is discovered. A reason for the re-allocation
must be recorded. Where the executed amount is less than the intended Combined Order, it is allocated
on a pro-rata basis. The allocation is pro-rated by reference to the gross assets of each portfolio.
Exceptions may occur if the execution is sufficiently small whereby it is uneconomical, in terms of
transaction and custody costs, to allocate pro-rata. Minimum lot sizes are set whereby certain portfolios
do not participate if their allocation does not meet the minimum. Alternatively, portfolios may be grouped
into blocks and a rolling allocation process used whereby each group in turn receives priority. IPO
allocations follow the same process. Compliance monitors these allocations on a daily basis to ensure
that no client is advantaged or disadvantaged. Longview allocates a Combined Order at the price
received by the executing broker.
If it appears that a trade error has occurred, Longview Partners promptly reviews the relevant facts and
circumstances to determine an appropriate course of action. To the extent that trade errors and
breaches of investment guidelines and restrictions occur, Longview Partners’ Breaches and Errors
Policy ensures appropriate escalation and that clients are treated fairly.
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Frequency and Nature of Review Investment review
Portfolio positions are reviewed on an ongoing basis by the Research team, led by the CIO. The team
meets regularly to discuss individual securities, in the context of our disciplined investment process.
This iterative, bottom-up security analysis drives buy and sell decisions and, ultimately, portfolio
construction.
Portfolio Risk review
Longview Partners has a dedicated Risk and Portfolio Analysis team which provides daily oversight and
support. The CIO is ultimately responsible for investment risk management. The Head of Risk and
Portfolio Analysis and our team of Risk and Portfolio Analysts work alongside the CIO to oversee daily
investment activities in areas such as the portfolio performance of each client account, asset allocation,
exposure, volatility and liquidity. As such, securities positions for all accounts are subject to review on a
daily basis.
Operations review
Longview Partners’ experienced Operations department, managed by the Head of Operations, carries
out daily full cash and security holdings reconciliations of all client accounts with the applicable custodian
bank.
Compliance review
Longview London has an established and experienced Compliance department, led by the Head of
Compliance/Chief Financial Officer, which regularly assesses and monitors all areas of business activity
to ensure compliance with internal procedures and external regulatory requirements.
The Compliance team carries out a full compliance monitoring program to implement a set of written
supervisory procedures and to test regulatory requirements on a monthly, quarterly, semi-annual or
annual basis as applicable. Additionally, Compliance undertakes daily reviews of transactions and
investigates any that appear to conflict with client restrictions. Also, using a compliance management
and portfolio monitoring system, Compliance checks each client portfolio, checking holdings against
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rules to ensure that we remain within client guidelines and to highlight any potential or actual breaches.
Full monthly monitoring reviews are completed and client-specific reports are generated as detailed in
each client’s investment management agreement.
Longview Guernsey has responsibility for client due diligence, including anti-money laundering and
countering the financing of terrorism. In addition, it provides oversight in all areas of compliance and
reports to its own regulator, the Guernsey Financial Services Commission.
Content and Frequency of Regular Account Reports Longview Partners provides clients and Fund investors with a monthly report within 10 working days of
the end of each month. Such a report includes the following items:
• Portfolio performance
• Portfolio contributors and detractors
• Performance attribution (by sector)
• Regional allocation
• Top 10 holdings
• Sector and geographic allocation against the index
• Breakdown of exposure by currency*
• Portfolio valuation
• Security transactions
• Income report
• Currency transactions*
• Contributions and withdrawals
Longview Partners also provides clients and Fund investors with a quarterly video, along with a report
within 15 working days of each quarter end, containing the following, in addition to the information
included in the monthly report:
• Market review and outlook
• Quarterly buys and sells
• ESG engagement
• Longview updates (changes to our people or processes)
• Commission Summary*
Longview also provides proxy voting reports on a quarterly basis to all clients invested in a separately
managed account on whose behalf we vote.
In addition, Longview Partners provides the client with any other periodic reports on their portfolio which
the client may reasonably require and/or request, either in accordance with the separate investment
management agreements or on an ad hoc basis.
All such reports may be delivered electronically or otherwise by hard copy to the client or Fund investor
in accordance with any agreements made with Longview Partners.
* not provided to Fund investors.
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Longview Partners provides investment management services on a discretionary basis to clients. Please
see Item 4 above for a description of any limitations clients may place on Longview Partners’
discretionary authority.
Prior to assuming discretion in managing a client’s assets, Longview Partners enters into an investment
management agreement or other agreement that sets forth the scope of Longview Partners’ discretion.
Unless otherwise instructed or directed by a discretionary client, Longview Partners has the authority to
determine (i) the securities to be purchased and sold for the client account (subject to restrictions on its
activities set forth in the applicable investment management agreement and any written investment
guidelines) and (ii) the amount of securities to be purchased or sold for the client account.
As investment adviser to the Separately Managed Accounts and to the Fund, Longview Partners is
granted the discretionary authority in the relevant investment management agreements and/or
organizational documents to determine which securities and the amount of securities that are bought or
sold, as well as the broker or dealer to be used.
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To the extent Longview Partners has been delegated proxy voting authority on behalf of its clients,
Longview Partners complies with its proxy voting policies and procedures that are designed to ensure
that in cases where Longview Partners votes proxies with respect to client securities, such proxies are
voted in the best interests of its clients. Longview Partners’ policy on the exercise of voting rights on
behalf of its clients is outlined in its Shareholder Activism Policy. Longview carries out proxy voting for
all institutional clients who request that Longview Partners take responsibility for the implementation of
their voting rights. In order to effectively meet these requirements, Longview engages Glass Lewis &
Co. (“Glass Lewis”). We believe Glass Lewis’s expert and independent analysis complements
Longview’s stock selection process.
All voting decisions are made on a case-by-case basis by Glass Lewis’s specialist research analysts, in
line with their detailed regional policies, which are approved by Longview on an annual basis. However,
Longview would advocate the exercising of votes, contrary to Glass Lewis’ recommendation, where
necessary.
The decision to vote contrary to Glass Lewis’s recommendation is made collectively by the Research
team and the CIO and will often follow engagement between our Research team and the company.
Longview Partners seeks to always act in the best interests of our clients and where possible avoid
conflicts, including those which may arise through voting or engagement. Occasions may arise where a
conflict or perceived conflict of interest exists. In such instances, all reasonable steps are taken to ensure
that we put the interests of our clients first, as outlined in our Conflicts of Interest Policy.
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If Longview manages assets for a company pension plan or related entity, Longview will respect client
restrictions but beyond that will vote proxies in that company in the best interest of our clients and
consistent with our voting policy and Glass Lewis’ recommendations.
If Longview Partners does not have authority to vote client securities, clients receive their proxies or
other solicitations directly from their custodian.
Longview maintains a policy of not participating in class actions, unless specifically instructed to do so
by a client. However, we do reserve the right to participate in specific cases.
Clients may obtain a copy of Longview Partners’ Shareholder Activism Policy and obtain information
about how Longview Partners voted a client’s proxies by contacting Client Services by email at
clientservices@longview-partners.com or by telephone at +44 1481 712 414 or +44 207 809 4100.
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Longview is not aware of any financial condition that is reasonably likely to impair its ability to meet
contractual commitments to clients. Longview has not been the subject of a bankruptcy petition at any
time during the past ten years.
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