REGULATORY DISCLOSURES

THE UK STEWARDSHIP CODE

Pairstech Capital Management LLP is UK-based asset management firm founded in 2007 with headquarters in London. The company is authorized and regulated by the Financial Conduct Authority (“FCA”), registered number 477155. Pairstech offers expertise in a variety of asset classes and provides private and institutional investors with a range of products representing true diversification with the best risk-reward profile.

As a firm authorised and regulated by the FCA, Pairstech Capital Management LLP 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 several 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.

Pairstech Capital Management LLP 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

1. Introduction

The European Union’s Capital Requirements Directive (CRD) introduced consistent capital adequacy requirements for authorised credit institutions and investment firms, through a regulatory framework consisting of three ‘Pillars’:

Pillar 1 - sets out the minimum capital requirement to meet a firm’s credit, market and operational risk. 

Pillar 2 - requires a firm to undertake an Internal Capital Adequacy Assessment Process (ICAAP) to establish whether its Pillar 1 capital is adequate to cover all the risks faced by the firm and, if not, to calculate the additional capital required. 

Pillar 3 - requires a firm to disclose specific information concerning its risk management policies and procedures and its regulatory capital position.

The CRD has been implemented into UK law through the FCA Handbook, specifically General Prudential Sourcebook (GENPRU) and the Prudential sourcebook for Investment Firms (IFPRU).

IFPRU 11 sets out the provisions governing Pillar 3 Disclosures. This report contains all the disclosures required under IFPRU 11 unless a particular disclosure is not applicable, regarded as not material, or is proprietary or confidential information.

1.1. Frequency of Disclosure

Pairstech will make Pillar 3 disclosures on an annual basis, as soon as reasonably practicable following completion of its annual financial statements. However, Pairstech will update its Pillar 3 disclosure more frequently than annually if material changes to its business model have occurred that would affect the calculations of its regulatory capital requirement.

 

2. Location and Verification of Disclosure

Disclosures are verified and approved by the Board prior to being published on the Pairstech website (www.pairstech.com).

2.1. Business Overview

Pairstech Capital Management LLP is UK-based asset management firm, authorized and regulated by the Financial Conduct Authority (“FCA”), under the registered number 477155. Pairstech offers expertise in a variety of asset classes and provides private and institutional investors with a range of products representing true diversification with the best risk-reward profile.

The firm’s services are offered to Eligible Counterparties, Professional Clients and Retail Clients, as defined by the EU Markets in Financial Instruments Directive (MiFID).

3. Risk Management Governance Structure

3.1. Introduction

Risk management is embedded throughout Pairstech, with the overall risk appetite and risk management strategy being approved by the Board and then disseminated throughout the business as appropriate.

3.2. The Board

The Board is responsible for setting Pairstech's risk appetite, ensuring that it has an appropriate and effective risk management framework, and for monitoring the ongoing process for identifying, evaluating, managing and reporting the significant risks faced by the firm.

3.3. Risk Management Framework

Pairstech's Risk Management Framework identifies risks within the following risk categories:

(1) Market Risk;

(2) Credit Risk;

(3) Operational Risk;

(4) Business Risk

(5) Liquidity Risk; 

The risks within each area are analysed, mitigating factors assessed and relevant controls identified. The risks within each category are rated according to their potential impact and probability and assigned a risk rating. Action is taken by the Board to manage the key risks, as appropriate, to safeguard Pairstech and its clients.

 

The Risk Management Framework is regularly updated and is reviewed at least annually by the Board, with particular focus on those risks rated 'High'. The Risk Management Framework is used to identify the risks to be considered in the Internal Capital Adequacy Assessment Process ('ICAAP').

3.4. Compliance

The Compliance Function monitors for compliance by Pairstech with the various regulatory requirements to which the firm is subject, including those imposed by the UK regulatory regime. The Compliance Officer reports directly to the Chief Executive Officer.

 

4. Principle Risks

4.1. Market Risk

Market risk is the vulnerability of firms to movements in the value of financial instruments held either by themselves, or by their clients. Pairstech is exposed to trading risk on any client positions which are not hedged give rise to this risk which is monitored and managed dynamically. When Pairstech hedges a position, the firm is not exposed to market risk as orders are matched.

4.2. Credit Risk

Credit Risk is the risk that a firm's clients and counterparties fail to pay money due to the company.

Pairstech main exposure to credit risk is in respect of its underlying clients. Clients are not permitted to begin trading until money is deposited on their account and Pairstech operates a strict Margin Call Policy, which protects clients from losing more money than they have available to trade.

Pairstech faces credit risk from banks and counterparties where deposits and other balances are held. We minimise this risk by only using top tier banks to hold its funds.

4.3. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. As such, operational risk spans a wide and diverse range of potential risks, including: loss of key staff; IT system failures; loss of data; telecommunications failures; loss of power supply; failure or disruption of a critical business process; disaster occurrences, natural or otherwise.

Operational risks are identified, mitigated and/or managed at Pairstech by senior individuals who are alert to the risks faced by the area of the business they are responsible for e.g. Trading, Operations, Finance, Compliance, etc.

4.4. Business Risk

Pairstech operates in an environment characterised by intense competition, rapid technological change and a continually evolving regulatory framework. Failure to adapt to changing market dynamics, customer requirements, or the way OTC markets and their participants are regulated constitutes a significant long-term risk.

Pairstech's main strategy for managing and mitigating these risks is through the active management of client relationships and by keeping abreast of all relevant regulatory reforms affecting the operation of OTC markets.

4.5. 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.

5. Internal Capital Adequacy Assessment Process (ICAAP)

The ICAAP formally records the assessment as to whether a firm's capital and liquidity resources are sufficient to cover the risks identified in the Risk Management Framework. Pairstech's ICAAP is updated and formally approved by the Board on at least an annual basis.

6. Capital Management

The firm's capital management objectives are to:

(1) to ensure Pairstech continues operating as a going concern, and

(2) meets its regulatory capital requirements at all times.

These objectives are primarily met by managing the risks that Pairstech faces on a regular basis.

 

7. Remuneration

Pairstech Capital Management LLP (“the Firm") is authorised and regulated by the Financial Conduct Authoirty 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;

are in line with the Firm's business strategy, objectives, values and long-term interests.

7.1. 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.

7.2. 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.

Summary of information on the decision-making process used for determining the firm’s remuneration policy including use of external benchmarking consultants where relevant.

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.

a. 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 three 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.

Partnership profits allocated to members of the Ltd are disclosed in aggregate in the report and accounts of the Firm.

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.