The purpose of this Remuneration Policy is to set out how Coupland Cardiff Asset Management LLP (“CCAM”) will provide remuneration in a form and amount that is consistent with the Remuneration Code as set out in SYSC 19, whilst being able to attract, motivate and maintain high-calibre employees.
CCAM is subject to the Alternative Investment Fund Managers Directive (“AIFMD”). As a Collective Portfolio Management Investment Firm, CCAM must comply with the AIFM Remuneration Code in SYSC 19B for its AIFMD activities; and also comply with the Financial Conduct Authority (“FCA”)’s Remuneration Code in SYSC 19C in relation to its MiFID type activities. SYSC 19C.1.1A states that where CCAM complies with SYSC 19B, it will also be regarded as compliant with SYSC 19C. CCAM has chosen to rely on SYSC 19C.1.1A and therefore this Remuneration Policy is designed to ensure that CCAM complies with all of the AIFM Remuneration Code Principles in SYSC 19B and does not refer to SYSC 19C.
Pursuant to SYSC 19B.1.7 and 19B.1.8, CCAM’s Remuneration Policy will be reviewed annually by the governing body to ensure that it remains consistent with the Remuneration Code Principles. In addition, the Compliance Officer, as part of CCAM’s regulatory monitoring, will include a review of the implementation of this Policy by CCAM.
Firms must establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote sound and effective risk management and which do not encourage excessive risk taking which is inconsistent with the risk profile of the Alternative Investment Funds (AIFs) CCAM manages. The Principles apply to remuneration of any type, including both ‘variable’ and ‘fixed’, whether paid directly by CCAM or an AIF (including carried interest); and also to the transfer of units or shares of the AIF made to the benefits of staff. Remuneration includes any form of remuneration including salaries, discretionary pension benefits and benefits of any other kind. The Remuneration Code is concerned with the risks created by the way remuneration arrangements are structured and not with the amount of remuneration.
The Remuneration Code is based around nine Principles with which CCAM must comply when remunerating its Remuneration Code Staff (see below). Although as the FCA has adopted a proportionate approach in applying the Code, not all of the Principles will be relevant to CCAM (see below).
Remuneration Code Staff comprises those categories of staff whose professional activities have a material impact on the risk profiles of CCAM or the AIFs that it manages. This includes staff engaged in control functions, risk takers, senior management, and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and risk takers. For the purpose of implementing the Code, the European Securities and Markets Authority (“ESMA”) has defined control functions as “staff (other than senior management) responsible for risk management, compliance, internal audit and similar functions within an AIFM”. Unless it can be demonstrated to the contrary, ESMA has stated in its Guidance that the following would be Remuneration Code Staff:
- Executive and non-executive members of the governing body of the AIFM;
- Senior management;
- Control functions;
- Staff responsible for heading portfolio management, administration, marketing and human resources; and
- Other risk takers.
This also extends to staff of any entity to whom CCAM has delegated the AIFM activities of portfolio or risk management, and whose professional activities have a material impact on the risk profiles of the AIFs.
CCAM has in place a record of its Remuneration Code Staff which is maintained and monitored by the Compliance Officer with oversight by the governing body. All such staff understand the implications of their status.
3. Proportionality in application of the Remuneration Code
Certain Principles may be disapplied when they are deemed disproportionate. These include the following Principles which are known as the Payout Process Rules: Principle 5(e) (SYSC 19B.1.17 “retention”); Principle 5(f) (SYSC 19B.1.18 “deferral”); and Principle 5(g) (SYSC 19B.1.19 & 20 “performance adjustment”). The need to have a Remuneration Committee (SYSC 19B.1.9) may also be disapplied if it is proportionate to do so.
FCA Guidance states that a firm may begin with the presumption that they will disapply the Payout Process Rules where their AIF AUM is less than either: £1BN where assets are acquired through leverage; or £5BN where the AIF/s are unlevered and have no redemption rights for five years. CCAM’s AIF AUM is less than these thresholds and after consideration of the FCA’s suggested Proportionality Elements (see below), CCAM has determined that it is proportionate to disapply the Payout Process Rules.
Proportionality Elements: CCAM has 17 staff, it is not listed, it is predominantly owned by its partners, it manages only one AIF, it operates an equity strategy which is not complex, and its AIFs are not highly leveraged.
Whilst appreciating the contribution that can be made by a Remuneration Committee, CCAM considers that such a body would not be proportionate given the size and non-complex nature of both its activities and organisation. Instead, CCAM’s governing body undertakes this role.
4. CCAM’s remuneration arrangements
CCAM’s policy on the allocation of remuneration requires that its governing body set aside a proportion of the firm’s profits to form a bonus pool out of which variable remuneration awards will be made. The size of the bonus pool will be at the discretion of the governing body, and duly recorded, giving due consideration to both the need to incentivise personnel and to the current and future risks faced by CCAM and its AIFs. It is unlikely that any awards will be made in the event of CCAM making a loss.
The Code is based upon nine Principles and when determining remuneration, the governing body consider this Remuneration Policy and thus ensures that all remuneration payments are made in line with the Principles as they apply to CCAM. CCAM’s approach to the Principles is set out below.
Principle 1: Risk management
CCAM has a low risk appetite and monitors the risk profiles of the funds to ensure that any investment decisions are consistent with the risk profiles of the instruments constituting the funds. CCAM does not take own positions where its own capital would be at risk. CCAM does not hold client money or assets.
Principle 2: Supporting business strategy, objectives, values and interests, and avoiding conflicts of interest
CCAM received FSA/FCA authorisation on 27/05/2005. CCAM is a London based investment management Limited Liability Partnership. CCAM currently acts as investment manager and adviser to AIFs, UCITS funds and a number of third party managed accounts. CCAM focuses on investment opportunities within Asia. Its partners and teams of investment and operations professionals have significant market experience which provides hands-on expertise in sourcing, executing and managing the investment strategy of CCAM and the funds that it manages.
CCAM’s revenue is derived from management and performance fees and as such depends upon sound investment decisions, in line with its Clients’ interests and objectives as set out in the Client Agreements and where relevant, their constitution documents. This Remuneration Policy is in line with these values.
CCAM has in place a Conflicts of Interest Policy and Register which have been developed and approved by the Partners. CCAM is aware of the need to ensure that its Remuneration Policy and arrangements do not give rise to any conflicts of interest.
Principle 3: Governance
As mentioned in the ‘Introduction’, there will be an annual review undertaken by CCAM’s governing body with an independent review by the Compliance Officer. Remuneration decisions taken by the governing body will be consistent with CCAM’s financial condition and future revenues.
Principle 4: Control functions
Those engaged in control functions have been given the appropriate authority to carry out that role and, as far as possible, they are compensated according to the achievement of the objectives linked to their functions, independent from the business areas they control. To ensure independence and avoid the risk of undue influence, CCAM will ensure that the compliance function is consulted when setting the Remuneration Policy. Remuneration of senior offices in risk management and compliance functions is directly overseen by the governing body in its supervisory function.
As CCAM is a small firm with a limited number of personnel, it is inevitable that it will not always be possible to ensure independence. However this is recognised by CCAM and, where relevant, is referenced in its Conflicts of Interest Policy.
In setting remuneration levels, CCAM recognises the importance of attracting and retaining experienced staff that perform control functions.
Principle 5: Remuneration structures
At the heart of CCAM’s Remuneration Policy is the need to ensure that the structure of an employee’s remuneration is consistent with, and promotes, sound and effective risk management and that it does not encourage risk-taking which is inconsistent with the risk profile of the instrument constituting the fund of the AIFs it manages.
Since CCAM has determined that it is proportionate to disapply the Payout Process Rules, three elements of Principle 5 have been disapplied. However, for the sake of completeness these will be referenced below as appropriate.
Where remuneration is performance-related, then in addition to the performance of the individual CCAM will also take into account the performance of the business unit or AIF concerned and the overall results of CCAM. Performance assessment will not relate solely to financial criteria but will also include compliance with regulatory obligations and adherence to effective risk management. In keeping with CCAM’s long term objectives, the assessment of performance will take into account longer-term performance appropriate to the life-cycle of the AIFs where these are not already aligned. Payment of any such performance related bonuses may need to be spread over a period which takes account of the redemption policy of the AIFs it manages and their investment risks.
In the case of early termination of a contract any payments will reflect performance achieved over time. CCAM does not reward failure.
CCAM does not award guaranteed variable remuneration. In exceptional circumstances such payments may need to be considered in the context of new Remuneration Code Staff. In such cases the governing body, in conjunction with the Compliance Officer, will consider and document whether such an award would be in keeping with Remuneration Principle 5 and SYSC 19B.
CCAM sets appropriate and balanced ratios between any fixed and variable components of staff remuneration. Staff are paid sufficiently high levels of fixed remuneration compared to variable remuneration to allow the operation of a fully flexible policy on variable components, including the possibility to pay no variable remuneration.
As mentioned above, three elements of Principle 5 are disapplied in the case of CCAM. These concern: the need to ensure that at least 50% of any variable remuneration consists of units or shares of the AIF concerned, or equivalent ownership interests (Principle 5(e)); the need to defer at least 40% of any variable remuneration over a period of not less than three to five years (Principle 5(f)); and the need for performance adjustment (Principle 5(g)).
Principle 6: Measurement of performance
Performance is an important factor in the calculation of any variable remuneration.
Variable remuneration will be contracted where subdued or negative financial performance occurs. CCAM will not ordinarily make any variable remuneration awards should CCAM make a loss however in exceptional circumstances such payments may need to be considered. In such cases the governing body, in conjunction with the Compliance Officer, will consider and document whether such an award would be in keeping with Remuneration Principle 6 and SYSC 19B.
In both performance measuring and the allocation of variable remuneration, the governing body of CCAM will make qualitative judgements, making due recourse to CCAM’s current ICAAP. The measurement of financial performance includes consideration of all relevant types of current and future risks and the cost and quantity of capital and liquidity required.
Principle 7: Pension policy
CCAM does not offer any non-cash pension benefits.
Principle 8: Personal investment strategies
At times it is possible that one effect of aligning an individual’s remuneration with risk is that the remuneration may be subject to downside. As this alignment is an important feature of the Remuneration Code, staff will not be permitted to use any personal hedging strategies or take out insurance contracts that would undermine this alignment. This requirement is reflected in CCAM’s Personal Account Dealing Policy.
Principle 9: Avoidance of the Remuneration Code
CCAM adheres to the Remuneration Code.
No variable remuneration awards will be paid through any vehicles or methods that would facilitate the avoidance of the Remuneration Code.
This Remuneration Policy is formally approved and adopted by CCAM’s governing body which will have ultimate responsibility for its implementation.
Approved by the Partnership on: 18 November 2021