Disclaimer & Regulatory Information
This communication has been issued in the United Kingdom by Affirmative Investment Management Partners Limited (“the Firm”) which is authorised and regulated by the Financial Conduct Authority of the United Kingdom and is made to and directed solely at
- existing customers of the Firm and/or
- persons who would be classified as a professional client or eligible counterparty under the FCA Handbook of Rules and Guidance if taken on as customers by the Firm and/or
- persons who would come within Article 19 (investment professionals) or Article 49 (high net worth companies, trusts and associations) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2001 and/or
- persons to whom this communication could otherwise be lawfully made in the United Kingdom.
Any recipient of this communication who is not one of the intended recipients as set out above should disregard the communication and may not rely on or take any action in relation to the communication. Recipients of this communication in jurisdictions outside the United Kingdom should inform themselves about and observe all applicable legal or regulatory requirements.
Whilst the Firm has taken reasonable care to ensure that the information in this communication is accurate at the time of its preparation, it should not be construed as the giving of advice or the making of a recommendation. In particular, actual results and developments may be materially different from any forecast, opinion or expectation expressed in this communication.
Pillar 3 Disclosures
Affirmative Investment Management Partners Limited
Year ended 30 November 2021
Affirmative Investment Management Partners Limited (“AIM” or the Firm) is required by the FCA to disclose information relating to the capital it holds and each material category of risk it faces in order to assist users of its accounts and to encourage market discipline.
The Capital Requirements Directive (CRD) created a revised regulatory capital framework across Europe covering how much capital financial services firms must retain. In the United Kingdom, rules and guidance are provided in the General Prudential Sourcebook (GENPRU) for Banks, Building Societies and Investments Firms (BIPRU).
The FCA framework consists of three “Pillars”:
- Pillar 1 sets out the minimum capital requirements that companies need to retain to meet their credit, market and operational risk;
- Pillar 2 requires companies to assess whether their Pillar 1 capital is adequate to meet their risks and is subject to annual review by the FCA;
- Pillar 3 requires companies to develop a set of disclosures which will allow market participants to assess key information about its underlying risks, risk management controls and capital position. These disclosures are seen as complimentary to Pillar 1 and Pillar 2.
Chapter 11 of BIPRU sets out the provisions for Pillar 3 disclosure. The rules provide that companies may omit one or more of the required disclosures if such omission is regarded as immaterial. Information is considered material if its omission or misstatement could change or influence the decision of a user relying on the information. In addition, companies may also omit one or more of the required disclosures where such information is regarded as proprietary or confidential. The Firm believes that the disclosure of this document meets its obligation with respect to Pillar 3.
AIM is incorporated in the UK and is authorised and regulated by the FCA as a Full Scope Alternative Investment Fund Manager. AIM’s activities give it the prudential categorisation of a Collective Portfolio Management Investment (“CPMI”) Firm.
The Governing Body of AIM has the daily management and oversight responsibility. It generally meets quarterly and is composed of
- Stephen Fitzgerald;
- Michelle Smith and
- Hideyuki Omokawa (non-executive director).
The Governing Body is responsible for the entire process of risk management, as well as forming its own opinion on the effectiveness of the process. In addition, the Governing Body decides AIM’s risk appetite or tolerance for risk and ensures that AIM has implemented an effective, ongoing process to identify risks, to measure its potential impact and then to ensure that such risks are actively managed. The Governing Body is responsible for designing, implementing and monitoring the process of risk management and implementing it into the day-to-day business activities of AIM.
Capital Resources and Requirements
As at 30 November 2021, the Firm’s regulatory capital resources comprised of the following:
|Tier 1 Capital||£2,895,591|
|Tier 2 Capital||£2,895,591|
|Tier 3 Capital||£2,613,522|
The Firm’s Total Capital is made up of fully paid up share capital and a subordinated loan.
Pillar 1 – Own Fund Requirement
As a CPMI, the Firm is subject to the requirement as detailed in IPRU(INV) chapter 11, GENPRU and BIPRU, which sets out that the Firm must have own funds in excess of the:
- Funds under management requirement of €125,000 plus 0.02% of the AIF AUM exceeding €250,000,000;
- The sum of its market and credit risk requirements; and
- Fixed Overhead Requirement (which is essentially 25% of the firm’s operating expenses less certain variable costs).
- Professional Negligence Requirement.
As at 30 November 2021, the Firm’s Pillar 1 capital requirement was £1,193,453.
The Firm has adopted the “Structured” approach to the calculation of its Pillar 2 Minimum Capital Requirement as outlined in the Committee of European Banking Supervisors Paper, 27 March 2006 which takes the higher of Pillar 1 and 2 as the Internal Capital Adequacy Assessment Plan (“ICAAP”) capital requirement. It has assessed Business Risks by modelling the effect on its capital planning forecasts and assessed Operational Risk by considering if Pillar 2 capital is required taking into account the adequacy of its mitigation.
Since the Firm’s ICAAP (or Pillar 2) process has not identified capital to be held over and above the Pillar 1 requirement, no additional capital is required to be injected into the firm for Pillar 2 purposes.
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 risk management process is overseen by the Firm’s Governing Body.
As risks are identified within the business, appropriate controls are put in place to mitigate these and compliance with them is monitored on a regular basis. The frequency of monitoring in respect of each risk area is determined by the significance of the risk. The Firm does not intend to take any risks with its own capital and ensures that risk taken within the portfolios that it manages is closely monitored and in line with the set parameters. The results of the compliance monitoring performed is reported to the Governing Body by the Compliance Officer.
The Firm places strong reliance on the operational procedures and controls that it has in place 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. These relate to disruption of the office facilities, system failures, trade failures and failure of third-party service providers. Appropriate policies are in place to mitigate against risks, including a business continuity plan and the Firm also has an appropriate insurance policy in place.
The main credit risk to which the Firm is exposed is the failure of its debtors to meet their contractual obligations. The Firm’s primary receivable is related to investment management activities. The Firm believes its credit risk exposure is limited since its revenue is ultimately related to management fees received from funds. These management fees are drawn throughout the year.
Other credit exposures include bank deposits and office rental deposits.
The Firm undertakes periodic impairment reviews of its receivables. All amounts due to the Firm are current and none have been overdue during the year. As such, due to the low risk of non-payment from its counterparties, management is of the opinion that no provision is necessary. A financial asset is overdue when the counterparty has failed to make a payment when contractually due. Impairment is defined as a reduction in the recoverable amount of a fixed asset or goodwill below its carrying amount.
The Firm has adopted the standardised approach to credit risk, and therefore follows the provision within BIPRU 3 standardised credit risk of the FCA handbook. The Firm applies a credit risk capital component of 8% of its non-trading book risk weighted exposure. As the Firm does not make use of an external credit rating agency, it is obligated to use a risk weight of 100% to all non-trading book credit exposures, except cash and cash equivalents which are held by investment grade firms and currently attract a risk weighting of 20%.
The table below sets forth the Firm’s credit exposures and corresponding capital resource requirements as at the date of its ICAAP assessment:
|Item||Credit Exposure||Risk Weighting||Risk Weighted exposure|
|Tangible fixed assets||£123,391||100%||£123,391|
|Cash at bank||£12,560,203||20%||£2,512,041|
|Credit Risk Capital Component (8% of risk weighted exposure total)||£282,059|
The Firm holds no trading book positions on its own account. However, as it has cash held in non-GBP denominated accounts, AIM has followed the approach set out by the FCA in BIPRU 7.5 towards the calculation of its foreign currency position risk requirement as follows:
|Item||Open currency position||Risk Weighted exposure|
|Cash held in non-GBP denominated accounts||£434,262|
|Market Risk PRR (8% of total open currency positions)||£34,741|
The Firm is subject to the remuneration code requirements set out in chapters 19B & C of the FCA’s Senior Management Arrangements, Systems and Controls Sourcebook (“SYSC”). The Firm has remuneration policy and procedures to ensure that it complies with the remuneration codes to which it is subject.
As a UK AIFM, the Firm has assessed the proportionality elements and dis-applies the Pay Out Rules. Furthermore, the Firm 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. Instead, the Governing Body sets, and oversees compliance with, the Firm’s remuneration policy including reviewing the terms of the policy at least annually.
As at the reporting date, the Firm has set the variable remuneration of its directors and staff in a manner which takes into account directors, staff and firm performance, by reference to individual performance, performance of the Firm. AIM takes into account the specific nature of its own activities (including the fee-based nature of its revenues) in conducting any ex-ante risk adjustments to awards of variable remuneration and, given the nature of its business, has disapplied the requirement under the Remuneration Code to make ex-post risk adjustments.
Due to the size of the Firm and in accordance with rules set out for Pillar 3 Disclosures, the Firm has omitted numerical remuneration disclosures on the basis of confidentiality.
Affirmative Investment Management Partners Limited Annual Best Execution Disclosure 2021
On an annual basis, the Firm is required to provide additional disclosures around the execution venues utilised for each asset class and certain information on the quality of execution in line with the requirements of Regulatory Technical Standard 28 of the MiFID II regulation.
The Firm takes into consideration various execution factors, which are detailed within its best execution policy, when placing an order. The Firm takes into account each client’s objectives, the specific financial instruments to which the order relates, the execution venues or counterparties available for such orders and the prevailing market conditions.
The Firm has categorised all its clients as professional under Article 4 (1)(11) of Directive 2004/39/EC.
During the period January 2020 to December 2021, the Firm confirms that there were no material close links, common ownership or conflicts of interest between us and the execution venues/brokers used by the Firm.
AIM places orders to be executed with approved counterparties. The list of approved counterparties is reviewed regularly and may change over time. Amendments to the approved counterparties list will be made taking into account a number of factors, including the creditworthiness of the counterparty and the execution performance of the counterparty. The Firm does not receive payments, discounts, rebates or non-monetary benefits in its trading arrangements.
There is no preferential treatment across clients in relation to execution and/or allocation arrangements, with the exception of where venues are dictated by the client.
A governing body meeting is held on a quarterly basis in order to review adherence to the best execution policy. It is attended by Senior Management, Compliance and Risk, who review the management information available for all traded instrument types and discuss any concerns or issues.
During the year ending December 2021, the Firm has met its obligation to achieve the best possible results for its clients on a consistent basis.
|Class of Instrument||Debt Instruments|
|Notification if <1 average trade per business day in the previous year||N|
|Top five execution venues ranked in terms of trading volumes (descending order)||Proportion of volume traded as a percentage of total in that class||Proportion of orders executed as percentage of total in that class||Percentage of passive orders||Percentage of aggressive orders||Percentage of directed orders|
|TD LEI: PT3QB789TSUIDF371261||18.79%||17.95%||N/A||N/A||N/A|
|HSBC LEI: MP6I5ZYZBEU3UXPYFY54||17.99%||15.20%||N/A||N/A||N/A|
|MS LEI: VLR6T6E60GH5GUS0XX16||13.42%||9.68%||N/A||N/A||N/A|
|CITI LEI: E57ODZWZ7FF32TWEFA76||9.93%||11.79%||N/A||N/A||N/A|
|BAML LEI: GGDZP1UYGU9STUHRDP48||6.04%||10.71%||N/A||N/A||N/A|
Stewardship Code Disclosure
Affirmative Investment Management Partners Limited
Under chapters 2.2B and 2.2.3R of the FCA’s Conduct of Business Sourcebook, Affirmative Investment Management Partners Limited (the “Firm”) is required to include on this website a disclosure about the nature of its commitment to the UK Financial Reporting Council’s Stewardship Code and the Shareholders Rights Directive.
Stewardship Code (the “Code”)
The Code sets out a number of principles relating to engagement by investors with UK equity issuers, as follows:
The twelve principles of the Code for Asset owners and Asset Managers (in our case, Asset Managers) are as follows:
|Purpose and Governance:||
1. Purpose, strategy and culture
Asset Managers’ investment beliefs, strategy, and culture to facilitate long term value, via stewardship, for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.
2. Governance, resources and incentives
Asset Managers’ governance, resources and incentives support stewardship.
3. Conflicts of Interest
Asset Managers should manage conflicts of interest to put the best interests of clients and beneficiaries first.
4. Promoting well-functioning markets
Asset Managers should identify and respond to market-wide and systemic risks to promote a well-functioning financial system.
5. Review and assurance
Asset Managers should review their policies, assure their processes and assess the effectiveness of their activities.
6. Client and beneficiary needs
Asset Managers should take account of client and beneficiary needs and communicate the activities and outcomes of their stewardship and investment to them.
7. Stewardship, investment and ESG integration
Asset Managers should systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.
8. Monitoring managers and service providers
Asset Managers should monitor and hold to account third-party managers/proxy advisors/research or other service providers.
Asset Managers should engage with issuers to maintain or enhance the value of assets.
Asset Managers, where necessary, should participate in collaborative engagement to influence issuers.
Asset Managers, where necessary, should escalate stewardship activities to influence issuers.
|Exercising rights and responsibilities:||
12. Exercising rights and responsibilities
Asset Managers should actively exercise their rights and responsibilities across all asset classes.
Shareholders Rights Directive (the “Directive”)
Similarly, the Directive requires firms that invest in shares that trade on an EU regulated market to develop and publicly disclose an engagement policy or publicly disclose a clear and reasoned explanation of why it has chosen not to comply with this requirement.
The Firm pursues an investment strategy to which the aims of the Code and the Directive are not relevant.
The Firm follows a new approach to fixed income and cash management that gives ultimate power back to the end investor. The Firm focuses on bonds and cash instruments that both generate mainstream market returns and achieve positive externalities to benefit the local and global community. As such, its strategy does not result in it trading in single equities.
Consequently, while the Firm supports the general objectives that underlie the Code and the Directive, the provisions of both are not relevant to the type of trading currently undertaken by the Firm. If the Firm’s investment strategy changes in such a manner that the provisions of either the Code and the Directive become relevant, the Firm will amend this disclosure accordingly.
For further information on the Firm’s approach contact: Michelle Smith, email@example.com; tel: +44 (0)203 949 6901
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