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.

 

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 body of the firm which exercises daily oversight of its activities, in conjunction with the Group’s Head of Finance. The Designated Members are the Governing Body of the Firm and each is considered to be a Senior Manager, as defined by the rules relating to the Senior Managers and Certification Regime. 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:

  • In anticipation of the Senior Managers and Certification Regime, a Risk Committee was established in 2019 to look at risk from a group perspective and allocate responsibility for managing those risks accordingly. Three key areas of risk and control focus for CIP have been identified as part of the Risk Committee’s work: processes, regulatory risk and people. Each of these is being addressed and the introduction of the Senior Managers and Certification Regime has driven individual accountability and awareness of conduct issues across the group, thus further mitigating internal risks. The whole is overseen by a group Executive Committee which meets at least monthly, is responsible for advising the Managing Partner on all aspects of group strategy and monitors operational performance.  Its members comprise Heads of operational areas, including Compliance and Finance. It is served by the Partnership Secretary.
  • A detailed compliance monitoring programme, undertaken by our Compliance function.
  • The Head of Compliance prepares quarterly reports for Partners meetings which monitor progress in dealing with the identified risks; and
  • 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

Exposure

£

Weighting

Risk Weighted Exposure

£

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

2,048k

20%

410k

Debtors

BIPRU 3.4.129

473k

100%

473k

Investments

BIPRU 3.4.96

0k

100%

0k

Tangible Assets (Fixed assets)

BIPRU 3.4.127

0k

100%

0k

Total

 

2,551k

 

913k

Credit risk capital component

8% of risk weighted exposure

 

 

73k

 

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

£ 226k

 

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. We have modelled the effect on our capital planning forecasts and cash requirements of scenarios in which funds under management remain flat instead of increasing in line with our business plan and a further scenario in which there is a downturn in the market equivalent to 25% from which there is no recovery. Our aim is to ensure that in such conditions we have sufficient regulatory capital. The modelling shows that our regulatory capital would be adequate but actions we would consider 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 and has the resources to provide financial support, although, in accordance with FCA guidance, our analysis does not imply reliance on this type of external shareholder support. Any such investment would be part of a medium-term plan, rather than a short term ‘fix’. 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 which are assigned high credit ratings.

All data is as at 31 August 2020 being the Firm’s year end, except for the Capital Resources, which is as at 30 November 2020. This information was published, following update, approval and publication of the latest ICAAP, on 21 December 2020.

 

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, updated and republished. It was most recently published on the date shown below.

The Firm has nine Code Staff, consisting of individuals identified as material risk takers and/or those holding certified functions - five of them are working members of Castlefield Investment Partners LLP (described as a Partner). The remaining individuals carry out a certified function or are captured by the Code in their capacity as Senior Managers with prescribed responsibilities. These individuals are also CF10 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 residual profits of the LLP, after account is taken of the prior charge on profits represented by fixed prior share of profits. 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 budgeted to be 26%, (2019/20: 26%). The actual percentage may vary depending on the profits for the year but this does not alter the firm’s strategy, which remains that of managing money in a responsible and ethical way.  The partners will only take their variable profit share once these costs have been met.

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 in the Castlefield group who are not in client facing roles and therefore in some cases eligible for target-based remuneration, are eligible for a modest bonus from CPL based on responsibility levels and performance. Mr Eckersley, Ms Mosam, Ms Hanlon and Mr Slattery-Vickers are eligible under this scheme, although any bonus paid to Mr Slattery-Vickers is in respect of his work for ConBrio Fund Partners Limited, a separate group company.  At inception in 2018 the bonus pool was calculated as 5% of targeted or actual underlying profit, whichever was lower. The weightings were based on a simple points-based system and applied only to more senior roles. Group profits were disproportionately high in 2018/19 and for this reason the bonus level was kept at the 2017/18 level with an inflationary uplift. In 2019-20 it is calculated as a percentage of salary without reference to profit. This bonus is discretionary, does not exceed 10% of total remuneration and is paid only if the firm has enough regulatory capital.

 

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. No bonus was paid in respect of 2019-20 and it is assumed that there will be no bonus due in respect of 2020-21. Taking account of both CIP and CPL remuneration, Mr Eckersley receives 81% fixed remuneration. He receives 74% 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 Mr Eckersley, Ms Hanlon (who is not a partner in CIP but is captured by the Remuneration Code in her capacity as CF10 for the Firm), Ms Mosam (in her capacity as MLRO) and Mr Slattery-Vickers (who holds a certified function). All are employed by CPL and receive a fixed salary, including pension contributions of 5% of qualifying earnings in respect of their group-wide roles. All have an interest in the equity capital of the holding company and are entitled to join the Castlefield Share Incentive Plan. Their shareholding represents their main long-term incentive.

In addition, all of Mr Eckersley, Ms Mosam, Ms Hanlon and Mr Slattery-Vickers, as employees of CPL, are eligible to receive a share of any flat rate bonus payment based on the results of the year ended 31 August 2020. This bonus is 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 15th December 2020 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 updated in March 2020 to reflect Code Staff changes.

The Company has five Code Staff, consisting of individuals holding Significant Influence Functions three of whom are directors of the Company and therefore Senior Managers with prescribed responsibilities. The other individuals are captured by the Code in their capacity as CF10 and MLRO for the Company.

Remuneration Scheme applying to those employed to work for the UCITS: This applies to Mr Slattery-Vickers, who is a director and 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 holds a group wide role and receives fixed remuneration plus pension contributions of 5% of qualifying earnings from Castlefield Partners Limited for her role as CF10 and Mr Eckersley and Ms Holland also hold group-wide roles and their remuneration is for their role across the group as is Ms Mosam’s, the group MLRO. They receive fixed remuneration, including pension contributions of 5% of qualifying earnings, in respect of their Senior Manager roles, including prescribed responsibilities. None of the Code staff receives 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 as a designated member of Castlefield Investment Partners LLP (‘CIP’), which is itself covered by the BIPRU Remuneration Code. The variable element of his remuneration from CIP is forecast to be 26%. When the remuneration from CPL is taken into consideration, the variable element falls to 19%. The profit share of Mr Eckersley must be agreed by Castlefield Partners Limited (CPL). Like CFP, CIP 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: Assuming profit levels are in line with budget or exceed budget, all Partners and Associates in the Castlefield group who are not in client facing roles and therefore in some cases eligible for target-based remuneration, are eligible for a modest bonus from CPL based on responsibility levels and performance. Mr Eckersley, Ms Mosam, Ms Hanlon and Ms Cohen are eligible under this scheme.  At the inception in 2018 the bonus pool was calculated using 5% of targeted or actual underlying profit, whichever was lower. The weightings were based on a simple points-based system and applied only to more senior roles.  Group profits were disproportionately high in 2018/19 and for this reason the bonus level was kept at the 2017/18 level with an inflationary uplift. In 2019-20 it is calculated as a percentage of salary without reference to profit. This bonus is discretionary, does not exceed 10% of total remuneration and is paid only if the firm has enough regulatory capital.

 

 

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. No bonus was paid in respect of 2019-20 and it is assumed that there will be no bonus due in respect of 2020-21.

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 2020. This bonus is 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.

The Company’s detailed Remuneration Policy was approved for publication on 15th December 2020 and was accordingly subsequently published via this web site.