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Victory Capital’s Corporate Responsibility Statement

Victory Capital is committed to the well-being of all stakeholders. With an emphasis on the sustainability of our business and how our investment products impact the world in which we all live, we endeavor to ensure that we consistently meet the needs of current and future, clients, employees, shareholders, communities, and the environment. We thoughtfully allocate resources to further our corporate social responsibility mission in many ways. In the pages that follow, we proudly share specific actions that demonstrate this approach from both our enterprise and responsible investing perspectives.

 

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Our Approach and Objectives

Victory Capital is committed to sustainable growth while striving to deliver desired investment performance and outcomes for our clients by focusing on our Company’s material ESG factors. According to the Sustainability Accounting Standards Board (SASB) Materiality Map®, the key ESG factors for asset management firms include:

  • Social Capital issues comprising customer privacy, data security, and selling practices;
  • Human Capital initiatives encompassing employee engagement, diversity and inclusion;
  • Business Model and Innovation matters such as product design and lifecycle management; and,
  • Leadership and Governance subjects including business ethics and systematic risk management.

Here we address each of the ESG factors identified as being material to asset management companies and explain how we enhance our own long-term success in each of these areas.

Social Capital

As a socially responsible Company, we care deeply about all our constituents including our clients, employees, industry partners, shareholders, and our communities. One example is the Victory Capital Financial Readiness Program. In conjunction with our management of the USAA Mutual Funds, ETFs and 529 College Saving Plan, this program centers on programming to educate service members on financial management and investing for their futures. According to Blue Star Families Annual Military Family Lifestyle Survey (2018), financial issues and funding a dependent child’s education are two of the top concerns of military families. To do our part, we have committed a $1 million initial investment for the program’s inaugural year and a portion of revenue from these USAA Mutual Funds in subsequent years to advance this important cause.

We also are proud to have a paid-time-off policy allowing employees to volunteer their time for causes uniquely important to them. This is in addition to our Victory Matching Gifts Program that encourages employees to contribute to qualifying charitable organizations. This program supports employee giving by offering a way to double – up to $250 (US) per person each calendar year – employees’ cash contributions to their favorite charitable organizations and thus improve our communities. We also sponsor service initiatives in many of the communities in which our employees work and live.

Victory Capital is partnering with The Children’s Hospital of San Antonio to serve children with serious medical conditions and their families. We are providing support in two specific ways:

  • Providing emotional care for children with serious medical conditions by creating a joyous and memorable experience at the San Antonio Spurs home games.
  • Providing “care packages” to families with infants in the Hospital’s Neonatal Intensive Care Unit (“NICU”)

We also partner with Breakthrough Schools of Cleveland, a nationally recognized network of free, public charter schools in Ohio. The mission of Breakthrough Schools is to help students achieve success in school, their careers, and ultimately in life.  Our support includes a financial commitment and service opportunities for our employees.

 

Customer Privacy

We abide by formal policies with respect to cybersecurity and the protection of customer and employee data. We continuously assess and test our cybersecurity program and environment which enhances resiliency and reduces risk of evolving cybersecurity threats. Our Corporate Information Protection and Technology Use Policy prohibits storing or sending private client data on personal devices or email. Please click here for more information on our privacy policy.

We do not sell customer information to third parties. We do not joint market, or share information about creditworthiness or insurability, or share any customer information with non-Victory companies for marketing purposes.

In order to provide services to our customers, we retain vendors who, depending on the services provided, may require access to certain customer information. We have a formal vendor oversight policy in place that is designed to ensure customer data is adequately protected by our vendors.

If we receive a request to disclose customer information, we will only disclose such information if the request is: required under applicable law, made by court order or subpoena, made by written administrative request (and is reviewed and cleared by appropriate Victory Capital personnel), or made by state or federal regulatory authorities under their powers of examination or supervision.

 

Date Security and Business Continuity Planning

We take security very seriously and are committed to protecting our information systems and data. We maintain a comprehensive Information Security Program consisting of a wide array of controls and procedures to reduce cyber risk. We protect information and systems from threats, whether internal or external, deliberate or accidental, through reasonable administrative, technical, and physical security controls. We are dedicated to the following principles to protecting information:

  • Protecting the confidentiality of data
  • Preserving the integrity of data
  • Promoting the availability of data for authorized use

We maintain plans to minimize impact of significant incidents through coordinated continuity planning and resource management. These plans provide guidelines for ensuring that the needed personnel and resources are available to respond to an incident and that the proper steps be carried out for the timely restoration of services to an acceptable level. Here are the main points of these plans:

  • Victory Capital’s data centers are geographically diverse and independent to its office locations.
  • Any impact to a single office would be contained to that specific office.
  • All other Victory Capital office locations would continue to support the critical business operations while the situation is addressed.
  • Victory Capital has contracted with workplace recovery provider, Regus, for on-demand dedicated office space in Cleveland, San Antonio, and San Francisco. Should an event occur to any of Victory’s branch offices, all vital personnel may be immediately set up with office space at a nearby Regus facility in any of these three geographic regions. Regus provides wired and wireless internet access, printers, scanners, and access to meeting rooms and video conferencing to support business continuity.
  • All vital personnel have Company issued laptops with virtual private network (VPN) capability from anywhere with an internet connection, including Regus offices.
  • For personnel without a laptop, Victory Capital maintains a scalable pool of virtual machines which may be securely accessed from any computer. Business critical applications are pre-loaded onto these virtual machines.
  • Victory Capital performs annual business continuity plan testing with Regus. The last test in, September 2019, consisted of key personnel meeting at a nearby Regus facility, connecting via VPN, and following a detailed test script of critical applications and business functions to confirm the ability to work remotely.

We also contract with third parties to test our Information Security Program by conducting penetration testing and security assessments to further ensure we can adequately withstand these evolving and increasingly sophisticated threats. In our history, there have been no known cybersecurity breaches or incidents from which we needed to invoke our Disaster Recovery or Business Continuity Plans.

 

Selling Practices

Investment adviser advertising is regulated primarily under Rule 206(4)-1, adopted under Section 206(4) of the Investment Advisers Act (IAA). Fund material is covered under Financial Industry Regulatory Authority (FINRA) rules 2210-2214, and 3010, among other rules. Our internal policies articulate guidelines and review processes to ensure all advertisements are clear, fair and balanced with appropriate disclosures and otherwise compliant with all applicable laws. In addition to the regulations covered by the IAA, FINRA, and Victory Capital policy, all materials are reviewed and approved in advance of public dissemination.

  • The Securities and Exchange Commission defines the term “advertisement” as any notice, circular, letter or other written communication addressed to more than one person, or any other published or broadcast notice, which offers analyses or reports concerning securities, any graph, chart, formula or other device to be used in determining when a security should be bought or sold, or which security to buy or sell, or which offers any other investment advisory service related to securities.
  • The product distribution teams at Victory Capital are staffed with individuals who, in addition to being licensed through FINRA, undergo extensive background checks to ensure the Company maintains an educated, competent and ethical sales force.
  • We have policies in place regarding the Investing and Retention of Qualifying Employer Securities, and Transactions Involving Parties in Interest, to ensure we invest on behalf of ERISA clients in a compliant manner.

Human Capital Development and Succession Planning

As an asset management firm, we are in the human capital business. As such, we value and appreciate our most important asset—our people. We employ “owners”, not employees. We want them to own their contribution to Victory Capital’s success. In recognition of this mission, Victory Capital has established an equity awards program that has been recognized by MSCI as industry leading.

We all take pride in the deep expertise that we bring to the table. Every “owner” is held accountable for their individual actions as we work hard to generate positive outcomes for both our clients and shareholders. This culture is consistently supported and deliberately reinforced to drive sustainable financial performance and enhance value for our clients and shareholders.

We strive to provide a healthy work environment for our employees. Victory Capital sponsors an annual health fair that includes access to wellness vendors, free flu shots, and biometric screenings. We also have an employee rewards program that incentivizes employees to stay up-to-date with appropriate health screenings and complete health education courses. Victory Capital offers a wellness reimbursement program for external fitness memberships and other health programs and amenities at no cost to employees such as treadmill workstations at certain office locations and a new fitness facility in our San Antonio headquarters.

 

Employee Engagement, Diversity and Inclusion

Victory Capital recognizes and appreciates the importance of creating an environment in which all employees feel valued, included, and empowered to do their best work. We recognize that each employee’s unique experiences, perspectives, and viewpoints add value to our ability to create and deliver the best possible investment products to our clients. Given that our individual social, economic, and cultural identities shape and influence our experiences and perspectives, we enhance our collective success by ensuring diversity in our workforce across the various dimensions of social, cultural, and cognitive identity and by practicing inclusivity in how we work with one another. We have a formal Diversity and Inclusion committee charged with integrating a diversity strategy that drives best practices, goals and objectives, and monitors progress on results. The Committee’s mission is to foster an environment that attracts the best talent, values diversity of life experiences and perspectives, and encourages innovation and excellence.

Furthermore, we recently joined the growing CEO Action for Diversity & Inclusionᵀᴹ coalition pledging to advance diversity and inclusion in the workplace. Our Chairman and CEO, David Brown, has committed himself and Victory Capital Management to advancing diversity and inclusion in our workplace. By signing on to this commitment, we have pledged to take action to cultivate a workplace where diverse perspectives and experiences are welcomed and respected and where employees feel encouraged to discuss diversity and inclusion.

Where appropriate and beneficial to our clients, we strive to engage business partners and vendors owned by historically marginalized groups. For example, three Minority- and Women-Owned Business Enterprises (M/WBE) have been approved as trading counterparties to execute client transactions. Each of these firms are allocated trades for execution, subject to our fiduciary obligation to obtain best execution.

We also have formal Health and Safety, Anti-Discrimination, Diversity, and Human Rights policies in place at every level of our Company.

All employees complete mandatory sexual harassment and compliance training and are encouraged to voice concerns and obligated to report any policy violations, without fear of retaliation.

Hiring, compensation, and promotion practices are not influenced by gender, race, ethnicity, or religious affiliation, rather by role and achievement.

 

Benefits, Training & Development

We offer an array of benefits to attract, retain and assist our employees. These benefits include health and wellness benefits, as well as other programs to help our employees’ health and financial wellbeing. All new employees are welcomed into Victory Capital through onboarding, a process in which we integrate new employees into the Company. Access to training and development are provided which allows our employees to further develop their talents.

We provide all full-time exempt employees with unlimited paid vacation and optional flexible spending account (FSA) benefits to cover medical expenses not covered by insurance, in addition to commuting and childcare expenses. We also fund a portion of each employee’s Healthcare Savings Accounts (HSAs) and provide numerous perquisites such as paid paternity and maternity benefits, in addition to accommodating lactation with Mother’s rooms.

Victory Capital is committed to supporting our military service member employees through our Paid Military Leave Policy. Under this policy, employees who serve in the National Guard or the Reserve of the Armed Forces are eligible for paid time off in the event they are put on active or temporary military duty. Victory Capital also supports employees who choose to enlist in the U.S. Armed Forces after they begin employment with Victory Capital. Such employees are eligible for paid leave of up to 12 months while they complete basic training and other follow-up skills before becoming a full-time active duty military member. Employees who return from Paid Military Leave are eligible to be reinstated to the position they would have attained if his or her continuous employment had not been interrupted. This means that reasonable effort is made to train or retrain returning employees to refresh or upgrade their skills. Seniority and other benefits also accrue to the level they would have attained if his or her continuous employment had not been interrupted (the “escalator principle”).

Certain job related relevant educational expenses are reimbursed upon approval, and we provide employees with identity theft protection at no cost.

Business Model and Innovation

Product design and lifecycle management

As the asset management business matures, the industry is rapidly undergoing dramatic transformations. We knowingly developed a unique business model that specifically addresses ongoing trends in the capital markets and investment industry. Our distinctive business model addresses the epic shift of assets from active to passive management and embraces these changes with our growing exchange traded funds (ETFs) and solutions offerings. Moreover, the compression of average industry fee rates for active management plays perfectly into our integrated multi-franchise platform, which has produced industry-leading profit margins despite a currently lower-fee-rate environment.

Our platform is also structured to make accretive acquisitions and add value for asset managers seeking the innovation, technology and distribution afforded by ever increasing economies of scale. With approximately two-thirds of our cost structure made up of variable expenses, this model allows us to scale and flex quickly in response to changing business and market conditions. In short, our Company has been built to benefit from current industry trends and rapidly adapt to future developments.

Leadership and Governance

Please  click here  for more information on our leadership team and  click here  for more information on our Board of Directors, Board Committee Charters, and additional Corporate Governance information.

The Victory Capital ethics hotline is available 24 hours a day, seven days a week. Employees may report an anonymous complaint by calling 1-800-584-9055. Victory Capital also has a Victory Funds ethics hotline and a USAA Mutual Funds ethic hotline.

Victory Funds ethics hotline: 1-866-855-3863 USAA Mutual Funds ethics hotline: 1-877-711-3336

 

Business ethics

Trust and integrity are core to our DNA. Trust is a sacred attribute that forms the foundation of our culture. We understand that great relationships are built on trust. Every day we earn trust through reliability, discipline, transparency and strength. Our culture is one of mutual respect, our business partners, and our clients. Therefore, identifying and mitigating conflicts of interest as at the heart of what we do. We limit gifts to a value of $100 per year and all travel and entertainment expenses must be reasonable and customary to avoid even the appearance of any conflicts. All employees must pre-clear their political contributions, and we monitor the outside business activities of our employees to ensure they don’t present conflicts to our clients.

Additionally, we monitor the personal trading activities of our employees closely and all employees are subject to our investment adviser Code of Ethics. In most cases, employees must obtain pre-clearance prior to engaging in any personal securities transactions and the Code establishes controls and restrictions to ensure personal transactions are conducted in a manner to avoid any actual, potential, or the appearance of a conflict of interest.

It is our policy to maintain the highest ethical standards and comply with all applicable laws, rules, and regulations that affect our business. Because we conduct business internationally, we also abide by the applicable national and local laws of all countries in which we operate, including the Foreign Corrupt Practices Act and Anti Money Laundering to prevent financial crime.

All employees are prohibited from shorting any stock, including their beneficial ownership in our common stock or any associated options.

We believe that adherence to our Code helps to ensure our continued success, as well as earn and maintain the confidence of our clients, shareholders, and the communities in which we live.

 

Systematic risk management

Victory Capital’s risk governance structure includes a committee led by a diverse set of business managers that assist the firm in identifying and evaluating risks associated with the firm’s profile. We stress and note that risk management is the responsibility of every employee and is a core responsibility for each senior executive. Senior management plays an active and visible role in all risk management functions. We employ a risk management evaluation methodology and have established a framework that defines major risk categories and the responsible parties for managing those risks.

  • This methodology assesses the impact and likelihood of events or threats, the residual risk based on the control design and effectiveness, and the risk outlook based on trends, industry knowledge and external analysis.
  • The framework’s major risk categories include financial, legal, compliance, investment, operational and reputational.

Evaluation of risks and the adequacy and execution of controls are critical to our enterprise risk management, therefore open communication is encouraged at Victory Capital.

We provide all employees with Security Awareness Training for cyber risks and proper use of systems. Moreover, we require critical suppliers and contractors receive proper training if their in-house programs are less robust than ours.

 

Environmental Considerations

We actively take steps to reduce the impact our operations have on the environment. At year-end 2019, 83% of our employees work in “green” office buildings. Our largest office and headquarters in San Antonio, Texas, and our second largest office in Brooklyn, Ohio, have achieved sliver status certification from the Leadership in Energy and Environmental Design (LEED) program, and we have offices that have achieved platinum and gold status certifications.

We also have policies for employees to use their own mobile devices for work purposes thereby reducing the environmental impact from requiring employees to maintain multiple devices. Moreover, we issue employees portable  laptops with VPN capabilities and avoid the need for multiple computers. Additionally, FSA funds can be used to defray the costs of commuter travel, which encourages use of mass transit where available.

Victory Capital’s Approach to Responsible Investing

Victory Capital views integrating material ESG considerations alongside long-standing, disciplined investment processes as compatible with the fiduciary duty of active managers as they pursue returns or risk mitigation.

Victory Capital is a signatory to the United Nations-supported Principles for Responsible Investment (PRI).

Earlier in 2020, Victory Capital hired a Director of Responsible Investing to establish a robust framework for evaluating and monitoring ESG considerations across Victory Capital’s investment franchises and Solutions Platform. This role is also chair of the Company’s proxy voting committee.

As a global asset management firm operating a next-generation business model that combines boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform, Victory Capital strongly advocates independent decision-making and investment processes. Each of our investment franchises and Solutions Platform follow an approach to integrating ESG considerations that best suits its autonomous investment process or the objectives of its clients.

We appreciate the importance of ESG issues in the investment, risk management, and due diligence processes and we promote the following Principles for Responsible Investment (PRI):

  • We will incorporate ESG issues into investment analysis and decision-making processes.
  • We will be active owners and incorporate ESG issues into our ownership policies and practices.
  • We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  • We will promote acceptance and implementation of the Principles within the investment industry.
  • We will work together to enhance our effectiveness in implementing the Principles.
  • We will each report on our activities and progress towards implementing the Principles.

These Principles for Responsible Investment were developed by an international group of institutional investors reflecting the increasing relevance of ESG issues to investment practices. The process was convened by the United Nations Secretary-General. Additional information can be found at www.unpri.org.

We also provide our investment professionals with the requisite resources to access the ESG attributes of portfolio companies and prospective portfolio companies. These resources include access to research and training on best practices to use at their discretion in a manner consistent with our fiduciary responsibilities and client-specific objectives.

We review our Proxy Voting Policy at least annually and have increasingly integrated ESG concerns into our policy based on consultation provided by Institutional Shareholder Services (ISS).

We endeavor to advance continuous improvements in every aspect of our business and welcome comments and/or suggestions regarding our Corporate Responsibility Initiatives.

 

Serving with purpose

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