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The information provided on this site is being communicated by Albemarle Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority.  It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or that would subject Albemarle Asset Management Limited (“we” or “us”), to any regulation under, or registration requirement within, such jurisdiction or country. It may be illegal to download the information contained in this site in certain countries and Albemarle Asset Management Limited disclaims all responsibility if you download any information from this site in breach of any law or regulation of the country in which you are residing.

All information and material on this Website is for information only and does not constitute an offer or recommendation or invitation to subscribe or buy or sell any investment or subscribe to any investment management or advisory service or form the basis of any contract or commitment whatsoever. The content within this Web Site is not, under any circumstances, intended for distribution to the general public and distribution in the UK is restricted to those Investment professionals defined under Articles 19 & 49 of Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 & Articles 14 & 22 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemption) Order 2001 and/or such other persons as are permitted to receive this document under The Financial Services and Markets Act 2000.

With investment, your capital is at risk and the value of an investment and the income from it can go up as well as down, it may be affected by exchange rate variations and you may not get back the amount invested. Past performance is not necessarily a guide to future performance.

We do not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such.  Opinions expressed herein reflect the opinion of Albemarle Asset Management Limited and are subject to change without notice. No part of this document may be reproduced in any manner without the written permission of Albemarle Asset Management Limited. This information should be read in conjunction with the relevant fund documentation which may include the fund’s prospectus, simplified prospectus or supplement documentation and if you are unsure if any of the products and portfolios featured are the right choice for you, please seek independent financial advice provided by regulated third parties.

REGULATORY DISCLAIMER

 

UK Stewardship Code

Introduction

As a firm authorised and regulated by the FCA, Albemarle Asset Management Limited is required to either disclose its compliance with or explain its non-compliance with the principles set out in the UK Financial Reporting Council’s Stewardship Code (the “Stewardship Code”).

The Code is a voluntary code and sets out a number of principles relating to engagement by investors with UK equity issuers. Investors that commit to the Code can either comply with it in full or choose not to comply with aspects of the Code, in which case they are required to explain their non-compliance.

Albemarle Asset Management Limited manages assets across a number of discretionary strategies, however the investment processes do not involve significant engagement with underlying investee companies in any of these strategies.

While the Firm generally supports the objectives that underlie the Code, the Firm has chosen not to commit to the Code.

 

Pillar 3 Disclosure

Introduction

The Capital Requirements Directive (‘the Directive’) of the European Union establishes a revised regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment firms must maintain.

In the United Kingdom, the Directive has been implemented by the Financial Conduct Authority (‘FCA’) in its regulations through the General Prudential Sourcebook (‘GENPRU’) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (‘BIPRU’).

The FCA framework consists of three ‘Pillars’:

Pillar 1 sets out the minimum capital amount that meets the 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 further determine whether it should apply additional capital, processes, strategies or systems to cover any other risks that 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.

The rules in BIPRU 11 set out the provision for Pillar 3 disclosure. This document is designed to meet our Pillar 3 obligations.

The Pillar 3 disclosure document has been prepared by Albemarle Asset Management Limited (“The Firm”) in accordance with the requirements of BIPRU 11 and is verified by the senior management. Unless otherwise stated, all figures are as at the financial year-end.

Pillar 3 disclosures will be issued on an annual basis after the year end.

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

The Firm is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. The Firm is categorised as a Limited Licence Firm by the FCA for capital purposes.

It is an investment management firm and as such has no trading book exposures.

The Firm is not a member of a group and so is not required to prepare consolidated reporting for prudential purposes.

Risk management

The Firm 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 Senior Management team takes overall responsibility for this process and the fundamental risk appetite of the Firm. The team has responsibility for the implementation and enforcement of the Firm’s risk principles.

Senior Management meet on a regular basis and discuss current projections for profitability, cash flow, business planning and risk management. Senior Management engage in the Firm’s risks though a framework of policy and procedures having regard to the relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required.

The Senior Management team has identified that business, operational, market and credit are the main areas of risk to which the Firm is exposed. Annually the Senior Management team formally review their risks, controls and other risk mitigation arrangements and assess their effectiveness.

Management accounts demonstrate continued adequacy of the Firm’s regulatory capital and are reviewed on a regular basis.

Appropriate action is taken where risks are identified which fall outside of the Firm’s tolerance levels or where the need for remedial action is required in respect of identified weaknesses in the Firm’s mitigating controls.

Business risks

Specific risks applicable to the Firm come under the headings of business, operational, credit and market risks.

Business risk

The Firm’s revenue is reliant on the performance of the existing funds under management and its ability to launch new funds/obtain new mandates. As such, the risk posed to the Firm relates to underperformance resulting in a decline in revenue and adverse market conditions hindering the launch of new funds and ultimately the risk of redemptions from the funds managed by the Firm. This risk is mitigated by the significant levels of capital held by the Firm which will continue to cover all the expenses of the business.

Operational risk

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 to manage. These relate to systems failure, failure of a third party provider, potential for serious regulatory breaches, and market abuse. Appropriate polices are in place to mitigate against these risks, which includes taking out adequate professional indemnity insurance, compliance training for employees and business continuity planning.

Credit risk

The Firm is exposed to credit risk in respect of its debtors, investment management and performance fees billed and cash held on deposit.

Management fees are drawn monthly or quarterly from the funds managed and performance fees are drawn quarterly or annually where applicable. The Firm considers that there is little risk of default by its clients. All bank accounts are held with large international credit institutions.

Given the nature of the Firm’s exposures, no specific policy for hedging and mitigating credit risk is in place. The Firm uses the simplified standardised approach detailed in BIPRU 3.5.5 of the FCA Handbook when calculating risk weighted exposures of 1.6% (Cash in Bank) and 8% in respect of its other assets.

Market risk

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

Since the Firm takes no trading book positions on its balance sheet, the primary market risk relates to fluctuations in the value of its revenues due to movements in currency rates. The Firm maintains multi-currency bank accounts and uses currency contracts to hedge this risk.

The Firm calculates its foreign exchange risk by reference to the rules in BIPRU 7.5.1 of the FCA Handbook and applies an 8% risk factor to its foreign exchange exposure.

Liquidity risk

The Firm is required to maintain sufficient liquidity to ensure that there is no significant risk that its liabilities cannot be met as they fall due or to ensure that it can secure additional financial resources in the event of a stress scenario.

The Firm retains an amount it considers suitable for providing sufficient liquidity to meet the working capital requirements under normal business conditions. The Firm has always had sufficient liquidity within the business to meet its obligations and there are no perceived threats to this given the cash deposits it holds. Additionally, it has historically been the case that all management fee debtors are settled promptly, thus ensuring further liquidity resources are available to the Firm on a timely basis. The cash position of the Firm is monitored by the Senior Management on a monthly basis.

The Firm maintains a liquidity risk policy which formalises this approach.

Regulatory capital

The main features of the Firm’s capital resources for regulatory purposes are as follows as at 31/12/2019:

 

Tier 1 Capital                                                   £425, 000

Tier 2 Capital                                               –

Tier 3 Capital                                               –

Total capital resources requirement                £425, 000

 

Our Firm is small with a simple operational infrastructure. Its market risk is limited to foreign exchange risk on its accounts receivable in foreign currency, and credit risk from management and performance fees receivable from the funds under its management. The Firm follows the standardised approach to market risk and the simplified standard approach to credit risk.

The Firm is not required to calculate an operational risk capital charge though it considers this as part of its process to identify the level of risk based capital required.

As discussed above the Firm is a limited licence firm and as such its capital requirements are:

– €50,000

– The sum of the market & credit risk requirements

The FOR is calculated, in accordance with FCA rules, based on the Firm’s previous years audited expenditure as Tier 1 capital is calculated based on 2019 ‘FOR’. The Firm has adopted the standardised approach to credit and market risk and the above figures have been produced on that basis. The Firm is not subject to an operational risk requirement.

 

Remuneration Code Disclosure

Introduction

Albemarle Asset Management Limited (“the Firm”) is authorised and regulated by the Financial Conduct Authority as a Limited Licence 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. The Remuneration Code (“the RemCode”) covers an individual’s total remuneration, fixed and variable. The Firm 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;
  • include measures to avoid conflicts of interest; and
  • are in line with the Firm’s business strategy, objectives, values and long-term interests.

Proportionality

Enshrined in the European remuneration provisions is the principle of proportionality. The FCA have sought to apply proportionality in the first instance by categorising firms into 3 tiers. The Firm falls within the FCA’s third proportionality tier and as such this disclosure is made in line with the requirements for a Level three proportionality Firm.

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 Firm’s policy has been agreed by the Senior Management in line with the RemCode 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 Firm’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 Firm’s ability to pay bonus is based on the performance of firm overall and derived after the fund’s managed returns have been calculated by client appointed third party administrators.

Individuals are rewarded based on their contribution to the overall strategy of the business.

  1. Investment Generation
    b. Investment Trading
    c. Sales & Marketing
    d. Operations

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.

In accordance with CRD III and CEBS guidance the Firm takes a proportionate approach to its Remuneration Code disclosures in line with the nature, scale and complexity of the Firm and as such has chosen not to disclose exact remuneration figures in regards to the remuneration of the four Code Staff identified by the Firm’s Policy. Furthermore, all discretionary remuneration is directly related to the performance of our managed entities and as such staff interests are intrinsically aligned with the interest of the Firm and its Clients vis-à-vis remuneration and performance.

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.

 

EU SHAREHOLDER RIGHTS DIRECTIVE II

 

Engagement Policy

Purpose

This Engagement Policy sets out how Albemarle Asset Management Limited (“Albemarle”) undertakes stewardship and shareholder engagement for its discretionary equity investment strategies. This policy has been written in accordance with the requirements of Directive (EU) 2017/828 and its implementing measures (together, the “Shareholder Rights Directive II”).

 

Introduction

Albemarle Asset Management UK Limited was founded in 2003 in London. In 2007, after a change in the shareholder base, the company started its fund management business.

Albemarle interprets its fiduciary duty to its clients as an effort to maximise the value of their investments over the long-term as well as the short-term, and fulfilment of its stewardship responsibilities not only by participating in shareholder votes, but also by actively engaging with company management. Albemarle believes that faster growth and higher long-term returns can be achieved by implementing sustainable business practices in its own business, as well as in the companies that it invests in.

Albemarle has developed a deep understanding of the complex relationship between business, industry and society and the increasing number of feedback loops between them. It recognises that companies in which it invests are increasingly impacted by technological and regulatory changes, as well as changes in consumer behaviour. It therefore seeks to incorporate an assessment of material environmental and social issues, as well as the quality of governance into its investment research.

 

How Albemarle monitors investee companies

Albemarle investment professionals monitor the public statements of investee companies through financial information platforms like Bloomberg, financial statements and regulatory announcements, reports & accounts, results meetings and capital markets days.

Meetings with the management teams of the companies in which it invests, through one to one meetings and site visits, are an integral part of Albemarle’s fundamental investment process. Albemarle believes a regular dialogue with investee companies plays an important role in stewardship.

Albemarle collects information about the ESG issues discussed in meetings with company management.

During meetings with company management, investment professionals may discuss a variety of topics, such as operating performance, financial performance, management succession, reports and disclosure, proxy proposals, ESG issues or other matters that may present a potential material risk to a company’s long-term financial performance.

Albemarle’s investment professionals can utilise the following tools and resources to help monitor the financial and non-financial performance and risk exposure of investee companies:

  • Company financial reports, regulatory filings, press releases and presentations;
  • Information platforms including Bloomberg;
  • Industry conferences and trade shows;
  • Sell-side research;
  • Research reports; and
  • Data from ESG research providers

 

Strategy and capital structure

Albemarle recognises that minority equity investors do not have control over a company’s strategy, capital allocation or capital structure. Decision-making authority lies with the company’s management and ultimately its board of directors, and shareholders have influence through the periodic election or re-election of board members or through votes on specific resolutions at annual or extraordinary general meetings. Decisions that can have a material impact on long-term shareholder value can be made without a shareholder vote via an AGM or EGM, and in any case there may be pre-existing shareholders with effective or majority voting control.

Consequently, Albemarle’s approach is proactive. Investment opportunities (e.g. price action, regulatory changes, changes in economic or political outlook etc.) do sometimes arise when management teams are unavailable (e.g. in close period), but generally Albemarle’s investment professionals meet the management team of a company before investing in it, as well as scrutinising their public statements. This allows Albemarle’s investment professionals to understand management’s strategy and their thought processes around the use of capital and financial leverage. Albemarle’s investment professionals monitor the strategy and capital structure of investee companies, analysing financial statements as they are produced, assessing execution of a stated strategy, and paying close attention to events like capital investment decisions, shareholder returns, acquisitions and divestments. They also seek to understand the important features of capital structure like the term structure of borrowing, access to working capital and financial obligations that may not appear in their entirety on the balance sheet, and monitor changes in them over time. Albemarle’s investment professionals pay close attention to changes in governance structures (board composition, voting rights, pre-emption rights etc) and management incentives. The aim is to understand Albemarle’s ability to influence corporate decision-making and whether the interests of management are aligned with those of Albemarle’s clients. The interplay between governance and environmental and social issues is discussed separately in the next section, but in practice Albemarle sees them as entirely interlinked with decisions about strategy and capital.

 

Environmental, social and governance (“ESG”) issues

Albemarle’s sustainable investment philosophy stems from a belief that long-term structural changes such as globalisation, inequality and climate change present both financial risks and market opportunities for the companies that it invests in. Albemarle incorporates an assessment of material environmental and social issues, as well as the quality of governance practices, into its investment research and these also inform its stewardship activities. Albemarle believes that the materiality of individual ESG factors differ by company, sector, and region, and consequently does not apply a “one size fits all” approach to risk assessment. Through the establishment of a robust analytical framework, training, risk assessment and engagement, Albemarle’s investment professionals aim to systematically incorporate ESG.

 

How Albemarle engages with investee companies

The decision to engage with the management of an investee company is primarily based on what Albemarle investment professionals believe will maximise shareholder value in the long-term, specifically the value of its clients’ investments. These engagements are undertaken by the same Albemarle investment professionals that perform financial analysis, as part of integrated ESG research. Investment professionals may engage with company management on a variety of issues, including ESG matters that present a potential material risk to a company’s financial performance. On occasion, companies seek Albemarle’s input on a range of issues, and Albemarle investment professionals use such opportunities to work with companies and, when permitted by and consistent with local regulation, may play an active role in seeking to effect changes that maximise shareholder value. Albemarle believes that its investment professionals are in the best position to evaluate the potential impact that ESG issues or the outcome of a given proposal will have on long-term shareholder value. As such, all of Albemarle’s engagement activities are the responsibility of investment professionals and are fully integrated into its investment processes, rather than being delegated to stewardship specialists. The normal methods through which Albemarle engages with companies are:

  • ongoing dialogues with the company management through regular meetings, visits, and telephone calls during which Albemarle investment professionals discuss and pose questions on operational, strategic, and other management issues and, where appropriate, will offer their own opinions and comments, based on their fiduciary duty to Albemarle’s clients; and
  • proxy voting; where clients delegate the responsibility to vote proxies, Albemarle, as a fiduciary, is obligated to vote proxies in the best interests of its clients.

 

Communication with other shareholders

Albemarle’s investment professionals regularly engage with companies seeking to improve shareholder value, specifically the value of clients’ investments. Engagement activities are generally conducted on a one-to-one basis with company management or members of the board of directors. Collaborating with other investors can add value on specific issues and on rare occasions, Albemarle may be willing to participate in collective engagements where it believes it is in its clients’ best interests. Key factors Albemarle takes into consideration in deciding whether to participate in collective engagement include whether:

  • the engagement objectives of the collective group are consistent with Albemarle’s objectives;
  • engaging as a part of a group will be more successful than engaging individually; and
  • engaging as a group could be interpreted as having “acted in concert” with another financial institution. If Albemarle’s Legal & Compliance team believes that this may be the case Albemarle will not participate.

 

Conflicts

Albemarle has conflicts of interest policies that apply to its engagement and proxy voting activity.

 

Transparency

Annual implementation of this Engagement Policy

Albemarle will annually disclose how this Engagement Policy has been implemented, including:

  • a description of its voting behaviour;
  • an explanation of the most significant votes;
  • the use of the services of proxy advisors; and
  • a description of how Albemarle has cast votes in the general meetings of companies in which it holds shares on behalf of its clients.

 

Additional disclosures to institutional clients

As required by applicable law, Albemarle will provide certain of its institutional clients with additional disclosures regarding how its investment strategy:

  • complies with the arrangements in place with those clients; and
  • contributes to the medium to long-term performance of the assets of that institutional investor

 

Review

The Engagement Policy is reviewed and approved annually or more frequently as needed and is publicly available on Albemarle’s website.