Investment beliefs of Vive

Vive wants you to be able to achieve your goals through your investments. The investments and investment portfolios are in the service of achieving your financial goals. Vive's asset management to private clients provides the desired investments with an efficient ratio between return and risk, at low cost, in a transparent manner and taking into account widely accepted ESG criteria (i.e. in the areas of environment, social relations and good corporate governance).

Socially responsible investing

Vive believes that investing entails a responsibility that is broader than just a financial fiduciary duty; therefore, environmental, social and corporate governance (ESG) impacts should be an integral part of the investment strategy.

Integrating ESG criteria has added value from a risk/return perspective. Responsible investment includes a combination of:

• Exclusion policy;
• Best in class selection policy;
• Exercise of voting rights and active engagement strategy.

In principle, Vive seeks to select only funds with ESG policies that include the above policy components.

To evaluate the ESG integration in the funds, we look at the fund classification under the EU Sustainable Finance Disclosure Regulation (SFDR). The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of EU rules aimed at making the sustainability profile of funds more comparable and easier to understand for end investors.

Spreading risk and keeping costs low are important

Vive believes that investing is best done through broadly diversified portfolios. Vive strives to diversify as much as possible across asset classes, and within them across geographic regions and sectors. Avoidable risk that is not rewarded by a positive expected risk premium (excess return above the risk-free rate) should in principle be avoided.

Vive does not believe that market timing and tactical asset allocation add value to the client after fees. Vive does not believe that trying to beat the market structurally adds value to the client net of fees. With active management, it is very difficult to outperform the market average. Therefore, the policy is to select funds on a "passive where possible" basis. Vive believes that active management makes sense for less efficient or inefficient markets if it leads to better risk management. Vive's focus within portfolio management is on constructing portfolios by risk level as best as possible based on realistic and plausible (long-term) economic scenarios. Customers' investment horizons range from short-term to long-term. Outsourcing to external asset managers, or providers of unlisted mutual funds in which Vive invests for its clients, allows Vive to focus on adding value for you as a client. Vive can select the mutual funds itself. Vive invests only through unlisted UCITS in the selected asset classes.

Focus on risk management

Risk management is crucial to sustainable asset management. This means measuring risk frequently and adjusting the portfolio as needed. Vive adopts the principle that the value of downside risk of optimal portfolios is updated quarterly and that the composition of optimal portfolios can be adjusted accordingly to achieve the best ratio of expected return to downside risk. To ensure that clients' investment plans remain close to the intended risk profile, Vive monitors your investment portfolios daily and applies rebalancing of the portfolios if they deviate too much from that risk profile. The actual composition is then aligned with the strategic portfolio belonging to the investment plan at the time of rebalancing.

In which investment categories will the money be invested?

The asset classes that qualify for the optimal portfolio should have a positive expected risk premium that is scientifically substantiated.

Based on the investment beliefs, Vive can fill the portfolios with the following asset classes:

• Money market investments in euro;
• Government bonds denominated in euro or hedged to the euro;
• Investment grade corporate bonds denominated in euro or hedged to the euro;
• Global equities, in mature markets and emerging markets;
• High Yield corporate bonds, i.e. corporate bonds of lower credit quality than Investment Grade.

Vive determines a representative index series for each category, which is used to determine the statistical characteristics in Vive Technology's Economic Scenario Generator model. These characteristics determine the degree of risk dispersion across categories.

How does Vive select the funds for each asset class?

Vive offers asset management through investments in unlisted mutual funds ("funds"). Vive does not invest in its own funds but uses third-party funds; this prevents unwanted conflicts of interest.

Vive selects third-party funds based on the following criteria:

Liquid:
The portfolio is composed of unlisted open-ended mutual funds that are traded daily.

High degree of risk diversification:
There is a wide spread within the fund: there are sufficient names in each investment fund and it is ensured that no individual investment has an excessive allocation within the fund, both in terms of Euro weighting and risk weighting. This is tested by applying a 5% worst case scenario to the two largest positions in the portfolio and checking that they do not exceed the Value at Risk of the relevant asset class. If this is exceeded, the fund does not meet the risk diversification criterion and does not qualify for selection.

Low costs:
The ongoing cost factor (OCF) must be low. This is tested by comparing the OCF of a fund to be selected with the median OCF of comparable funds. The level of any entry or exit charge must be in line with the market.

The level of ESG:
Vive believes that investing involves a responsibility that is broader than just a financial fiduciary duty; the effects on environment, social relations and good corporate governance (ESG) should therefore be an integral part of the investment strategy. Integrating ESG criteria has added value from a risk/return perspective. In principle, Vive only selects funds with an ESG policy. If no fund with such an ESG policy is available for a specific asset class, Vive may consider adding a fund that does not meet Vive's ESG selection criteria if the improvement in the return-risk ratio for the client is significant. In this case, it will be specifically recorded and communicated to clients how Vive's ESG policy starting point is deviated from and why Vive believes it is in the best interest of clients that the fund in question can be part of client portfolios.

Appropriate Mandate of the Instrument:
The benchmark of the fund is in reasonable agreement with the representative index series on which the statistical characteristics are based; the tracking error between the two indices is not expected to exceed 1%. This concerns two index series. The index series on which the statistical characteristics are based refers to the index series used to determine the parameters in the Economic Scenario Generator model. The other index series, from the benchmark, refers to the fund's benchmark. The investment universe and risk limits contribute to sufficient risk diversification. In the case of an index tracker, the replication method ensures a good connection to the benchmark (e.g. full replication). The management style of the fund is passive and responsible where possible.

Good quality asset manager:
The asset manager has a proven track record (i.e. has demonstrated reliable asset management in the relevant asset class), has its own risk management in order and has a stable organization. Vive specifically sets an ISAE 3402 certificate as a criterion. The stability of the organization is checked by, among other things, looking at staff turnover both of the organization as a whole and within the group of decision makers.

Suitable and permitted for retail investors within the European Union:
The fund has UCITS (UCITS) status and for the fund the Key Investor Information Document (EBI, in English: KIID) is available in the English language and in the language of the country where Vive offers the app. This means that the EBI is available in the Dutch language for the funds used for clients in the Netherlands.

Funds with securities lending and unnecessary use of derivatives should be avoided:
Vive has a strong preference for funds with no securities lending and no use of derivatives (such as total return swaps). Vive considers the addition of counterparty risk through securities lending undesirable because it is not a transparent source of risk for the client. The use of derivatives in a fund introduces additional risks that cannot be clearly understood by non-professional investors. If a fund without securities lending or derivatives use is not available for a specific asset class, but the improvement in risk-return ratio for Vive's clients is significant, Vive may still consider adding this fund. In this case, it will be specifically recorded and communicated to clients in what manner it deviates from Vive's principle for securities and derivatives lending, and why Vive considers it in the interest of clients that the fund in question may be part of client portfolios. Excluded are funds that use so-called exotics (custom derivatives).

How are investment plans made?

Vive helps clients set investment goals based on preferences that clients specify and within the client's risk tolerance profile based on the client's stated risk appetite. Using a software-defined procedure, an optimal investment strategy is then derived for each goal plan. This strategy is a so-called lifecycle strategy: the "investment risk decreases as the end date approaches.

Vive determines an optimal investment portfolio within the client's risk profile. Vive provides portfolio optimization and rebalancing after adjusting the risk-return characteristics of the underlying asset classes. The optimal portfolios and forecasts for the median and worst-case scenario are based on an economic scenario set generated quarterly by the Economic Scenario Generator model.

Investment plans are implemented by investing for each investment plan in an optimal portfolio belonging to the level of risk the client accepted when the plan was created (or last revised). Vive uses the same consistent portfolio optimization to fill out the investment mix in the different types of investment plans.

Portfolio optimization with eligible asset classes is done by selecting, at each desired Value-at-Risk (VaR) level, the portfolio with the highest expected return (median scenario) based on a realistic 1-year scenario. Vive uses a robust optimization technique to minimize the impact of outliers. The VaR level is determined as the 5% percentile of the probability distribution of portfolio returns.

Part of Vive's services includes rebalancing the portfolios in the investment plans created by the client. Differences between the actual portfolio and the strategic portfolio for the client's investment plan can occur due to price movements and change in the strategic portfolio. The purpose of rebalancing is to align the actual portfolio with the strategic portfolio associated with the specific investment plan at that time.