Regulatory Disclosures

Regulatory Disclosures

 

Castlefield Investment Partners LLP

Pillar 3 Disclosure and Policy

Our Pillar 3 disclosure as required by BIPRU 11.3.3 R is set out below. Pillar 3 disclosures will be made annually in our Audited Annual Accounts and/or via our web site (www.castlefield.com).

 

BIPRU 11.5 Technical criteria on disclosure: General requirements

Background

Castlefield Investments Partners LLP (‘the Firm’) is incorporated in the UK and is authorised and regulated by the FCA as an Investment Management Firm. The Firm’s activities give it the BIPRU categorisation of a “Limited Licence” “BIPRU €50K” firm.

The Firm’s ICAAP was updated on 18 December 2018 in accordance with GENPRU 1.2.47 which gives firms with a consolidation waiver an exemption from preparing the ICAAP on a consolidation basis as required by BIPRU 8.2, which deals with consolidation requirements for UK Groups. The ICAAP disclosures therefore apply to Castlefield Investment Partners LLP (CIP) only.

The Firm is a BIPRU Investment Firm with an Investment Firm Consolidation Waiver, which first took effect on 11th September 2012 and was renewed for a further period of five years from 11th September 2013. Following the acquisition of Castlefield Advisory Partners Limited (CAP), (formerly Barchester Green Investment Limited) by Castlefield Partners Limited (CPL), (formerly Castlefield Capital Ltd) on 31st May 2014, the consolidation waiver was extended to include the newly acquired company on 30th October 2014. GENPRU 2 Annex 6 applies. The existing consolidation waiver expired on 10 September 2018 but an application was made for a further consolidation waiver to run from 1 December 2018 to 28 February 2020 and the FCA approved this application on 29 November 2018. In the intervening period the firm had sufficient capital.

 

BIPRU 11.5.1

Disclosure: Risk Management Objectives and Policies 

Governance Framework

John Eckersley and parent company, CPL, are the Designated Members of CIP. John acts as the Managing Partner of the LLP and as its Chief Executive Officer, from an FCA perspective. In this capacity, he chairs a regular meeting of its Ordinary Members, who in turn are deemed by FCA to be its Partners. This is the governing body of the firm which exercises daily management and oversight of its activities, in conjunction with the Group’s Head of Finance. The Designated Members are the Governing Body of the Firm. The full list of Members/Partners is:

  • John Eckersley – Designated Member, Voting Member, Managing Partner

  • Castlefield Partners Limited – Designated Member, Voting Member

  • Mark Elliott – Ordinary Member, Partner

  • David Elton – Ordinary Member, Partner

  • Rory Hammerson – Ordinary Member, Partner

  • Simon Holman – Ordinary Member, Partner

 

Risk Framework

Risk within the Firm is managed by use of the following:

  • A detailed compliance monitoring programme, undertaken by our Compliance function which comprises a Head of Compliance, a Senior Executive, Compliance and an Executive.
  • Risks are considered continuously, initially discussed at regular compliance meetings and raised at quarterly Partners’ meetings; and

  • In anticipation of the Senior Managers and Certification Regime, a Risk Committee is being established to look at risk from a group perspective and allocate responsibility for managing those risks accordingly. Already the Committee, using an external consultant, has identified 10 top risks for the group which will be considered at future meetings. The introduction of the Senior Managers and Certification Regime will also drive individual accountability and awareness of conduct issues across the group, thus further mitigating internal risks. The whole will be overseen by an Executive Committee which will be responsible for all aspects of group strategy and monitor operational performance. Its members will be the Heads of all operational areas, including Compliance and Finance.

  • External compliance consultants raise any issues during monitoring

 

BIPRU 11.5.4

Disclosure: Compliance with BIPRU 3, BIPRU 4, BIPRU 6, BIPRU 7, BIPRU 10 and the Overall Pillar 2 Rule

 

BIPRU 3

For its Pillar 1 regulatory capital calculation of Credit Risk the Firm has adopted the Standardised Approach (BIPRU 3.4) and the Simplified Method of calculating risk weights (BIPRU 3.5). 

Credit risk calculation

 

Credit Risk Capital Requirement

Rule

 

 

 

Credit risk capital component

BIPRU 3.2

£0

 

 

Counterparty risk capital component

BIPRU 13 & 14

£0

 

 

Concentration risk capital component

BIPRU 10

£0

 

 

Total

 

£0

 

 

Pershing deposit

BIPRU 3.4.45

£30k

100%

£30k

Banks

BIPRU 3.4.44

£684k

20%

£137k

Debtors

BIPRU 3.4.129

£364k

100%

£364k

Investments

BIPRU 3.4.96

£0k

100%

£0k

Tangible Assets (Fixed assets)

BIPRU 3.4.127

£0k

100%

£0k

Total

 

£867k

 

£531k

Credit risk capital component

8% of risk weighted exposure

 

 

£42.5k

 

BIPRU 11.5.5

This disclosure is not required as the Firm has not adopted the Internal Ratings Based approach to Credit Risk and therefore is not affected by BIPRU 11.5.4R (3).

 

BIPRU 11.5.6

This disclosure is not required as the Firm has not adopted the Internal Ratings Based approach to Credit Risk and therefore is not affected by BIPRU 11.5.4R (3).

 

BIPRU 11.5.7

This disclosure is not required as the Firm does not have a Trading Book.

 

BIPRU 11.5.9

This disclosure is not required as the Firm does not make Value Adjustments and Provisions for Impaired Exposures that need to be disclosed under BIPRU 11.5.8R (9).

 

BIPRU 11.5.10

Disclosure: Firms calculating Risk Weighted Exposure Amounts in accordance with the Standardised Approach

This disclosure is not required as the Firm uses the Simplified method of calculating Risk Weights (BIPRU 3.5).

 

BIPRU 11.5.11

Disclosure: Firms calculating Risk Weighted Exposure amounts using the IRB Approach. 

This disclosure is not required as the Firm has not adopted the Internal Ratings Based approach to Credit and therefore is not affected by BIPRU 11.5.4R (3).

 

BIPRU 11.5.13

Disclosure: Use of VaR model for calculation of Market Risk Capital Requirement

This disclosure is not required as the Firm is not exposed to market risk.

 

BIPRU 11.5.14

Disclosure: Operational Risk

This disclosure is not required as a Pillar 1 Operational Risk calculation is not required under GENPRU 2.1.45R. We are disclosing the Fixed Overhead Requirement (FOR) as a proxy for the Pillar 1 Operational Risk calculation.

 

Fixed Overhead Requirement

GENPRU 2.1.53

£ 247k

 

BIPRU 11.5.15

Disclosure: Non-Trading Book Exposures in Equities

This disclosure is not required as the Firm does not have a Non-Trading Book Exposure to Equities.

 

BIPRU 11.5.16

Disclosures: Exposures to Interest Rate Risk in the Non-Trading Book

Although the Firm has relatively significant cash balances on its Balance Sheet, there is currently no significant exposure to Interest Rate fluctuations.

 

BIPRU 11.5.17

Disclosures: Securitisation

This disclosure is not required as the firm does not securitise its assets.

CIP is an Investment Management Firm.  Its greatest risks are therefore business and operational risk. We have assessed business risks in our ICAAP and set out appropriate actions to manage them. One example would be a severe and instant (40%) market downturn lasting, say, three months, for which we have modelled the effect on our capital planning forecasts and cash requirements, as well as set out actions to ensure we have sufficient regulatory capital. These actions include reducing costs as appropriate and seeking additional capital from the members of CIP. Of particular relevance is the fact that each of the working members (Partners) has, by way of formal Members’ Agreement, agreed to reduce their fixed prior charge over profits in the event that the business does not generate sufficient profits to cover the amounts concerned. The parent company, Castlefield Partners Limited, has expressed itself willing to provide financial support in the worst-case scenario, although, in accordance with FCA guidance, our analysis does not imply reliance on this type of external shareholder support.  The Firm’s exposure to credit risk is the risk that management fees and/or advisory fees cannot be collected and therefore credit risk is low. The Firm holds all cash balances with banks that are assigned high credit ratings.

All data is as at 31st August, 2018 being the Firm’s year end, except for the Capital Resources, which is as at 30/11/18. This information was published, following update, approval and publication of the latest ICAAP, on 18th December 2018.

 

BIPRU 11.5.18

Disclosures: Remuneration Policy

In accordance with the FCA’s Remuneration Code, the following represents a summary of the Firm’s formal Remuneration Policy, which was documented, approved and first implemented during 2011. It is subject to annual review during December in each subsequent year and amended and republished. It was most recently published on the date shown below.

The Firm has seven Code Staff, consisting of individuals holdings Significant Influence Functions - five of whom are working members of the LLP (described as a Partner). The remaining individuals are captured by the Code in their capacity as CF10 for the Firm and MLRO respectively.

Bonus Scheme One: There are five members of this scheme, each of whom is a member of the LLP. Each of these working Partners/members has an agreed, fixed prior share of the profits of the LLP (where such profits exist). The share of the four Ordinary Members (Messrs Elliott, Elton, Hammerson and Holman) is determined by the Managing Partner (Mr Eckersley), who is also one of two Designated Members of the LLP (the other being the Group holding company, Castlefield Partners Limited). The profit share of Mr Eckersley must be agreed by Castlefield Partners Limited (CPL). CIP LLP is effectively controlled by CPL. The directors of CPL are Mr Eckersley, BCF Capital Limited and Piccadilly Trustee Limited and they serve in this capacity at the discretion of the shareholders of CPL – the main external one being the Burdens Charitable Foundation.

Beyond the fixed remuneration each working member/Partner of the LLP receives, each is entitled to a share of 20% of the profits of the LLP in excess of the total of the fixed remuneration. This 20% forms a bonus pool, to be distributed amongst the members, at the discretion of the Designated Members. It is assumed for the current year that this pool will, in due course, be allocated to the Members pro-rata to their fixed profit shares. Based upon this analysis, the variable element of remuneration received by each is 31%, an increase of 5% on the prior year. This change does not alter the firm’s strategy, which remains that of managing money in a responsible and ethical way. Funds under management have increased during the year which has in turn required increased staff numbers and new legislation has impacted on the overheads. The partners will only take their variable profit share once these costs have been met.

Beyond these modest bonus arrangements, each of the working members of the LLP is also a shareholder in the holding company (CPL) and each has generally paid for their stake in this business. Each member caught by the Code is therefore focused not only on short term reward (which is predominantly of a fixed nature) but also on long term shareholder value creation.

Bonus Scheme Two: All Partners and Associates who are not in client facing roles and therefore eligible for target-based remuneration, are eligible for a modest bonus from CPL based on the actual profit level in the relevant cost centre versus target return, responsibility levels and performance. Mr Eckersley, Ms Mosam and Ms Hanlon will be eligible under this scheme. The weightings are based on a simple system of 1 for the Executive role (the lowest level) and 5 for Partners. The profit pool is allocated by setting a core figure (£300 in 2017/18 and likely to be at a similar level in 2018/19) and multiplying this by the grade weighting and by an additional responsibility factor. This bonus is discretionary and is estimated as being in the range of 6-15% of salary.

 

Executive Incentive Scheme 1: This applies to Mr Eckersley, as a director of CPL and is overseen by the CPL Board. Apart from the remuneration he derives as a member of CIP LLP, Mr Eckersley receives additional fixed remuneration, including pension contributions of 5% of qualifying earnings, in his capacity as a director of CPL (the non-regulated holding company of the group) and is eligible to join the Castlefield Share Incentive Plan He is theoretically entitled to a discretionary bonus determined by the CPL Board with reference to external market analysis and the performance of the business, compared to pre-agreed targets. There was no bonus paid in respect of 2017-18 and it is assumed that there will be no bonus due in respect of 2018-19. Taking account of both CIP and CPL remuneration, Mr Eckersley receives 78% fixed remuneration. He receives 69% fixed remuneration from CIP (the entity caught by the Remuneration Code).

His main long term incentive comes via his interest in the equity capital of the group holding company, CPL.

 

Executive Incentive Scheme 2: This applies to Ms Hanlon who is not a partner in CIP but is captured by the Remuneration Code in her capacity as CF10 for the Firm and to Ms Mosam in her capacity as MLRO. Both are employed by CPL and receive a fixed salary, including pension contributions of 5% of qualifying earnings. Both have an interest in the equity capital of the holding company and are entitled to join the Castlefield Share Incentive plan. The shareholding represents their main long term incentive.

In addition, all Mr Eckersley, Ms Mosam and Ms Hanlon, as employees of CPL, are, in theory, eligible to receive a share of any flat rate bonus payment based on the results of the year ended 31 August 2018. Any such bonus is likely to be approximately £1,000 and is therefore immaterial in this context.

In summary, the Firm steers clear of large elements of variable remuneration, whilst paying what is believed to be fair fixed remuneration. Equity ownership amongst all colleagues is encouraged. There is no direct link between any one person’s remuneration and products sold or promoted to clients and/or potential clients. We have stressed a team approach to clients within CIP LLP.

The Firm’s detailed Remuneration Policy was approved for publication on 18th December 2018 and was accordingly subsequently published via this web site.

 

Castlefield Fund Partners Limited

UK UCITS Management Company

In accordance with the FCA’s Remuneration Code, the following represents a summary of the Company’s formal Remuneration Policy, which was documented, approved and first implemented in 2016, the first year in which the Company started trading with its current permissions. The Policy has been subject to annual review in each subsequent year, amended and republished. It was most recently published on 18 December 2018 and subsequently updated to reflect Code Staff changes.

The Company has four Code Staff, consisting of individuals holding Significant Influence Functions two of whom are directors of the Company. The other individuals are captured by the Code in their capacity as CF10 and CF10a for the Company.

Remuneration Scheme applying to those employed to work for the UCITS: This applies to Mr Slattery-Vickers, who is CF10a and receives fixed remuneration plus pension contributions of 5% of qualifying earnings from Castlefield Partners Limited, the group holding company, for his work in the Company. Ms Hanlon and Ms Mosam receive fixed remuneration plus pension contributions of 5% of qualifying earnings from Castlefield Partners Limited for their roles of CF10 and group MLRO respectively. Mr Eckersley receives fixed remuneration, including pension contributions of 5% of qualifying earnings, in respect of his role as Group Managing Partner but no remuneration directly from, or as a result of, the activities of the ACD. No variable remuneration is envisaged for Code staff in respect of their ACD activities.

Mr Eckersley also receives fixed and variable remuneration in respect of his role as designated member of Castlefield Investment Partners, which is itself covered by the BIPRU Remuneration Code. The variable element of his remuneration from CIP is 31%. When the remuneration from CPL is taken into consideration, the variable element falls to 22%. The profit share of Mr Eckersley must be agreed by Castlefield Partners Limited (CPL). Like CFP, CIP LLP is effectively controlled by CPL. The directors of CPL are Mr Eckersley, BCF Capital Limited and Piccadilly Trustee Limited and they serve in this capacity at the discretion of the shareholders of CPL – the main external one being the Burdens Charitable Foundation.

All code staff have an interest in the equity capital of the holding company and are eligible to join the Castlefield Share Incentive plan. The shareholding represents their main long-term incentive.

Bonus Scheme: All Partners and Associates who are not in client facing roles and therefore eligible for target-based remuneration, are eligible for a modest bonus from CPL based on the actual profit level in the relevant cost centre versus target return, responsibility levels and performance. All four Code Staff are eligible under this scheme. The weightings are based on a simple system of 1 for the Executive role (the lowest level) and 5 for Partners. The profit pool is allocated by setting a core figure (£300 in 2017/18 and likely to be at a similar level in 2018/19) and multiplying this by the grade weighting and by an additional responsibility factor. This bonus is discretionary and is estimated as being in the range of 6-15% of salary.

 

Executive Incentive Scheme 1: This applies to Mr Eckersley, as a director of CPL and is overseen by the CPL Board. He is also eligible to join the Castlefield Share Incentive Plan. Apart from the remuneration noted above from CPL and CIP, he is theoretically entitled to a discretionary bonus determined by the CPL board with reference to external market analysis and the performance of the business, compared to pre-agreed targets. There was no bonus paid in respect of 2017-18 and it is assumed that there will be no bonus due in respect of 2018-19.

His main long-term incentive comes via his interest in the equity capital of the group holding company, CPL.

In addition, all Code staff are eligible to receive a share of any flat rate bonus payment based on the results of the year ended 31 August 2018. Any such bonus is likely to be approximately £1,000 and is therefore immaterial in this context.

In summary, the Company avoids basing rewards on variable remuneration but pays what is believed to be fair fixed remuneration. Equity ownership amongst all colleagues, not only Code staff, is encouraged. Each individual caught by the Code is therefore focused not only on short term reward (which is predominantly of a fixed nature) but also on long term shareholder value creation.

 

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