Pillar 3 Disclosures

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Disclosure Policy

The following disclosures are provided pursuant to the Pillar 3 disclosure rules as laid out by the Financial Conduct Authority (“FCA”) in section 11 of its Prudential sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”). The BIPRU Pillar 3 disclosure rules implement certain aspects of the European Union’s capital adequacy requirements and the Basel Committee Recommendations.

The FCA's prudential framework for investment management firms consists of three pillars:

  • Pillar 1 sets out the minimum capital requirements for the investment manager;
  • Pillar 2 deals with the Internal Capital Adequacy Assessment Process (“ICAAP”) undertaken by the investment manager to assess the adequacy of capital held in relation to its material risks; and
  • Pillar 3 requires the investment manager to publicly disclose its policies on risk management, capital resources and capital requirements.

The disclosures below are the required Pillar 3 disclosures and apply solely to Glen Point Capital LLP (“Glen Point Capital”). The disclosures do not apply to the funds managed by Glen Point Capital, which are exposed to different risks.

The Glen Point Capital Pillar 3 disclosures are published and available on the Glen Point Capital external website. Glen Point Capital’s Pillar 3 disclosures are made annually as of the Accounting Reference Date (“ARD”). Glen Point Capital has an ARD of 31 December. The information contained in this document has not been audited by the auditors for Glen Point Capital and does not constitute any form of financial statement and must not be relied upon in making any judgement about Glen Point Capital.

Certain information relating to BIPRU 11.5 has been omitted on the basis that it has been deemed to be immaterial or proprietary/confidential. Glen Point Capital regards information as material in the disclosure if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions. Glen Point Capital regards information as proprietary/confidential if sharing that information with the public would undermine its competitive position. Further, Glen Point Capital must regard information as confidential if there are obligations to customers or other counterparty relationships binding Glen Point Capital to confidentiality.

Background to Glen Point Capital

Glen Point Capital is an investment manager based in London and incorporated in England and Wales as an English limited liability partnership.

Glen Point Capital is authorised and regulated by the FCA as a full-scope Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive (“AIFMD”). Glen Point Capital also has permission to carry on certain investment services under Article 6(4) AIFMD. As such, Glen Point Capital is a Collective Portfolio Management Investment Firm (“CPMI Firm”) for UK regulatory purposes. As a CPMI firm, Glen Point Capital is subject to the BIPRU rules, as well as the AIFMD rules in IPRU-INV Chapter II. Glen Point Capital is a CPMI firm without retail clients, and is not authorised to hold client money or take proprietary trading positions.

As an AIFM, Glen Point Capital manages certain AIFs and segregated managed account(s) under a discretionary mandate to provide investment services in respect of the portfolios of the funds and segregated managed account(s), subject to any contractual restrictions set out in the relevant investment management agreements, and any investment restrictions described in the offering memorandum for any relevant fund.

Capital Resources Requirement

Pillar 1 - Minimum Capital Requirements

As a CPMI Firm, Glen Point Capital has an initial capital requirement of €125k and an ongoing capital resource requirement which comprises the greater of:

  1. the funds under management requirement (the sum of Glen Point Capital’s base own funds requirements of €125k plus 0.02% of the amount by which Glen Point Capitals funds under management (related to Glen Point Master Fund Limited) exceed €250m); and
  2. the own funds based on fixed overheads requirement (the “FOR”); and
  3. the sum of market risk and credit risk (for non-AIFM business);

plus: whichever is the applicable of:

  1. the professional negligence capital requirement (“additional own funds requirement”); or
  2. the professional indemnity insurance (“PII”) capital requirement.

Glen Point Capital calculates the credit risk applicable to its non-AIFM activities under the simplified approach.

Glen Point Capital has determined that the FOR is the higher of these values and this is therefore used for the purposes of the Pillar 1 calculation.

Glen Point Capital’s capital structure is comprised solely of tier one capital equal to the sum of £1,700,000 as at 31 December 2016. Glen Point Capital has no ‘innovative Tier 1’ instruments.

Pillar 2 – ICAAP

The capital required under Pillar 2 is the sum of the capital required under Pillar 1 plus any additional capital required to be maintained against risks not adequately covered by Pillar 1 capital. Glen Point Capital’s overall approach to assessing the adequacy of its internal capital is set out in its ICAAP. The ICAAP involves consideration of a range of risks faced by Glen Point Capital and determines the level of capital needed to cover these risks. The level of capital required by Glen Point Capital to cover identified risks is a function of their impact and probability and risk mitigation controls in place. Glen Point Capital believes it has taken a prudent approach to its Pillar 2 calculations and that both its capital resources and their solvency are sufficient to meet Glen Point Capital’s operational and other risk requirements and that these capital resources are also adequate to support its operations without any need for additional injections of capital over the period considered within the business plan forecasts contained within the ICAAP. Stress and scenario tests performed during the ICAAP support management’s view that adequate additional capital is held by the firm under Pillar 2.

Risk Management Objectives and Policies

Glen Point Capital’s approach to risk management is predicated on the need to manage the full range of risks it faces including operational, business, liquidity, credit and market risks. Glen Point Capital’s overriding aim is to minimise the risks to its clients and to ensure it remains in full compliance with regulatory and legal requirements. Glen Point Capital’s risk management framework incorporates an analysis of the impact of each material risk on the business, the probability of each risk occurring and the procedures in place to mitigate such risks. Risks identified through the operation of the risk management framework are assessed as part of the ICAAP process each year. This risk management framework is a core component of Glen Point Capital’s high-level systems and controls arrangements and ensures all areas of the business are subject to senior management oversight.

Operational Risk

Operational risk is defined by Glen Point Capital as the risk of loss due to system breakdowns, internal and operational control failures, staff fraud or misconduct, and catastrophes. Senior management review all aspects of the business on a regular basis to ensure operational risks have been identified and effective controls put in place to mitigate the risks identified so the combination of the impact assessment and probability of each risk is kept to an acceptable level. Glen Point Capital has embedded within its business processes robust and effective risk management processes that are subject to regular appraisal. Glen Point Capital’s operating committee meets at least monthly to monitor, investigate and remediate operational, finance, legal and compliance associated risks as they apply to Glen Point Capital and its clients.

Business Risk

Business risk is the risk of loss inherent in a firm’s operating, business and industry environment. Glen Point Capital’s main business risk relates to a possible fall in assets under management and a consequent diminution in investment management fees. Glen Point Capital mitigates its exposure by holding sufficient capital to withstand adverse changes in the business environment.

Liquidity Risk

Glen Point Capital maintains sufficient surplus cash to meet its working capital requirements and other immediate requirements that can reasonably be foreseen. The risk that Glen Point Capital will be unable to meet its financial obligations as they fall due is not considered material for the purposes of this disclosure.

Credit Risk

In dealing with market counterparties, Glen Point Capital acts as agent on behalf of its clients. Accordingly it does not incur credit risk other than the risk of non-payment of investment management fees which is mitigated, in the case of the fees payable by the Glen Point funds, by the appointment by such funds of an independent administrator, and by the requirement that management fees from the Glen Point funds be accrued for and paid monthly. In the case of any segregated managed account(s), provision for the non-payment of fees is governed by Glen Point Capital’s agreement(s) with such client(s), the terms of which are subject to confidentiality clauses. The group is not subject to the FCA’s large exposures regime. In the case of bank deposits, money is only deposited with highly rated approved counterparties.

Market Risk

Glen Point Capital’s market risk is limited to exposure to foreign exchange fluctuations as a result of its revenues being denominated in USD while the majority of its costs are denominated in GBP. Glen Point Capital’s exposure to currency risk is actively controlled through sales of foreign exchange, regular monitoring of future currency needs and stress testing of GBP cash flows.

FCA Remuneration Code Disclosure

Glen Point Capital must comply with the remuneration rules as set out in Article 14 of the Alternative Investment Fund Managers Directive (“AIFMD”) and SYSC 19B of the FCA Handbook (“the AIFM Remuneration Code”), as well as SYSC 19C (“the BIPRU Remuneration Code”). The purpose of these Remuneration Codes is to ensure that firms have risk focused remuneration policies, which are consistent with and promote effective risk management and do not expose themselves to excessive risk. Glen Point Capital has reviewed all existing employment contracts to ensure they comply with the Codes.

Glen Point Capital’s Executive Committee is responsible for setting the Remuneration Policy Statement for all staff and the Compliance Officer is a member of the Executive Committee. The Executive Committee oversees the remuneration governance framework and ensures that remuneration arrangements are consistent with, and promote, effective risk management. No external consultants have been engaged on remuneration matters.

The Remuneration Codes can (subject to certain conditions being met) be applied in a proportionate way. As such the Executive Committee has determined that it is not proportionate for Glen Point Capital to apply the following detailed rules in setting Glen Point Capital’s Remuneration Policy:

  • SYSC 19B 1.17 – Retained units, shares and other instruments;
  • SYSC 19B.1.18 – Deferral; and
  • SYSC 19B.1.19, 19B 1.20 – Performance adjustment

Information on the link between pay and performance

Variable remuneration is not based solely on the financial performance of the individual. The Executive Committee considers the various components of total remuneration (base salary, variable bonus and benefits) and balances them appropriately having regard to the role fulfilled by each particular individual, taking into account issues such as retention, recruitment, motivation and talent development and the external market environment. The performance of the individual is assessed over the entire year. The Executive Committee will also receive updates on regulatory developments and general remuneration issues, as well as market and benchmarking data.

Glen Point Capital’s position, success of the business area and individual performance are the significant contributors to the determination of bonus awards. All of Glen Point Capital’s bonus awards are fully discretionary and therefore variable. The principal objective in determining variable bonus awards is to reward individual performance whilst ensuring that such payments are warranted given overall business results. There is a focus on differentiation so that any rewards are determined according to the contribution of individuals and teams. Bonus pools and individual awards are subject to the governance of the Executive Committee and it is possible that in any year no variable bonus will be awarded. Glen Point Capital’s remuneration policies, procedures and practices are designed to promote sound and effective risk management.

Quantitative Information

Glen Point Capital only has one "business area", namely its asset management business.

Glen Point Capital is a full scope AIFM and benefits from the proportionality guidance of the FCA’s General Guidance on the AIFM Remuneration Code (SYSC 19B), as well as the FCA’s General Guidance on Proportionality as it applies to the BIPRU Remuneration Code (SYSC 19C) and Pillar 3 disclosures on Remuneration (BIPRU 11). The number of current Code Staff has been established as 9. Total remuneration to Code Staff for the performance year ended 31 December 2016 was £6,470,000

DISCLAIMER

The information contained in this document has not been audited by Glen Point Capital’s external auditors and does not constitute any form of financial statement and should not be relied upon in making any judgement on Glen Point Capital. The risks identified in this disclosure may not include all of the risks faced by Glen Point Capital. Reliance should not be placed on these disclosures as to the effectiveness or otherwise of Glen Point Capital’s internal control environment.

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