FundRock Management Company S.A. (“FundRock”) has established and applies a remuneration policy (“The Policy”) in accordance with the principles laid out under AIFMD and UCITS V, and any related legal & regulatory provisions applicable in Luxembourg*.
As an independent management company relying on a full-delegation model (i.e. delegation of the collective portfolio management function), FundRock ensures that its remuneration policy adequately reflects the predominance of its oversight activity within its core activities. As such, it should be noted that FundRock’s employees who are identified as risk-takers under UCITS V and AIFMD are not remunerated based on the performance of the funds under management.
This Policy has been drafted based on FRMC’s assessment on the application of the proportionality principle as set out in section 4. The Company has performed its assessment in accordance with principles included in ESMA guidelines 2016/411 (section 7) with respect to the Company as a whole and for each category of staff, including the identified staff. The Company will regularly review and at least, annually, the application of the proportionality principle.
The Policy covers also the remuneration of Identified Staff, i.e. those categories of staff, including senior and executive management risk takers, control functions and any employee receiving total remuneration that takes them into the same remuneration bracket as senior management and risk takers, whose professional activities have a material impact on the risk profiles of FRMC or, in its function as AIFM, of the AIFs it manages or, in its function as Management Company, of UCITS under management. The list of the identified staff is detailed in section 3 of this Policy.
The Board of Directors of FRMC (the “Board” or the “Supervisory Function”) is responsible for approving and maintaining the Policy of FRMC, and overseeing its implementation. The Policy will not be controlled by any executive members of the Supervisory Function. The Supervisory Function will approve any subsequent material exemptions or changes to the Policy and carefully consider and monitor their effects, and will review the Policy at least annually.
2. Scope of activities of FRMC
FRMC is a Management Company authorised under Chapter 15 of the amended Law of 17 December 2010, and an AIFM under Chapter 2 of the amended Law of 12 July 2013. In its current operating model, the Supervisory Function should ensure that FRMC’s Policy is consistent with and promotes sound and effective risk management.
The investment managers to whom FRMC has delegated investment management activities fall under the scope of the amended Law of 17 December 2010 and the Law of 12 July 2013. Compliance with these requirements is verified as part of the FRMC’s program of Due Diligence and External Compliance Reviews of its delegates (including investment managers).
3. Identified Staff
The following FRMC categories of staff are considered as Identified Staff, after taking into account the clear distinction between operating and control functions, the skills and independence requirements of members of the management body, the role performed by internal committees, including the remuneration committee (“Remuneration Committee”), the safeguards for preventing conflicts of interests and the internal reporting system and the related parties’ transactions rules.
Senior and executive management:
- Executive Directors
- Conducting Officers
- Senior Manager of branch
- Compliance Officer
- Operational Risk Manager
- Risk Manager
Other Risk Takers: None
4. Proportionality principle
In view of the size of the assets underpinning the clients to whom it provides services, as well as the nature of the investment policies and strategies, the complexity and size of its organization, reflected by an excess of 50 employees, FRMC is in the opinion it cannot apply the proportionality with respect to its own characteristics as Company.
FRMC is in the opinion that the proportionality principle may be applied at the level of its identified staff that may lead to the neutralisation of some remuneration policy requirements such as retention policy, deferral of part of the variable remuneration, ex post incorporation of risk, establishment of a remuneration committee.
5. Basic remuneration principles
The Policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profiles, management regulations or instruments of incorporation of the funds managed by FRMC. The Policy is in line with the business strategy, objectives, values and interests of FRMC and the funds it manages or the investors of such funds.
Staff members engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independently of the performance of the business areas they control.
Objectives are set up at the start of the year. Performance and achievement of objectives are assessed by formal annual and semi-annual evaluation, the results of which will determine the remuneration and the level of any discretionary performance bonus.
The employees, at all levels, will be assessed on the following key focus areas which criteria is based on qualitative and quantitative objectives:
- Great Financial & Business Result
- Outstanding Client Focus
- The Best People - Winning Teams
- Robust Risk & Control
- Behaviours & Living Values
Where remuneration is performance-related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual, the overall results of FRMC, and when assessing individual performance, financial as well as non-financial criteria are taken into account. The assessment of performance is set in a multi-year framework appropriate to the lifecycle of FRMC.
Fixed and variable components of total remuneration are appropriately balanced.
Payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure (“Golden Parachute”).
6. Fixed Remuneration
Remuneration paid to the Staff including Identified Staff shall be in the form of an annual salary and related benefits. The fixed remuneration will take into consideration the diplomas, the background, the level of expertise and the salary benchmark for each individual.
The Fixed Remuneration is annually revised.
7. Variable remuneration
7.1 Discretionary Bonus
All Staff, including Identified Staff, may be eligible to receive variable remuneration in the form of a discretionary bonus (the “Discretionary Bonus”), under the terms of their employment contract. Guaranteed variable remuneration is exceptional and awarded only in the context of hiring new staff and only for the first year. The Discretionary Bonus is awarded on the basis of the performance of all staff in respect of performance targets and goals established during the annual performance evaluation process.
A meeting of the Management Committee will determine the final amount of the bonus for non-identified staff.
The Remuneration Committee will determine and oversee the total remuneration of the Identified Staff.
The measurement of performance used to calculate components or pools of components for the Discretionary Bonus includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks.
The Discretionary Bonus is paid only if it is sustainable according to the financial situation of FRMC as a whole, and is justified according to the performance of FRMC and the individual concerned.
7.2 Payment in instruments
The Discretionary Bonus does not include remuneration in the form of financial instruments.
A deferral schedule is defined by different components: (a) the time horizon of the deferral, (b) the proportion of the variable remuneration that is being deferred, (c) the time span from accrual until the payment of the first deferred amount.
7.4 Severance Payments
FRMC has set up a framework for individuals who are leaving the Company to ensure that there is no reward for failure in accordance to ESMA Guidelines.
8. Award Process
The Discretionary Bonus is awarded on the basis of the performance of all staff in respect of performance targets and goals established during the annual performance evaluation process.
Each individual will be evaluated on the performance realised and objectives achieved during the end of year review by the Line Manager.
9. Remuneration Committee
FRMC has put in place a Remuneration Committee which is constituted in a way that enables it to exercise competent and independent judgment on FRMC’s Policy and the incentives created for managing risk. The Remuneration Committee is responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of FRMC and the funds concerned (Identified Staff, as described earlier in this policy) and which are to be taken by the Executive Directors. The Remuneration Committee is composed by the members of the Board who do not perform any executive functions in FRMC.
The Remuneration Committee meets once a year, but may take place on a more frequent basis as necessary.
10. Roles of Control Functions
Working closely with the Remuneration Committee, the Board and management body, the control functions should assist in determining the overall remuneration strategy applicable to the management company, having regard to the promotion of effective risk management.
The Compliance Officer of FRMC analyses how the remuneration structure affects the FRMC’s Compliance with legislations regulations and internal policies.
The internal Audit function periodically carries out an independent audit of the design and implementation of the Policy. The work performed and results is presented in the internal audit report which is then reviewed and approved by the Board.
11. Delegated Investment Management Functions
FRMC, having delegated investment management functions, ensures through the Investment Oversight Team that its:
- Delegates are subject to Regulatory requirements that are equally as effective as those applicable to FRMC (e.g. CRD IV, AIFMD or UCITS V); or
- appropriate contractual arrangements are in place with the Delegates to ensure that there is no circumvention of the remuneration rules applicable to FRMC
12. External Disclosures:
As required by UCITS and AIFMD regulations, an extract of the Policy is made available on the website of FRMC.
Appropriate and UCITS and AIFMD regulatory required disclosures are included in the respective Annual reports of the funds under management and FRMC.
13. Conflict of Interests
The Policy has been designed and implementing in a way to avoid any potential conflict of interests.
A paper version of this remuneration policy is made available free of charge to investors at FundRock’s registered office.
*It should be noted that, upon issuance of further regulatory guidelines, this remuneration policy may be subject to certain amendments and/or adjustments.
No representation, warranty, or assurance of any kind, express or implied, is made as to the accuracy or completeness of the information contained in this document and FundRock Management Company S.A. (hereinafter called “FRMC”) accepts no obligation to any recipient to update or correct any information contained herein. The information in this document is published for information purposes only. Views expressed herein are not intended to be and should not be viewed as advice or as a recommendation.
Copyright 2016 FRMC. All rights reserved. This communication is for the use of intended recipients only and the contents may not be reproduced, redistributed, or copied in whole or in part for any purpose without FRMC’s prior express consent.