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).

Sustainability Policy

At Vive, investing goes beyond financial aspects. Vive incorporates sustainability criteria into its selection policy. Vive strives to select investment funds and managers that excel in sustainability within their category. Sustainability is approached from two sides.

Sustainability risks (outside-in): Vive analyzes sustainability risks around environmental, social and governance (ESG) issues that can affect investments. We incorporate these into our investment process to make better choices and make our portfolios stronger.

Sustainability impact (inside-out): Vive does not have a target for sustainable investments but promotes social characteristics through its selection policy. Vive does this based on the frameworks from the Sustainable Finance Disclosure Regulation (SFDR), the European legislation that promotes transparency around sustainability.

Vive selects investment funds based on a selection policy, where sustainable characteristics are taken into account, with the aim of a balanced risk-return ratio. The selection criteria based on sustainability are based on the following principles:

1. Exclusion Policy

Vive invests only in funds that exclude investments based on a structured policy, whenever possible within the asset class.

2. Best-in-Class Selection

We select only funds that excel in sustainability:

• At least an MSCI ESG rating of BBB, to mitigate sustainability risks.
• At least an SFDR Article 8 rating (preference for Article 9).
  For government bonds, this requirement is not applied by default.

3. Voting Rights and Engagement.

For equity funds, we invest only in funds that actively use their voting rights and encourage companies to behave more sustainably.

4. Social Characteristics

Vive promotes social values such as:

• No investments in controversial weapons.
• Limiting investments in the tobacco industry.
• Respect for human rights, labor rights and combating corruption according to the UN Global Compact.

This policy ensures that our investments are not only financially strong, but also contribute to social and sustainable goals, in line with changing laws and regulations. See the Vive Sustainability Policy and SFDR documents for more information.

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 set up with unlisted open-end mutual funds that are tradable on a daily basis.

High degree of risk diversification: there is broad diversification within the fund: there are sufficient names in each investment fund and care is taken to ensure 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 it does not exceed the Value at Risk of the relevant asset class. If exceeded, the fund does not meet the risk diversification criterion and is not eligible for selection.

Low cost: The ongoing expense 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 amount of any entry fee or exit fee must be market-based.

Sustainability Criteria: Vive invests only in funds that meet our sustainability criteria (see above for more information).

Appropriate mandate of the instrument: The Fund's benchmark reasonably matches 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 is about 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 constraints contribute to sufficient risk diversification. For an index tracker, the replication method ensures a good fit with the benchmark (e.g., full replication). The fund's management style is passive and responsible whenever 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 AFM registration of the fund manager and the fund as a criterion. In addition, the fund must have a reliable custodian.

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 extreme deviations. 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.