Pillar 3 Disclosure
The Capital Requirements Directive (“CRD”) represents the EU’s interpretation and application of the proposals arising from the Basel Committee to provide a framework for the international convergence of capital standards across all European regulated firms other than insurance companies.
The CRD sets out a three-pillar framework:
Pillar 1: Rule-based minimum capital requirements;
Pillar 2: Supervisory review and the setting of capital requirements for individual firms through the Individual Capital Adequacy Assessment Process (“ICAAP”); and
Pillar 3: Disclosure requirements.
The disclosures detailed in this document relate to Phanar Asset Management UK Ltd. (“Phanar”) and are made as of 28 February 2021.
This Pillar 3 disclosure document explains the basis of preparation of certain capital requirements and provides information about the management of specific risks. The disclosures are not subject to audit, do not constitute any form of audited financial statements and have been produced solely for the purposes of fulfilling the Pillar 3 requirements. These disclosures have been reviewed and approved by the Phanar Board of Directors and are published on the corporate website:
Phanar Asset management (UK) Ltd. will report their Pillar 3 disclosure annually. These disclosures are based on the company’s position as at end of February. The Pillar 2 (ICAAP) capital requirements are excluded from this summary but are reviewed annually or upon material change.
Phanar Asset management (UK) Ltd is authorised and regulated by the Financial Conduct Authority and as such is subject to minimum capital requirements of € 50,000 as it is a BIPRU firm. The company is owned by its shareholders.
The Pillar 3 disclosures in this document relate solely to Phanar Asset Management (UK) Ltd.
Phanar Asset Management (UK) Ltd. provides investment management and advisory services to segregated mandates and mutual funds. Ultimately, Phanar Asset Management (UK) Ltd. is owned by its shareholders.
The Board of Phanar Asset Management (UK) Ltd. is committed to a robust control environment throughout the organisation, is accountable for risk and is responsible for oversight of the risk management process for Phanar Asset Management (UK) Ltd. The Board of Phanar Asset Management (UK) Ltd. regularly reviews the key risks that Phanar Asset Management (UK) Ltd. faces, and by fully understanding each risk, the associated mitigating actions and the overall control environment, the Board can be comfortable with the management of those risks.
Risks are assessed using a top down and bottom up approach to ensure all areas of business and compliance risks are identified. The Committee assesses, analyses, investigates and escalates all matters which may expose Phanar Asset Management (UK) Ltd. to unacceptable risk. Risk mitigation is achieved through effective controls taking preventative action where required, strong governance and a risk aware culture.
Risk Management by Risk Category
Phanar Asset Management (UK) Ltd.’s risk management focuses on the main areas of credit, market and operational risk. Phanar Asset Management (UK) Ltd. has clear risk management objectives and policies to mitigate each category of risk. These include processes to identify, measure, monitor, manage and ultimately mitigate risk.
Phanar Asset Management (UK) Ltd.’s credit risk is its exposure to a counterparty or a group of connected counterparties failing to meet their obligations, including third-party debtors (fee income and other debtors). There is no history of losses in respect of third-party debtors, as they are carefully monitored and are low risk by nature. The key credit risk facing Phanar Asset Management (UK) Ltd. is the failure of a counterparty where Phanar Asset Management (UK) Ltd.’s operating cash or surplus cash is held.
Phanar Asset Management (UK) Ltd. does not carry out any principal trading as this is not permitted under its FCA Scope of Permission Notice. In addition, it does not provide any seed capital for products managed or operated by the Phanar Asset Management (UK) Ltd.
Phanar Asset Management (UK) Ltd. has exposure to foreign exchange risk on foreign currency cash deposits held and management fee accruals that are denominated in foreign currencies.
The Phanar Asset Management (UK) Ltd. policy with regard to foreign currency cash balances is to maintain sufficient balances in order to be able to pay foreign currency invoices as they fall due but to otherwise convert all foreign currency receipts back into local currency. This is consistent with the requirement not to hold non-local currency balances for speculative purposes.
The main foreign exchange risk that Phanar Asset Management (UK) Ltd. is exposed to is via its fee income, as the much of its fee income is denominated in currencies other than sterling.
Phanar Asset Management (UK) Ltd.’s operational risk is its exposure resulting from inadequate or failed internal processes, people and systems or from external events. Although operational risk is inherent in Phanar Asset Management (UK) Ltd.’s investment management activities, Phanar Asset Management (UK) Ltd. strives to avoid it. Operational Risk is managed through a proactive approach to identifying operational risks and closely monitoring the effectiveness of the controls designed to mitigate and monitor those risks.
Phanar Asset Management (UK) Ltd.’s business risk is its dependence on fee income derived from client activity (advisory and discretionary asset management business). This could be the termination of mandates, unsatisfactory performance or changes to the regulatory environment. The exposure to Business Risk is mitigated by engaging in various business activities which should allow for adequate diversification and provide a certain resilience against changes in the business environment.
Phanar Asset Management (UK) Ltd.’s Reputational Risk is its reliance on its reputation for providing clients with high quality advise, market conform performance and a competent client relationship process. It is therefore essential that Phanar Asset Management (UK) Ltd.’s has guidelines in place which ensure the above service level.
Phanar Asset Management (UK) Ltd. has adopted a remuneration policy that complies with the requirements of chapter 19A of the FCA’s Senior Management Arrangements, Systems and Controls Sourcebook (“SYSC”), as interpreted in accordance with the FCA’s guidance publication entitled “General Guidance on Proportionality: The Remuneration Code (SYSC 19A) & Pillar 3 Disclosures on Remuneration (BIPRU 11)” and subsequent items of guidance issued by the FCA.
As a BIPRU Limited Licence firm, Phanar Asset Management (UK) Ltd falls within proportionality Tier 3. Phanar Asset Management (UK) Ltd has concluded, on the basis of its size and the nature, scale and complexity of its legal structure and business that it does not need to appoint a remuneration committee.
The Board sets individual remuneration packages of all employees, directors and partners, including Code Staff in accordance with the FCA rules on remuneration. Code Staff have been identified in accordance with FCA rules.
Remuneration consists of fixed pay (salary and benefits) and performance-related discretionary bonus payments. Performance-related pay is designed to reflect success or failure against a range of targets.
Phanar Asset Management (UK) Ltd. provides long-term incentives which are designed to link reward with the success of Phanar Asset Management (UK) Ltd.
CAPITAL RESOURCES AND CAPITAL ADEQUACY
Capital adequacy is assessed formally on a regular basis. This involves comparing capital resources with the capital requirement and assessing whether there is a sufficient surplus of capital resources.
Phanar Asset Management (UK) Ltd.’s capital resources are made of Tier 1 capital (called up share capital and audited reserves).
Phanar Asset Management (UK) Ltd. takes a prudent approach to the management of its capital base. This is reviewed on a quarterly basis to make sure that Phanar Asset Management (UK) Ltd. holds capital in excess of regulatory requirements.
Phanar Asset Management (UK) Ltd.’s capital resources are entirely Tier 1 capital, consisting of capital contributions and audited reserves.
Phanar Asset Management (UK) Ltd.’s capital requirement is the higher of Pillar 1 capital plus Pillar 2 capital (as described below) or the wind down requirement. The wind down requirement is the forecasted cost of winding the business down in an orderly manner, which takes all contractual obligations into consideration.
Phanar Asset Management (UK) Ltd. is a limited licence €50k firm with no trading book. This means that it’s minimum regulatory capital requirement (Pillar 1) is the highest of the following three calculations:
It’s base capital requirement of €50,000.
The sum of its market- and credit risk requirements
It’s fixed overhead requirement (which represents 25% of expenses from the most recent set of audited financial statements less non-recurring expenses)
For its Pillar 1 regulatory capital calculation of credit risk, under the credit risk capital component Phanar Asset Management (UK) Ltd. has adopted the standardised approach (BIPRU 3.4) and the simplified method of calculating risk weights (BIPRU 3.5).
The ICAAP provides an assessment of Phanar Asset Management (UK) Ltd.’s risks, risk appetite and determines the level of capital is required to deal with those risks. For each key risk, Phanar Asset Management (UK) Ltd. has identified the probability and severity of the risk materialising and the mitigating factors adopted by the firm. Stress and scenario analysis is also included as part of the process.
The ICAAP assessment is reviewed by the Board of Phanar Asset Management (UK) Ltd., on an annual basis or when a material change to the business occurs. The Board reviews and endorses the risk management objective annually or when a material change to the business occurs at the same time as reviewing and signing off the ICAAP document.
The level of the Pillar II assessment is outside the scope of this disclosure document.
Phanar Asset Management (UK) Ltd. Capital Requirement
As of 28 February 2021, Phanar Asset Management (UK) Ltd.’s capital resources amounted to £ 194.138,- while Phanar Asset Management (UK) Ltd. had a capital requirement of £ 81.082,-.
Phanar Asset Management (UK) Ltd. therefore maintains an adequate level of total capital resources to satisfy the regulatory capital requirements.
This document is issued by Phanar Asset Management (UK) Ltd., which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, in part or in full, without prior authorisation.
Short risk warning / disclaimer: The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.
Past performance is not a reliable indicator of future performance. Phanar Asset Management (UK) Limited is authorised and regulated by the Financial Conduct Authority (FRN 747254)
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