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Our commitment, first and foremost, is to protecting and respecting the privacy of our clients as we understand this is important in establishing trust and confidence between us.
This policy, together with our Terms of Website Use, sets out the basis on which any personal data we collect from you, or that you provide to us, will be processed by us. Please read the following carefully to understand our views and practices regarding your personal data and how we will treat it.
For the purpose of the Data Protection Act 1998 (DPA), Absolute Return Partners LLP (ARP) is the data controller.
We gather information about you for the purpose of serving you better. We cannot do our job properly without having a comprehensive understanding of your financial objectives. The information we gather originates from a variety of sources:
- Information provided by you directly (e.g. registration forms, records of correspondence with you);
- Details of your visits to our site (e.g. traffic data, location data, weblogs and other communication data);
- Information provided by you indirectly (e.g. information provided by your custodian, tax adviser and other advisers); and
- Information that is publicly available (e.g. newspapers, the Internet, etc.).
Transmission and storage of Information
Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our site and so any transmission is at your own risk.
Once we have received your information, this information will be stored in accordance with the FCA rules and the DPA. Information is kept mostly in electronic form, but certain forms are stored in paper form as well. We will use strict procedures and security features to safeguard your personal information and do our utmost to prevent unauthorised access. Access to such information is restricted to those members of staff who are trained in the proper handling of client information.
We will not sell any information obtained about you nor will we share your personal information with our service providers. We may, however, share information with regulatory or other public authorities or other third parties if we are required to do so by law, or in order to enforce or apply our legal rights in our Terms of Website Use or otherwise. This includes exchanging information with other companies for the purposes of fraud protection and credit risk reduction. We may also share your personal information with any entity that is connected with us.
Use of Information
In order to provide services to you we will need to hold personal information about you that might be held in physical or electronic form.
We limit the use of client information to what we reasonably believe will help us to deliver a superior service, administer our business, manage our risks and comply with applicable laws and regulations.
In particular, you agree that we may process, transfer and disclose your personal information for the following purposes:
- Providing you with services which may include us making data available to our agents for the purpose of executing orders, settling any resulting transactions, holding investments and money for you or any other related purpose. You agree that this may include transmitting data to third parties including our nominees and agents who may be outside the European Economic Area should you as us to execute an order relating to an overseas investment and that this may not be subject to the same level of protection;
- Notifying you of changes to our services;
- Verifying your identity for the purpose of detecting and preventing fraud, money laundering and terrorist financing; and
- Complying with any contractual obligations, a court orders, regulatory requirements of, or requests by, the Financial Conduct Authority, HM Revenue & Customs (or any other such body or organisation).
We do not discuss any client related issues with members of the press. Occasionally, we may attend or present at industry conferences. During such events, no reference to our client relationships will be made, not even on a "no names" basis.
We will never sell or trade your personal information to third parties.
Links to other websites
Our site may, from time to time, contain links to and from the websites of our partner networks, advertisers and affiliates. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.
Access to information
The DPA gives you the right to access information held about you. Your right of access can be exercised in accordance with the DPA. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.
To ensure that content from our site is presented in the most effective manner for you and for your computer.
If you have reason to believe that our records contain inaccurate or misleading information about you, please inform us immediately.
Conflicts of Interest Policy
In accordance with our commitment and obligations to our clients, Absolute Return Partners LLP (ARP) seek to ensure that our clients are properly treated where there are or could possibly be conflicts of interest. Conflicts of interest may arise between ARP and one of its clients or between one client of ARP and another client. ARP’s failure to act in the best interests of a client may involve a material risk of damage to the interests of that client. We therefore take our responsibilities in this regard very seriously. In the following, we set out our policy for avoiding conflicts of interest.
What conflicts of interest could arise?
The nature of the financial services industry is such that conflicts of interest can sometimes develop. Generally, a conflict of interest arises where the interests of the financial services company and its associates are different from its client or clients. For example, where ARP discharges its duty to one client it might create a conflict with another client.
How are conflicts managed?
Our Conflicts of Interest Policy identifies the types of conflicts we face and the controls we have put in place to mitigate those conflicts. The policy is reviewed regularly to ensure the record of conflicts is up-to-date and relevant and the appropriate mitigating controls are in place.
ARP has implemented procedures and controls and segregations of duties. Staff are segregated operationally, such that they report to functional managers and each have distinct password protected IT access.
ARP also has specific policies and procedures on when and how employees are permitted to undertake personal account transactions, restrictions on the offering and receipt of gifts to or from clients and other businesses counterparties. We also monitor our staff’s external interests to ensure they do not conflict with their duties to ARP and its clients.
Finally, our remuneration policy is designed to ensure that remuneration structures do not create conflicts of interest between members of staff and our clients.
Any client may request a full Conflicts of Interest Policy.
The Partnership is authorised and regulated by the Financial Conduct Authority as a Collective Portfolio Management Investment (‘CPMI’) Firm and, so, it is subject to FCA Rules on remuneration. These are contained in the FCA's Remuneration Code located in the SYSC Sourcebook of the FCA’s Handbook.
CPMI Firms are required make a remuneration disclosure in respect of the whole of their business, i.e. both MIFID and AIFMD. The specific requirements of the AIFMD remuneration disclosure are set out in the Annual Report of the AIF(s).
The Remuneration Code (‘the RemCode’) covers an individual’s total remuneration, fixed and variable. The Partnership incentivises staff through a combination of the two.
Our policy is designed to ensure that we comply with the RemCode and our compensation arrangements:
- are consistent with and promotes sound and effective risk management;
- do not encourage excessive risk taking or risk-taking which is inconsistent with the risk profiles or instruments of incorporation of the AIFs we manage;
- include measures to avoid conflicts of interest; and
- are in line with the Partnership’s business strategy, objectives, values and long-term interests.
Enshrined in the European remuneration provisions is the principle of proportionality. The FCA has sought to apply proportionality in the first instance by instituting two tests. Firstly, a firm that is significant in terms of its size must disclose quantitative information referred to in BIPRU 11.5.18R at the level of senior personnel. Secondly, that a firm must make disclosure that is appropriate to the size, internal organisation and the nature, scope and complexity of their activities.
The firm is not ‘significant’ (that is to say has relevant total assets <£50bn*) and so makes this disclosure in accordance with the second test (BIPRU 11.5.20R(2)).
* average total assets on the last three accounting dates.
Application of the Requirements
We are required to disclose certain information on at least an annual basis regarding our Remuneration policy and practices for those staff whose professional activities have a material impact on the risk profile of the firm. Our disclosure is made in accordance with our size, internal organisation and the nature, scope and complexity of our activities. The Partnership’s full Remuneration Policy is available at the request of investors.
Summary of the Policy
- The Partnership’s policy has been agreed by the Senior Management in line with the Remuneration principles laid down by the FCA.
- Due to the size, nature and complexity of the firm, we are not required to appoint an independent remuneration committee.
- The Partnership’s policy will be reviewed as part of annual process and procedures, or following a significant change to the business requiring an update to its internal capital adequacy assessment.
- The Partnership’s ability to pay bonus is based on the performance of the Partnership overall and derived after its fund’s returns have been calculated by client appointed third party administrators.
- Individuals are rewarded based on their contribution to the overall strategy of the business.
- Investment Generation
- Investment Trading
- Sales & Marketing
- Other factors such as performance, reliability, effectiveness of controls, business development and contribution to the business are taken into account when assessing the performance of the senior staff responsible for the infrastructure of the firm.
Aggregate quantitative information on remuneration broken down by significant business division (where such business divisions exist).
Aggregate compensation expense for 2015 financial year
Investment Management and Trading
Based on general proportionality, firms with distinct business divisions should provide this disaggregated information but may exclude this where no such divisions exist. For the purposes of alternate investment management firms, it is normally deemed appropriate to consider the functions of investment management and trading as being within the same business division.
Aggregate quantitative information on remuneration, for staff whose actions have a material impact on the risk profile of the firm/of those staff of the Firm who are fully or partly involve in the activities of the AIF.
Aggregate compensation expense for 2015 financial year
Others/ (If applicable)
Partnership profits allocated to members of the LLP are normally disclosed in aggregate in the report and accounts.
We may omit required disclosures where we believe that the information could be regarded as prejudicial to the UK or other national transposition of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data.
We have made no omissions on the grounds of data protection.
The UK Stewardship Code
Under COBS 2.2 of the FCA Handbook, Absolute Return Partners LLP (ARP) is required to make a public disclosure in relation to the nature of our commitment to the UK Stewardship Code which was published by the Financial Reporting Council (FRC) in July 2010.
The Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practice on engagement with investee companies and is to be applied by firms on a "comply or explain" basis.
ARP acts either as investment manager or investment adviser to one fund that invest in global (including UK) equities:
- The Global Equity Alpha Fund
The UK Stewardship Code is thus relevant to some aspects of our business. The following principles, which we adhere to, relate specifically to the two abovementioned funds.
Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities. At the heart of the investment process is a desire to eliminate human error which we believe is the key to generating long-term shareholder value. We recognise that the investment process we apply is not in tune with all elements of the Code; however, the spirit of the code which promotes the creation of long-term shareholder value is an objective that we fully embrace.
Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed. The investment approach is identical throughout the world and the average holding period is measured in years; yet conflicts of interest may still arise. Our Conflicts of Interest Policy is summarised on our website.
Institutional investors should monitor their investee companies. We never meet the companies in which we are invested; neither do we attend general meetings. This policy is a result of the investment decision process which seeks to minimise subjectivity. However, this does not imply that we do not monitor the companies in which we are invested; they are in fact monitored continuously.
Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value. If the companies in which we are invested are no longer deemed of the highest economic quality, we will under normal circumstances sell when we next rebalance the portfolio. It is not part of the investment approach to engage with management for the purpose of influencing corporate strategy.
Institutional investors should be willing to act collectively with other investors where appropriate. We are in principle prepared to act collectively with other investors whenever appropriate. Having said that, the investment methodology dictates change when a company no longer meets the strict quality criteria. For that reason, we are likely to have sold our shares by the time collective action becomes relevant.
Institutional investors should have a clear policy on voting and disclosure of voting activity. The success of the investment strategy is predicated upon the ability to identify companies of the highest economic quality which are usually managed by people of the highest quality. For that reason we are usually in support of management. Having said that, since it is the objective to eliminate as much subjectivity as possible, we do not normally vote.
Institutional investors should report periodically on their stewardship and voting activities.The investment process has been communicated to all investors in our equity products. It is our policy to communicate to investors any action which may deviate from the general policy outlined in this policy document. We herewith certify that we have never used our right to vote; nor have we ever been involved in stock lending activities.
Other Disclosures (Pillar 3)
The Capital Requirements Directive (‘CRD’) and Alternative Investment Fund Management Directive (‘AIFMD’) together establish a revised regulatory capital framework across Europe governing the amount and nature of capital investment firms must maintain.
In the United Kingdom, CRD and AIFMD have been implemented by the Financial Conduct Authority (‘FCA’) in its regulations via the General Prudential Sourcebook (‘GENPRU’); the Prudential Sourcebook for Banks, Building Societies and Investment Firms (‘BIPRU’); and the Interim Prudential Sourcebook for Investment Business ("IPRU (INV)").
CRD consists of three ‘Pillars’:
- Pillar 1 sets out the minimum capital amount that meets a firm’s credit, market and operational risk capital requirement.
- Pillar 2 requires the firm to assess whether its capital reserves, processes, strategies and systems are adequate to meet Pillar 1 requirements and to further determine whether it should apply additional capital, processes, strategies or systems to cover any other risks it may be exposed to.
- Pillar 3 requires disclosure of specified information about the underlying risk management controls and capital position to encourage market discipline.
AIFMD adds further capital requirements; primarily based on the Alternative Investment Fund (‘AIF’) assets the firm has under management and associated professional liability risks.
Pillar 3 Disclosure
The rules in BIPRU 11 set out the provision for Pillar 3 disclosure. This Pillar 3 disclosure document has been prepared by Absolute Return Partners LLP (‘ARP’) in accordance with the requirements of BIPRU 11 and is ratified by the Partners. Unless otherwise stated, all figures are as at the 30 April 2015 financial year-end.
Pillar 3 disclosures will be issued on an annual basis after the year end and published with the annual accounts. We are permitted to omit required disclosures if we believe that the information is immaterial; such that omission would be unlikely to change or influence the decision of a reader relying on that information for the purpose of making economic decisions about the firm.
In addition, we may omit required disclosures where we believe that the information is regarded as proprietary or confidential. In our view, proprietary information is that which, if it were shared, would undermine our competitive position. Information is considered to be confidential where there are obligations binding us to confidentiality with our customers, suppliers and counterparties.
We have made no omissions on the grounds that it is immaterial, proprietary or confidential.
Scope and application of the requirements
ARP is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. ARP is categorised as a, Collective Portfolio Management Investment Firm (‘CPMI’) Firm’ by the FCA for capital purposes. ARP is an investment management firm and as such has no trading book exposures.
ARP is not a member of a group and so is not required to prepare consolidated reporting for prudential purposes
ARP has established a risk management process in order to ensure that it has effective systems and controls in place to identify, monitor and manage risks arising in the business.
The management of the risks of the Partnership is carried out by Steven Bartel who is responsible for the oversight of the Partnership’s compliance and anti-money laundering controls and for financial controls and risk management. The Partnership’s Management Committee meets at least twice a month with all decisions being documented and all partners meet formally on an ad hoc basis.
The Management Committee receives and reviews the Partnership’s management accounts monthly. On the basis of the management accounts it is possible to monitor and project the Partnership’s capital resources.
The Partnership has a Compliance & Procedures Manual (updated in July 2015), a compliance monitoring programme and an ICAAP process that ensures it is able to manage the risks that it faces. The Partnership is supported in its compliance arrangements by a part-time compliance manager and in its accounting arrangements by an independent provider.
Given the nature and activities of the Partnership, its risk appetite is low. It does not deal in a principal capacity and therefore does not have a trading book. The key risks that it faces are as follows:
The main market risk of the Partnership is foreign exchange risk as a result of its management fees being calculated in a variety of currencies whilst the Partnership’s operating expenditures are mostly in sterling. This risk is monitored by the COO who actively hedges the risks the Partnership is exposed to. Net of the hedging strategy, the Partnership’s exposure to market risk is thus immaterial.
Interest Rate Risk
The Partnership is not exposed to interest rate risk as it does not rely on borrowings to meet operating expenditure and does not make loans to clients.
The main credit risk of the Partnership is a defaulting debtor. As noted above, the Partnership does not extend credit to its clients. The key credit exposures that the Partnership has are management fees receivable from its clients. Cash balances are held in overnight deposit accounts and readily available.
Under Pillar 1, cash balances are risk weighted at 1.6% and management fees receivable at 8%. The partners believe that the Pillar 1 risk weight is adequate and that a Pillar 2 adjustment is not required.
The liquidity risk that the Partnership faces is the inability to settle its liabilities as they fall due. Part of the risk management structure noted above monitors the liquidity position of the Partnership at all times. Bank reconciliations and cash flows are prepared monthly to ensure that all liabilities are understood and able to be settled as they fall due.
Cash resources of the Partnership are maintained in accounts with instant access as noted above.
The Partnership is aware of the reputational damage that could result from a failure in operating procedures. The Partnership’s key policy and procedures are documented in the Compliance & Procedures Manual and monitored via the compliance monitoring programme.
Changes to procedures are communicated to partners, employees and Appointed Representatives as they occur and, if significant, all individuals will provide a written confirmation of their understanding and acknowledgement of the changes.
Partners, employees and Appointed Representatives remain aware of the policies and procedures and periodically confirm their compliance via a semi-annual compliance declaration.
Professional Liability Risk
The Partnership has a legal responsibility for risks in relation to investors, products & business practices including, but not limited to; loss of documents evidencing title of assets of the AIF; misrepresentations and misleading statements made to the AIF or its investors; acts, errors or omissions; failure by the senior management to establish, implement and maintain appropriate procedures to prevent dishonest, fraudulent or malicious acts; improper valuation of assets and calculation of unit/share prices; and risks in relation to business disruption, system failures, process management. The Partnership is aware of, and monitors, a wide range of risks within its business operations and towards its investors. The Partnership has in place appropriate internal operational risk policies and procedures to monitor and detect these risks. These procedures and risks are documented, demonstrating how ARP aims to mitigate these risks. This is reviewed annually.
The Firm holds additional own funds of £563k, equating to 0.3% of the total AIF assets under management.
As the Partnership is a €125k Full Scope CPMI Firm; its capital requirements are the higher of:
€125,000 + 0.02% of AIF AUM; and
The sum of the market & credit risk requirements; or
The fixed overheads requirement (‘FOR’) which is essentially 25% of the firm’s operating expenses less certain variable costs.
It is the Partnership’s experience that the Fixed Overhead Requirement establishes its capital requirements.
Capital Resource Requirements
The Partnership’s Pillar 1 requirement is calculated as the higher of:
The Base Capital Requirement (€125k);
The sum of the Credit Risk Capital Requirement and the Market Risk Capital Requirement;
The Fixed Overheads Requirement (3 months’ expenditures of the Partnership).
In the opinion of the partners, the higher of these three is always likely to be the Fixed Overheads Requirement and therefore none of the Base Capital Requirement, the Credit Risk Capital Requirement or the Market Risk Capital Requirement are material to the Partnership as set out above.
Pillar 1 and Pillar 2
As at the date of this report (September 2015) the Partnership has a surplus of capital resources over its Pillar 1 capital resources requirement.
The Partnership has undertaken an Internal Capital Adequacy Assessment Process (ICAAP) to determine whether it needs any further regulatory capital due to the risks it faces as set out above.
As a result of this the Partnership has concluded that it is sufficiently capitalised to meet its requirements under Pillar 2.