Remuneration Policy

 

Introduction

The Remuneration Policy is to ensure that all procedures and benefits pertaining to this policy are carried out in a fair, equitable and transparent way that will attract and maintain a workforce that is representative of the community of which it is part.

Legal Basis

Management companies are required to define a remuneration policy consistent with and promote sound and effective risk management and does not encourage risk taking inconsistent with the risk profile of the funds. This principle is defined in the Alternative Investment Funds Manager Directive (2011/61/EU article 13 and Annexe II), the Code Monétaire et Financier (article L53322-2) and the AMF General Regulation (article 319-10).

On 20 December 2016, the AMF (Autorité des marchés financiers) published a revised Position DOC 2013-11 on guidelines concerning the remuneration policies applicable to Alternative Investment Funds Manager (AIFM).

The purpose of this Position was to implement ESMA guidelines 2016/579 on sound remuneration policies under the AIFMD.

In addition, the AMF published a guide for the management company on the remuneration.

Purpose and Aims

FundRock France AM (FFAM) is authorised as an Alternative Investment Fund Manager (AIFM) pursuant L532-9 of the Code Monétaire et Financier and articles 316-1 and following of AMF General Regulation implementing the EU Directive 2011/61/EU (“AIFMD”), is required to establish, implement and maintain an overall sound remuneration policy (the “Policy”).

FFAM as part of FundRock Management Company S.A. (“FRMC”) applies the group remuneration policy.

The present remuneration policy (“Policy”) encourages the alignment of the risks taken by its staff with those of the funds (AIFs– FCP and SICAV) that it manages, the investors of such funds and the management company itself. In particular, the remuneration policy should duly take into consideration the need to align risks in terms of risk management and exposure to risk.

This Policy is also based on FFAM’s assessment of the principles and the proportionality principles outlined in the Final Report of the ESMA Guidelines on sound remuneration policies under the AIFMD (ESMA 2016/579), as amended from time to time (“ESMA Guidelines”), in relation to quantitative and qualitative assessment criteria (i.e. company size, internal organisation and the nature and complexity of the activities). Further, consideration has been given to the requirements as outlined in Regulation (EU) 2019/2088 on sustainability – related disclosures in the financial sector (the “SFDR Requirements”).

The Policy applies to all employees within FFAM.

The Policy covers the remuneration of Identified Staff: 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 FFAM or, in its function as AIFM, of the AIFs it manages.

The Management Committee of FFAM (the “Board” or the “Supervisory Function”) is responsible for approving and maintaining the Policy of FFAM, and overseeing its implementation. The Policy will not be controlled by any executive members of the Supervisory Function. The Board 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.

Scope of activities of FFAM

FFAM is a Management Company authorised under article L.532-9 of the Code Monétaire et Financier implementing the EU directive 2011/61/EU. In its current operating model, the Supervisory Function should ensure that FFAM’s Policy is consistent with and promotes sound and effective risk management.

The Policy should:

  • Be in line with business strategy, objectives, values and interests of FFAM and the funds that it manages and of the investors in such funds, in line with FFAM’s role as AIFM to prevent excessive risk taking as compared to their investments policy for the AIFs
  • Enable FFAM to align the interests of the AIFs and their investors with those of the identified Staff that managers AIFs, and to achieve and maintain a sound financial situation

When FFAM retains the portfolio management activities. FFAM appoints a financial advisors. The Financial Advisors has for task to propose potential eligible investments subject to the approval of FFAM. FFAM does not suggest any investment to a particular investment funds for whom it acts as AIFM or to any other entity or on its own behalf.

When FFAM delegates the portfolio management activities to appointed delegates and does not process any transactions connected to investment funds for whom it acts as AIFM or to any other entity or on its own behalf.

Its income is almost entirely derived from fee income arising from the provision of services. FFAM does not hold any financial investments (or hold any complex financial or derivative instruments) in its own name or entered into on its own behalf. As such, it should be noted that FundRock’s employees who are identified as risk-takers under AIFMD are not remunerated based on the performance of the funds under management.

The investment managers to whom FFAM has delegated investment management activities fall under the scope of the AIFMD. FFAM will ensure also that similar safeguards are in place at the level of the financial advisors. The Compliance with these requirements is verified as part of the FFAM’s program of Due Diligence and External Compliance Reviews of its delegates (including investment managers) or Financial Advisors.

Identified Staff

The following FFAM 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,, the safeguards for preventing

Board of Directors

The Board of Directors is composed of FFAM CEO and the Managing Director, if any. Board of Directors do not receive variable remuneration paid by FFAM for their function as Board of Directors.

Senior and Executive Managements

  • Fund Manager (1)

Control functions

  • Compliance Officer (1)

FFAM (as of September 2021) employs 5 individuals, 4 of them would fall under the definition of Identified Staff for the scope of the Policy.

All processes and procedures must meet the requirements of current employment legislation, Governance and diversity, equality & inclusion requirements. All processes and procedures will be equitable, fair and auditable. Employees will be treated with courtesy and respect throughout all processes.

All employees involved in the processes and procedures covered by this policy must consider whether their family and other personal relationships create any actual or potential conflicts. For further information please refer to the Conflict of Interest Policy.

Internal audit is excluded since this function is currently outsourced.

Moreover, given the fact that fund manager and sales staff are not able to take decisions on their own to approve new business and cross-selling opportunities ( Pricing Committee is included in the Product Committee where FFAM CEO, the managing director and the Compliance officer are at least needed – the decision requires the unanimity), FFAM considers that its Sales’ activities are limited by upper hierarchy level and do not have an impact on the risk profile of the management company according to AIFM Directive.

Proportionality Principle

The AIFM Directive and the ESMA Guidelines envisage that the provisions should operate in such a way as to enable a management company to take a proportionate approach to compliance with a remuneration 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 integration within a group excessing of 100 employees, FFAM has decided not to apply the proportionality principle in light of its own characteristics as Company part of a Group. Except in the cases described below.

Taking into account, amongst others, the cap on variable remuneration described in the Policy, FFAM is in the opinion that up to this cap it is not exposed to higher risk at the level of individuals, and that the proportionality principle (that leads to the disapplication of some regulatory requirements) may be applied at the level of its identified staff:

  • Identified Staff whose total variable remuneration is lower than 200 K€ or lower than 150% over their fixed remuneration will receive their variable remuneration in cash, in one payment, in March of year N+1;
  • Identified Staff whose total variable remuneration is equal or higher than 200 K€ and equal or higher than 150% over their fixed remuneration will receive their variable remuneration with respect to the following applicable regulatory principles:
  • At least 50% of the variable components consists in instruments, unless the management of AIFs accounts for less than 50% of the total portfolio managed by the management company, in which case the minimum of 50% does not apply. This applies equally to both the non-deferred and the deferred parts of the variable remuneration;
  • The instruments referred to in the previous point are subject to an appropriate retention policy designed to align incentives with the interest of the management company and the AIFs it manages and the investors of the AIFs;
  • 40% of the variable component is deferred with a minimum deferral period of 3 to 5 years unless the lifecycle of the AIFs concerned is shorter. Remuneration payable under deferral arrangements vests no faster than on a pro-rata basis. In the case of a particularly high amount, at least 60% of the amount is deferred.

 

Basic Remuneration Principles

The Policy is consistent with and promotes sound and effective risk management and does prevent risk-taking including sustainability risks which is inconsistent with the risk profiles, management regulations or instruments of incorporation of the funds managed by FFAM. The Policy is in line with the business strategy, objectives, values and interests of FFAM.

The remuneration principles of the present policy apply to any benefit of any type paid by FFAM to any amount paid directly by the AIF itself, including performance fees, and to any transfer of units or shares of the AIF, made for the benefit of Identified Staff.

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 (see Annex 1). Performance and achievement of objectives are assessed by formal annual and semi-annual evaluation, the results of which will contribute to the determination of 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 and the overall results of FFAM, 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 FFAM.

Staff are required to refrain from using personal hedging strategies or remuneration and liabilityrelated insurance to undermine the risk alignment effects embedded in their remuneration arrangements.

Fixed and variable components of total remuneration, as described in more detail in the following sections, are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component.

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.

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.

Benefits may include (see details in Annex 3):

  • lunch vouchers
  • pension scheme
  • corporate credit card
  • car allowance

The Fixed Remuneration is annually revised

Variable Remuneration 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. Each individual will be evaluated on the performance realised and objectives achieved during the end of year review by the Line Manager. A rating scale of between 1 and 5 will be attributed, which will determine the level of bonus.

A meeting of the Board will then take place in order to confirm and validate the rating scores and determine the final amount of the bonus.

The FRMC Remuneration Committee will determine and oversee the total remuneration of the Identified Staff  within FFAM (see point 10: Remuneration Committee). The principle will remain exactly the same as for other staff, with the exception that the Remuneration Committee, and not the Board, will validate the final ratings and bonuses. The decisions on ratings and bonuses will be ratified by the Board of Directors.

For Sales personnel, the commission fee paid for any new business wins (Sales Commission), will be subject to deferral payment.

An exceptional bonus to reward the exceptional performance of employees can be allocated under certain circumstances. The assessment of exceptional performance will be accordingly documented (e.g. explanations in the award letter).

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 FFAM as a whole, and is justified according to the performance of FFAM and the individual concerned.

The Discretionary Bonus is deferred in accordance with section 7.5 of this Policy and may be reduced in the event that FFAM is loss-making at time of the Discretionary Bonus (malus). Any Discretionary Bonus awards which have been deferred will be forfeited by the recipient should the employee concerned resign prior to the payment date of the Discretionary Bonus awarded.

In order to ensure the effectiveness of risk alignment, staff members should not buy an insurance contract which compensates them in the event of a downward adjustment in remuneration. As a general rule, however, this would not prohibit insurance designed to cover personal payments such as healthcare and mortgage instalments (provided that the mortgage coverage concerns healthrelated circumstances that would render the staff member unable to work in an equivalent position), although each case should be judged on its merits.

The requirement not to use personal hedging strategies or insurance to undermine the risk alignment effects embedded in their remuneration arrangements should apply to deferred and retained variable remuneration. Management companies should maintain effective arrangements to ensure that staff members comply with this requirement.

Variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements laid down within the AIFM directive.

Sales Bonus

The sales bonuses are being paid for the first 24 months of activity of the customer

Year 1: Up to 10% of the revenue generated by AUM including add-on fees and excluding set up fees.

Year 2: 5% of the incremental revenue

Commission is payable quarterly based on the previous quarter’s income

Cap: 250% of the annual fixed salary

Retention Bonus

FFAM reserves the right to pay retention bonuses (according to the conditions of EBA Guidelines (BA/GL/2015/22) in absence of retention bonus explanations in the applicable ESMA Guidelines). Long-term incentive plan

FFAM reserve the right to provide its Senior Management with a long-term incentive plan (LTIP) based on options/ shares/ certificates, as it would be detailed by FRMC or FFAM.

Cap on Variable Remuneration

A cap is applied on the variable remuneration for the Identified Staff and Sales, as follows:

  • Identified Staff: variable remuneration capped at 150% over fixed remuneration up to 200 K€
  • Sales: variable remuneration capped at 250% over fixed remuneration

 

Deferral

Deferral arrangement for all employees of FFAM

As FFAM has judged that the proportionality principle applies in connection to its staff, the regulatory requirements to defer the variable remuneration does not apply to identified staff whose variable remuneration does not exceed the two cumulative thresholds defined in point 4 of the present policy.

The Discretionary Bonus it is paid in one instalment in March. Deferral arrangements and payment in instruments for identified staff of FFAM.

Identified Staff who are not able to apply the proportionality at their individual level will receive their variable remuneration with respect to the following applicable regulatory principles:

  • At least 50% of the variable components consists in instruments, unless the management of AIFs accounts for less than 50% of the total portfolio managed by the management company, in which case the minimum of 50% does not apply. This applies equally to both the non-deferred and the deferred parts of the variable remuneration;
  • The instruments referred to in the previous point are subject to an appropriate retention policy designed to align incentives with the interest of the management company and the AIFs it manages and the investors of the AIFs;
  • 40% of the variable component is deferred with a minimum deferral period of 3 to 5 years unless the lifecycle of the AIFs concerned is shorter. Remuneration payable under deferral arrangements vests no faster than on a pro-rata basis. In the case of a particularly high amount, at least 60% of the amount is deferred.

The discretionary bonus does not include remuneration in the form of financial instruments when FFAM is able to apply the proportionality principle at the level of the Identified staff.

Ex post incorporation of risk

FFAM reserves the rights to reassess or withhold the amount of variable remuneration allocated (“malus”) to its Identified Staff who cannot benefit from the individual proportionality, in the following conditions:

  • Evidence of misbehaviour or serious error by the staff member;
  • Whether the AIFs and/or the management company and/or the business unit subsequently suffers a significant downturn in its financial performance;
  • Whether the AIFs and/or the management company and/or the business unit in which the staff member works suffers from a significant failure of risk management.

FFAM also reserves the rights to demand full or partial repayment from the individual (“clawback”) to its Identified Staff who cannot benefit from the individual proportionality, in the following conditions:

  • Fraudulent conduct of staff member;  Misleading information by a staff member;
  • Breach of AIFM Directive or ESMA Guidelines.

Award Process

Management companies should adopt a documented policy for the award process and ensure that records of the determination of the overall variable remuneration pool are maintained

  • The risk adjustment in the award process
  • Quantitative ex ante risk adjustment
  • Qualitative measures for ex-ante risk adjustment

Remuneration of Executive and Non-Executive Directors

Executive Directors of FFAM who are employees of FFAM do not receive any additional remuneration for serving as a Board of directors of FFAM.

In case of appointment of non-Executive Directors, it will be paid fixed fees on an annual basis in line with the written agreement between themselves and FFAM.

Remuneration Committee

Due to the size of FFAM, no Remuneration Committee is hold within FFAM.

However, FFAM can seek advice from FRMC Remuneration Committee. FRMC has 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 FRMC Remuneration Committee is responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of FFAM and the funds concerned and which are to be taken by the Executive Directors. Therefore the remuneration of the senior officers in the risk management and compliance functions as well as the remuneration of the Senior Management, Identified Staff and Sales is overseen by the Remuneration Committee.

The Remuneration Committee is composed by the members of the Board of Directors who do not perform any executive functions in FRMC.

The FRMC Remuneration Committee meets once a year, but may take place on a more frequent basis as necessary.

Reporting

HR will formally report to the Management Board of FFAM in respect of the adherence to the Policy and any Discretionary Bonus awards which are in excess of 10% of the annual salary of any Identified Staff concerned.

Roles of Control Functions

Management companies should ensure that control functions have an active role in the design, ongoing oversight and review of the remuneration policies for other business areas.

Working closely with the FRMC Remuneration Committee and the FFAM Board of Directors 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 FFAM analyses how the remuneration structure affects the FFAM’s Compliance with legislations regulations and internal policies.

The internal Audit function carries out, at least annually, an independent audit of the design implementation and effect of the Policy.

Delegated Investment Management Functions

When FFAM delegates investment management functions, it will ensure through the Investment Oversight function that:

  • Delegates are subject to Regulatory requirements that are equally as effective as those applicable to FFAM (e.g. CRD IV, AIFMD and SFDR); or
  • Appropriate contractual arrangements are in place with the Delegates to ensure that there is no circumvention of the remuneration rules applicable to FFAM.

Internal Disclosure

The remuneration policy is accessible to all staff members of FFAM upon request. FFAM ensures that the information regarding the remuneration policy disclosed internally reveals at least the details which are disclosed externally.

The appraisal process should be properly documented and should be transparent to the member of staff concerned.

External Disclosures

Extract of the policy is made available on the website of FFAM.

Accounting provisions established to cover the potential cost of any Discretionary Bonus which may be awarded will be disclosed in the notes to the audited financial statements of FFAM, in line with applicable French accounting practices and laws.

Appropriate and regulatory required disclosures are included not only in the respective Annual reports of AIFs, but also in the KIID, if any, and prospectus or  issuing document of each AIF funds.

Review and update

The Policy is subject to annual review by  FFAM Compliance Officer and the update is performed by HR department presented and approved by the Board of FFAM.

The periodic review of the implementation of the remuneration Policy may be, partially or totally, externally commissioned, where appropriate. The Board of Directors remains responsible for the review of the remuneration Policy and for ensuring that the results of the review are followed up. Moreover, the relevant control functions should be closely involved.

Conflict of Interest

The policy has been designed and implemented in a way to avoid any potential conflict of interestshould nevertheless any potential arise, the implemented Conflict of Interest Policy of FFAM should apply and such potential conflict should be reported to Compliance in order to be logged and properly addressed and mitigated as foreseen in the policy.

 

SFDR Requirements

 

As per article 5 of SFDR, Financial Market Participant including AIFMs, are required to include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks and shall publish that information on their websites.

 

As outlined previously, FFAM’s employees who are identified as risk-takers under AIFMD are not remunerated (fixed and variable remuneration) based on the performance of the funds under management. Based on the limited impact of variable remuneration of the employees identified as risk-takers on the risk profile of the Funds and the nature of the business of the FFAM investing only in project or investment proposed by the financial advisor or delegating the portfolio management activity for few Funds to the relevant entities appointed, FundRock assessment is that there is no risk of misalignment with the sustainability risks associates with the investment decisions making process of FundRock in respect of the Funds.

 

As mentioned above, when FFAM retains portfolio management. In that case, FFAM will appoint systematically a Financial Advisor to the Funds. Even within this configuration FFAM income is almost entirely derived from fee income arising from the provision of services. Employees identified as a risk taker have no direct bearing on the performance capabilities of the Funds and the performance of the Funds does not impact the remuneration of those employees.

Where a Financial Advisor is appointed, FFAM is ensuring that the Financial Advisor adopts remuneration policies and procedures which are consistent with the integration of the sustainability risks.

 

When FFAM delegates portfolio management activity, FFAM ensures that the portfolio manager adopts remuneration policies and procedures which are consistent with the integration of sustainability risks, when sustainability risks are integrated into the investment decision making process. FFAM will perform periodic oversight and seek confirmations from each delegate portfolio manager that these policies are being complied with and the remuneration structures are not encouraging excessive risk-taking with respect to sustainability.