PILLAR 3 DISCLOSURE



Introduction

FPP Asset Management LLP (the “Firm”) is a London based discretionary investment management firm.  The Firm is a limited liability partnership incorporated in the UK, and is authorised and regulated by the Financial Conduct Authority. The Firm is categorised under the BIPRU section of the FCA’s Handbook as a “BIPRU €50k limited licence” firm.

 

Risk Management

The Firm is governed by its Partners who determine its business strategy and risk appetite. They are also responsible for establishing and maintaining the Firm’s governance arrangements along with designing and implementing a risk management framework that recognises the risks that the business faces.

The Partners also determine how the risk the business faces may be mitigated and assess on an ongoing basis the arrangements to manage those risks. The Partners meet on a regular basis with senior staff and discuss current projections for profitability and cash flow, along with the regulatory capital management, business planning and risk management. The Partners manage the Firm’s risks business though a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework.

On an annual basis, the Partners formally review their risks, controls and other risk mitigation arrangements and assess their effectiveness. Where the Partners identify material risks, they consider the financial impact of these risks as part of our business planning and capital management and conclude whether the amount of regulatory capital is adequate.

The Partners have identified the following as areas of risk to the Firm:

Business Risk

The main risk the Firm faces is an event leading to a significant fall in the level of assets under management.  The Firm’s revenue is reliant on the performance of the existing funds and its ability to launch new funds and obtain new mandates. As such, the risk posed to the Firm relates to underperformance of the current products due to adverse market conditions, causing the risk of redemptions from funds managed by the Firm resulting in a decline in revenue. This risk represents a fall in asset under management in the funds or the loss of key staff which may reduce the fee income earned by the Firm and hinder its ability to finance its operations. Business risks are assessed and mitigated as part of the Internal Capital Adequacy Assessment Process (“ICAAP”)

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or resulting from external events.  The Firm places strong reliance on the operational procedures and controls that it has in place in order to mitigate risk and seeks to ensure that all personnel are aware of their responsibilities in this respect.

The Firm has identified a number of key operational risks. These relate to the outsourcing of investment accounting, and various middle/ back office functions. Appropriate polices are in place to mitigate against these risks, including undertaking both onsite and desk based monitoring and the ongoing review of risk indicators, errors and incidents.

The risk of loss of key investment staff is mitigated by the cross training of staff and extended notice periods for key personnel.

Credit Risk

Credit risk is the risk that a party will default on a financial agreement. The Firm is exposed to credit risk as follows:

  • Fund management and performance fees due from unregulated collective investment schemes (‘UCIS’)
  • UK authorised banks in relations to deposits held with them

The risks are mitigated by:

  • Performing credit checks and completing due diligence checks at the outset of entering into material contracts;
  • Periodic monitoring of the financial strength of the credit institution with whom the Firm maintains its bank accounts;
  • Contractual arrangements in relation to the payment of management fees and monitoring payments against

agreed payment schedules, with management fees being drawn monthly and performance fees drawn quarterly as applicable.

Market Risk

The Firm takes no market risk other than foreign exchange risk in respect of its accounts receivable and cash balances held in non GBP currencies.

The risk is mitigated by keeping the size of the debtor balance under regular review.

Cash balances are maintained in GBP, USD and EUR.  The EUR and USD accounts are used effectively for receiving

EUR and USD denominated fees and managing the FX transactions into our GBP account.

 

Pillar 1

The Firm is a limited licence firm, and as such its capital requirements are the greater of:

  • It’s base capital requirement of €50,000;
  • The sum of its market and credit risk requirements;
  • Its fixed overhead requirement (“FOR”).

At 30 June 2017 the Firm’s Pillar 1 requirement was £418,000.  This has been determined with reference to the Firm’s FOR and calculated in accordance with the FCA’s General Prudential Sourcebook (“GENPRU”).  The requirement is based on the FOR since at all times this exceeds the total of the credit and market risk requirements it faces and also exceeds its base capital requirement of €50,000.

The FOR is based on annual expenses net of variable costs deducted, which include discretionary bonuses paid to staff, allowable commission and fees and other variable expenditure. The Firm monitors its expenditure on a monthly basis and takes into account any material fluctuations in order to determine whether the FOR remains appropriate to the size and nature of the business or whether any adjustment needs to be made intra-year. This is monitored by the COO and reported to the Partners on a periodic basis.

 

Pillar 2

Satisfaction of capital requirements

The Firm’s ICAAP (Pillar 2) process has identified no additional capital need be held over and above the Pillar 1 requirement.

Capital Resources at 30 June 2017

£’000
Tier 1 Capital 2,653
Total Capital Resources 2,653

 

Remuneration

Given the nature and small size of our business, remuneration for all employees is set by the Partners of the Firm. The Firm formally reviews the performance of all employees and based thereon determines each employee’s overall level of remuneration and the split of that between fixed and variable remuneration in compliance with the FCA Rules on remuneration.

Given that the Firm has only one business area, investment management, all remuneration disclosed in our audited financial statements is from this business area.

The Firm has identified “Code Staff” as the Firm’s current partners, other Significant Influence Functions and 6 further individuals remunerated in the same remuneration bracket, who are paid by the Firm’s parent company, Fabien Pictet & Partners Ltd.

Total Remuneration for all Code Staff  £756,063

The Firm is subject to the BIPRU Remuneration Code (“the Code”), has applied proportionality and, pursuant to this application and where relevant, has disapplied various provisions of the Code.



 

DISCLAIMER

The information contained in this website (“the Website”) is issued by FPP Asset Management LLP (“FPP”), 60 Sloane Avenue, London, SW3 3XB.  FPP Asset Management LLP is authorised and regulated in the UK by the Financial Conduct Authority.  This is not intended to exclude or restrict any liability under the rules of Financial Conduct Authority (“the FCA Rules”) or FSMA.

The distribution of the information contained in the Website in certain countries may be restricted by law and persons who access it are required to inform themselves and to comply with any such restrictions. The information is not intended to be published or made available to any person in any jurisdiction where doing so would contravene any applicable laws or regulations.  All investments and services mentioned on this website are directed only at those who are Eligible Counterparties and Professional Clients as defined by the Financial Services and Markets Act 2000 of the United Kingdom. Investments and services to which this website relates are available only to such persons.

By accessing the Website you confirm that you are aware of the laws in your own jurisdiction relating to the provision and sale of funds and related financial services products and you warrant and represent that you will not pass on or utilise the information contained in the Website in a manner that could constitute a breach of such laws by FPP or any other person. The Website does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer or solicitation.

The Website is provided for information purposes only and does not constitute investment, legal, tax or other advice or any recommendation to buy or sell any of the Funds or stocks mentioned.  Prospective investors should take appropriate professional advice before making any investment decision.  Investments in the Funds are to be made on the terms of the relevant prospectus and no reliance should be placed on the information contained in the Website.

FPP makes every effort to keep the content of the Website accurate and up to date and while the information contained in the Website has been taken from sources which FPP consider to be reliable, no warranty is given that such information is accurate or complete and it should not be relied upon on as such. Any opinions expressed on the Website reflect FPP’s judgment at the date of issue of the relevant report and are subject to change without notice. FPP will not be responsible for any liability for loss or damage of any kind which arises, directly or indirectly, from the use of the information contained in the Website.

The value of investments may go down as well as up and may be affected by change in rates of exchange.  Investors may not get back the amount invested.  Reference should be made to the prospectus in respect of the relevant Fund for further details of the financial commitments and risks involved in connection with an investment in the each Fund.  Past performance is not necessarily a guide to future returns.

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