Regulatory Disclosure



The Capital Requirements Directive (‘CRD’) of the European Union establishes a revised regulatory capital framework across Europe governing the amount and nature of capital that must be maintained by credit institutions and investment firms. In the United Kingdom, the Directive has been implemented by the Financial Conduct Authority (“FCA”).

The FCA framework comprises three Pillars:

  • Pillar 1 sets out the minimum capital amount that meets the firm’s Credit, Market and Operational risks;
  • Pillar 2 requires the firm to assess whether its Pillar 1 capital is adequate to meet its risks or whether additional capital is required and to document this in an ICAAP document. The results of the ICAAP are subject to annual disclosure to the FCA; and,
  • Pillar 3 requires public disclosure of specified information about the capital position and the underlying risk management controls.

This is an interim report based on audited accounts to 31 March 2016 and internal ongoing budget calculations used to produce an ICAAP document. Saracen Fund Managers Limited (SFM) scope of permissions were amended in September 2016 following transfer of the ACD function to T Bailey Fund Services (TBFS) on 1 July 2016. Consequent to this change in permissions SFM is now a limited license BIPRU firm, subject to GENPRU 1.2 and as such is required to produce an ICAAP to confirm its capital position in terms of the three Pillars as above. These documents will be reviewed after the first set of audited accounts available after the change of permissions.

It is the policy of SFM to publish its Pillar 3 disclosure annually on the SFM website ( Information will not be disclosed if it is not regarded as material or if it is regarded as proprietary or confidential.

This document is owned by the Board of SFM. The task of developing and maintaining the ICAAP has been delegated to the Compliance Director who is a board member. Each board agenda will include “Risk” as an item and any papers presented under this heading and any decisions affecting the risk profile of the firm will attached to this document as an appendix. This will include reference to budgets with consideration of capital adequacy requirements. As SFM is a small firm, all members of staff are involved in discussions about the firm’s risk profile and construction of appropriate scenarios for stress testing.


SFM is required to prepare an internal assessment of its capital adequacy, referred to as an ICAAP. The purpose of the ICAAP is to document the firm’s risk appetite (the degree of risk that the Board is willing to accept without applying further resources and capital to mitigate the risk) and to assess whether the Capital Resources are sufficient to meet all the principle risks to which the firms could be exposed. The ICAAP includes a series of stress tests and scenarios which are used to help assess whether SFM is adequately capitalised to withstand a range of adverse circumstances and scenarios. The ICAAP also models a wind down over 6 months in to demonstrate that sufficient capital is maintained to ensure that such a wind down can be conducted in an orderly manner.


a) Pillar 1 Risks:

i) Credit Risk: with reference to GENPRU 2.1.51R and the various definitions of the components of credit risk, see BIPRU 3.1.3, Saracen is not exposed to any form of credit risk.

Credit risk components are credit risk capital component and a counterparty risk component. The definitions in BIPRU 3.1.3 and BIPRU 14.2.1 and BIPRU 14.2.2 respectively refer to trading book exposures. SFM does not operate a trading book.

ii) Market Risk: GENPRU 2.1.52 definitions and the type of instruments involved as defined in BIPRU 7.2.3 refer to trading book exposures. SFM does not operate a trading book.

iii) Operational Risk: As per GENPRU 2.1.45 operational risk is defined as the firm’s calculation of the fixed overhead requirement (FOR) as 13/52 of the annual relevant expenditure, taken from the most recently available set of annual audited accounts. Based on the accounts for the year to 31 March 2016 the FOR is £227k.

Further operational risks have been considered in the ICAAP. Scenario testing covering all the agreed risks to SFM concludes that the Pillar 2 requirement for SFM is £216k. Wind down analysis shows that the capital required for an orderly wind down would be less than the Pillar 1 requirement.
SFM has sufficient capital reserves to ensure ongoing capital adequacy.


As discussed in detail in the SFM ICAAP, to give a true reflection of the financial position of SFM after a period of re-organisation of the firm’s resources since the last set of audited accounts (to March 2016), the ICAAP utilises the ongoing budget as a basis for scenario and stress testing.

Pillar 1 requirement is the audited FOR £227k
Pillar 2 requirement £216k

Present capital resources (end January 2017) £281k
Pillar 2 requirement £281k

Surplus £56k
Pillar 2 requirement £66k

The ICAAP will be revised after publication of the audited accounts to 31 March 2017.


SFM is a BIPRU firm and is thus subject to the BIPRU Remuneration code (SYSC 19C.1.1R).

The Remuneration Policy:

(i) Is consistent with and promotes sound and effective risk management;

(ii) Does not encourage risk taking that exceeds the level of tolerated risk of SFM or the ICVC managed by SFM;

(iii) Encourages behaviour that delivers results which are aligned to the interests of the ICVC managed by SFM;

(iv) Aligns the interests of Code Staff with the long-term interests of SFM, the funds it manages and its investors;

(v) Recognises that remuneration should be competitive and reflect both financial and personal performance. Accordingly, Remuneration for Code Staff may be made up of fixed pay (salary and benefits, including pension) and variable (performance-related) pay;

(vi) Recognises that fixed and variable components should be appropriately balanced and that the variable component should be flexible enough so that in some circumstances no variable component may be paid at all.

There is no remuneration committee. The Board of SFM oversees the setting and review of remuneration levels. There is no performance related pay. There is no specified bonus scheme. After a shareholder/all staff consultation process it was agreed that continuing profitability would see the following preferred disbursement cascade: establishment of a 50% buffer above the minimum capital adequacy requirement; repayment of directors’ loans; salary increases; staff bonuses; dividends.

The remuneration for code staff was as follows:

Number 7
Fixed £442.5k
Variable £12k
Total £454.5k

The total number of employees at this date is 8, of the 7 remuneration code staff, 5 are board members.

Issued by Saracen Fund Managers Ltd, 19 Rutland Square, Edinburgh EH1 2BB. Registered in Scotland No. 180545. Authorised and regulated by the Financial Conduct Authority. FCA No. 188536.