Pillar 3 Disclosure
  • Introduction

    In 2006, the Basel II capital accord revised the existing regulatory capital framework to make it more sensitive to the risk management practices of modern banks and investment firms. The European Union implemented these provisions via the Capital Requirements Directive (‘CRD’), which consists of a three pillar framework:

    • Pillar 1 – sets out the minimum capital requirements firms will be required to hold in order to meet credit, market and operational risk.
    • Pillar 2 – firms and supervisors have to take a view on whether a firm should hold additional capital against risks not covered in Pillar 1 and must take action accordingly.
    • Pillar 3 – aims to improve market discipline by requiring firms to publish certain details of their risks, capital and risk management.

    The United Kingdom financial regulatory body, the Financial Conduct Authority (‘FCA’) has incorporated the new framework into its existing rules and guidance through the General Prudential Sourcebook (‘GENPRU’) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (‘BIPRU’).

    • BIPRU 11 relates specifically the Pillar 3 disclosure requirements affecting firms subject to the CRD. This document discloses those requirements, as laid out in BIPRU 11.5, detailed below:
    • BIPRU 11.5.1R – the risk management objectives and policies for each separate risk referred to under BIPRU 11.5.1R to 11.5.17.
    • BIPRU 11.5.2R – the scope of application of directive requirements.
    • BIPRU 11.5.3R – information regarding capital resources.
    • BIPRU 11.5.4R – information regarding compliance with the BIPRU rules and the overall Pillar 2 rule.
    • BIPRU 11.5.12R – regarding disclosures relating to market risk.

    Information which is regarded as proprietary or confidential, or immaterial, is not included. Information should be considered as material if its omission or misstatement could change or influence the assessment or decision of a user relying on it to make economic decisions. Proprietary or confidential information could include information which, if shared with competitors, would render a firm’s investments less valuable or if the information comprises obligations to customers or other counterparty relationships binding a firm to confidentiality.

    Scope of application of directive requirements

    The Pillar 3 disclosures set out in this document pertain to Algebris (UK) Limited (‘Algebris’ or ‘the firm’), an FCA registered limited licence BIPRU investment firm.

    The firm is a subsidiary of Algebris Investments Luxembourg SARL, which is not regulated.

    Historically, Algebris Investments (UK) LLP was the investment manager of the various Algebris funds and managed accounts. As part of an internal re-organisation between December 2016 and June 2017 Algebris (UK) Limited became the investment manager of the various funds and managed accounts.

    Algebris (UK) Limited is a Collective Portfolio Management Investment (“CPMI”) Firm, as a result in addition to having to meet regulatory capital requirements based upon the retention of sufficient regulatory capital to meet an expenditure based requirement, Algebris is also subject to a capital requirement based upon its Assets Under Management. Although, as an AIFM, Algebris is subject to the capital requirements of the AIFMD, it continues to be categorised as a BIPRU Firm and is still subject to the Pillar 3 Disclosure Requirements. For the purposes of the CRD, the firm is not consolidated as per BIPRU 8.5.

    There are no current or foreseen material practical or legal impediments to prompt the transfer of capital resources or repayment of liabilities between the parent undertaking and any subsidiary undertakings. The firm’s capital resources are in excess of the required minimum and it is not affected by a solo consolidation waiver.

    Risk management objectives and policies

    The firm is governed by its Directors who determine its business strategy and risk appetite. They are also responsible for establishing and maintaining the firm’s governance arrangements, along with designing and implementing a risk management framework that takes into account the risks that the firm is likely to meet. The firm also addresses how these risks should be mitigated and managed.

    BIPRU 11.5.4-17 lists several risk categories for which the risk strategy must be disclosed. From those listed, the firm has identified credit, market and operational risks as currently applicable to its business. All risks identified are reviewed regularly as part of the firm’s internal capital adequacy assessment process (ICAAP). Any perceived changes to these risks are acted upon promptly.

    Credit Risk

    The firm is exposed to credit risk through its cash deposits, trade debtors, intercompany balances prepayments, amounts due from member’s, and the Firm’s monthly management fees.

    The firm will hold all cash with banks with whom the firm has strong, well-established relationships and who typically have a minimum Moody’s or S&P rating of investment grade. It does not have any external investments.

    The firm uses the standardised approach to calculating credit risk exposures, i.e. 8% of the risk weighted credit exposure. Under this approach the firm calculated its total credit risk to be €1,086,881.

    Market Risk

    Market risk is primarily limited to foreign exchange risk arising from a currency mismatch between the firm’s management fees and functional currency. The majority of the management and performance fees are received in the firm’s base currency, Euro. As the currencies involved are highly liquid (Sterling, Dollar and Euro), and the potential fluctuations relatively small, the firm does not believe it is necessary to hedge this exposure.

    The firm uses the standardised approach to calculating market risk exposures, i.e. 8% of the risk weighted market exposure. Under this approach the firm calculates its total market risk to be €189,044.

    Operational Risk

    The firm has in place a companywide risk management framework which outlines responsibilities and escalation procedures for the identification and management of risks, as outlined in the risk policy. As part of this risk management framework, the firm explicitly considers whether each identified key operational risk should be ‘taken’ (i.e. accepted with no changes to business processes and controls)’, ‘treated’ (i.e. its impact or likelihood of occurrence reduced by improvements in the control environment) or ‘transferred’ (i.e. insured). The responsibility for ensuring that operational risk management is performed in line with this ‘take, treat or transfer’ approach rests with the Risk Committee and Directors of the firm.

    The driver of the Pillar II capital is operational risk. The Operational Risk has been calculated using the Standardised Approach, as per, BIPRU 6.4. The firm has calculated that its Pillar II Operational Risk is €717,675.

    Fixed Overhead Requirement

    The Firm has determined the Fixed Overhead Requirement (FOR) to be €2,822,036. The Firm has determined that the actual costs associated with a wind down to be €1,328,810, which is less than those determined in the FOR calculation.

    Capital Resources

    The total value of tier 1 capital resources, reflecting the Firm’s total capital resources as at 31 December 2016 was €10,289,358. There were no deductions relating to material holdings in financial institutions.

    The Pillar I Requirement

    The Firm’s base capital requirement is €50,000. The Firm bases its Pillar I capital requirements as the fixed overhead requirement, as this amount is higher than both the sum of the credit risk and market risk, and the base capital requirement. The firm’s total Pillar I liquid capital requirement is therefore €2,822,036.

    The Pillar II Requirement

    The firm has calculated that €717,675 of capital should be held against Pillar II Operational Risks.

    Total Capital Requirement

    The Firm bases its Total Capital Requirement calculation on the Pillar I Plus approach. The sum of the individual Pillar I and Pillar II Capital Requirements is €3,539,710. This is greater than the cost of a wind down, and thus reflects the Firm’s Total Capital Requirements.

    The Firm holds €6,749,648 of surplus Capital.

UK Stewardship Code Disclosure Statement

Under COBS 2.2 of the FCA Handbook, all FCA authorised firms are required to make a public disclosure in relation to the nature of their commitment to the above Code (“the Code”), which was published by the Financial Reporting Council (“FRC”) in July 2010.

The Code aims to enhance the quality of engagement between institutional investors and the companies they invest in with the intention of improving long term returns for shareholders and the efficient exercise of governance responsibilities. The FRC recognises that not all parts of the Code will be relevant to all institutional investors and that smaller institutions may judge some of the principles and guidance to be disproportionate. Firms may either comply with the Code or choose not to comply with certain aspects of the Code, in which case an explanation of non compliance is required. If a firm does not commit to the Code, it must state, in general terms, its alternative investment strategy.

On behalf of the funds that it manages, the Firm invests in securities issued in, but not limited to the entirety of the European Union. The Code is therefore applicable only to some aspects of the firm’s trading (UK equities), but this represents just a small proportion of the firm’s business. At times, the funds may hold no UK equities. Although the firm supports the Code’s objectives, the firm has taken the decision not to commit to the specific principles of the Code.

The Firm invests in various asset classes and jurisdictions globally. The current policy of the Firm in engaging with issuers and their management is determined by the Chief Investment Officer and the investment team. The Firm takes a consistent approach to engaging with the issuers and their management in all the jurisdictions the Firm invests in. It is therefore not deemed appropriate to comply with any voluntary codes of practice in individual jurisdictions.

FCA Remuneration Code
  • FCA Remuneration Code (the “Code”)

    The Firm is a proportionality level three firm, as described in the FCA’s General Guidance on Proportionality dated September 2012, for the purpose of the Code. The other entities within the UK consolidation group of which the firm is a member are not considered relevant for the purpose of the disclosure requirements of BIPRU 11.5.18R in view of the limited nature of their activities (they are however subject to the Code’s provisions). This disclosure relates to the 12 month period ended 31 December 2016.

    The remuneration policy is the responsibility of the Firm’s Board. The Board oversees the remuneration governance framework and ensure that remuneration arrangements are consistent with, and promote, effective risk management (the agency nature of the business of the firm does not place its balance sheet directly at risk).

    The Board considers remuneration in the context of a wider agenda including retention, recruitment, motivation and talent development and the external market environment. The Board also receives updates on regulatory developments and general remuneration issues, as well as market and benchmarking data.

    The Board sets and monitors the remuneration policy standards and monitors compliance with them. The amount and composition of the total remuneration paid is determined under this policy.

    Information on the link between pay and performance

    The various components of total remuneration (which comprise base salary, variable bonus and benefits) are considered and are balanced appropriately having regard to the role fulfilled by each particular individual.

    Firm and individual performance are the significant contributors to the determination of variable bonus awards. The principal objective in determining variable bonus awards is to reward individual performance whilst ensuring that such payments are warranted given business results. In this context performance can include financial and non-financial measures, risk measures and other relevant factors. There is a focus on differentiation so that any rewards are determined according to the contribution of individuals. Bonus pools and individual awards are subject to the governance of the Board and it is possible that in any year no variable bonus will be awarded.

    Staff are strongly encouraged to personally invest in the Algebris funds which supports a performance culture where employees recognise the importance of sustainable (and sustained) firm and individual performance. This also encourages sound risk management whilst aligning the longer-term interests of participants with those of investors.

    Quantitative information on remuneration

    The Firm considers that it has a single business area (investment management). The aggregate remuneration of the individuals engaged in this business area for the period was €15,556,756, which is comprised of 47 individuals. This includes the aggregate remuneration of €12,941,967 of its Remuneration Code Staff, which is comprised of 19 individuals each of whom performs a significant influence function. The latter figure includes the aggregate remuneration of individuals who ceased to become Remuneration Code Staff during the year to 31 December 2016.

Modern Slavery Statement
  • Introduction

    Algebris (UK) Limited, Algebris Investments (UK) LLP, Algebris Investments (US) Inc, Algebris Investments (Asia) Pte Ltd, Algebris Investments (Luxembourg) Sarl and Algebris (UK) Limited – Milan Branch (collectively “Algebris Investments”) fully supports the Modern Slavery Act, which aims to drive out all forms of modern day slavery and human trafficking from business practices. Algebris Investments takes a zero tolerance approach towards human rights violations and is committed to having ethical and sustainable business practices and supply chains.

    Our Organisation, Risks and Policy

    Algebris Investments has considered its direct exposure towards forms of slavery, human trafficking or child labour and, in particular, its employment practices which it believes eliminate any risk of these occurring at Algebris Investments. Algebris Investments operates in the financial services industry which, by its nature, limits direct exposure towards forms of slavery, human trafficking or child labour. As is generally the case with financial services firms, Algebris Investments is required to be authorized, is subject to regulatory supervision and operates in a heavily regulated environment. Algebris Investments undertakes comprehensive pre-employment checks in relation to all potential employees that are required to be satisfied prior to employment. In addition, the work carried out typically requires staff with a higher education or other professional qualifications who, in order to perform their roles, are often subject to individual regulatory authorisation and continuing professional training requirements. Algebris Investments does not believe any incidents as outlined by the Modern Slavery Act have ever occurred within Algebris Investments.

    It is noted that, being in a professional services industry, procurement activities are also limited, as products and services are not manufactured using raw materials or other material goods, and material goods are not produced and sold by Algebris Investments. Accordingly, Algebris Investments’ exposure to supply chain risks is also considered limited. However, Algebris Investments has undertaken a risk based assessment of its suppliers and has determined due diligence based on the level of risk associated with each service provision.

    Due Diligence

    As part of our commitment to the aims of the Modern Slavery Act, Algebris Investments seeks to ensure that it knows who is providing it with goods and services at all times. Algebris Investments will communicate its policy of zero tolerance in writing to its existing and new suppliers that pose a material or higher risk. Algebris Investments also has controls in place to ensure that legal and regulatory requirements, including the Modern Slavery Act, are considered prior to any supplier agreement being finalized. Algebris Investments has standard contractual provisions on modern slavery that are included wherever appropriate.

    Algebris Investments’ material outsourcing relationships are with other financial services firms which, for similar reasons, are low risk from a modern slavery perspective. Notwithstanding, Algebris Investments has obtained Modern Slavery Act statements of compliance from all such suppliers rated as posing a material or higher risk. Algebris Investments also conducts routine periodic due diligence over its material outsourcing relationships and other vendors and includes modern slavery checks as part of these processes. Algebris Investments has reviewed service providers involved in the provision of office facilities, cleaning, and other products and services for its offices.


    Algebris Investments’ Code of Ethics includes sections on ethical procurement, which all staff are provided with and attest to on at least an annual basis.


    Algebris Investments will continue to look at how it can further mitigate the risk of modern slavery in its supply chain, and is ready to take appropriate action promptly to address any concerns that may arise. To this end, it will monitor the effectiveness of this policy and take any steps as may be appropriate to maintain an effective zero tolerance anti-modern slavery policy. This includes ensuring that all of its suppliers, existing and new, that pose a material or higher risk have provided statements of compliance; that contractual terms with any such new suppliers satisfy modern slavery requirements; that all relevant staff receive training appropriate to their needs and that any material issues arising from implementation of this policy are effectively escalated should the need arise.


    This statement is made pursuant to section 54 of the Modern Slavery Act 2015. As required by the Act, it has been approved by the Board of Directors of Algebris (UK) Limited, and it has been published on our website.

Best Execution Disclosure
EU Shareholders Rights Directive II
  • Algebris (UK) Limited is currently in the process of reviewing the requirements for and developing a Shareholder Engagement Policy.