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Pillar Three

Introduction 

Castlebay maintains a capital reserve requirement to ensure continuity in Castlebay’s operations.  Pillar 3 is one part of the capital program at Castlebay. The FCA states: “Pillar 3 complements the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2). Its aim is to encourage market discipline by developing a set of disclosure requirements which will allow market participants to assess key pieces of information on a firm's capital, risk exposures and risk assessment processes. The disclosures are to be made to the market for the benefit of the market.” http://www.fsa.gov.uk/Pages/About/What/International/basel/info/pill3/index.shtml

 

Risk Categories 

Operational Risk 

Castlebay conducts, and regularly reassesses, a complete review of all areas of our operations to ensure that operational risks have been identified, recorded, and that our compliance procedures limit the risk where possible.   

Business Risk  

As Castlebay is paid according to the assets under management of our fund and individual client portfolios, a fall in asset prices or the loss of significant accounts are our most significant risks. 

Credit Risk  

Castlebay is paid monthly and individual payments are not threatening to the continuity of the partnership.  Castlebay controls credit risk by ensuring prompt payment, and by reviewing the financial strength of our current clients.  As for our bank deposits, we only have deposits with highly rated approved counterparties. 

Market Risk   

The major risk for Castlebay is that its operating costs are in sterling and its revenue is derived from the assets under management which are invested in equities.  

Capital Resources 

Pillar 1 for Castlebay is its fixed overhead requirement, and it is our policy to retain additional capital on top of the minimum requirement.  Pillar 2 is a review of risks that are not covered in Pillar 1.  Due to the nature and operations of Castlebay, the partners have decided that the capital set aside for Pillar 1 is sufficient to cover our capital reserve requirement and no additional capital is needed due to Pillar 2. 

 

Pillar 3 Remuneration Code Disclosure 

The aim of the Remuneration Code (the “Code”) is to ensure that firms have risk focused remuneration policies which promote and are consistent with effective risk management, and do not expose firms to excessive risk. 

Under the Remuneration Code, we are classified as a Level Three Firm, the lowest risk category. As examples of our low category position we do not manage or trade proprietary positions. This allows us to dis-apply many of the technical requirements of the Code and proportionately apply the Code’s rules and principles establishing the Firm’s policies. 

However under the FCA’s Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU), firms are required to disclose their remuneration policy and practices, as well as to aggregate quantitative disclosure for staff assessed as having a material impact on its risk profile, including senior management (“Code Staff”). 

Remuneration Policies 

Castlebay has adopted policies in relation to the Partnership’s remuneration arrangements which address potential conflicts of interest arising from such arrangements by taking into account the controls in place to guard against the Partnership’s authorised persons being rewarded for taking inappropriate levels of risk. 

Castlebay pays fixed salaries and a profit share can be paid depending on the profitability of the partnership. Salaries are set at a level where there is a significant margin of safety surrounding the minimum capital required for the business. Castlebay’s profit share policy will at all times consider the capital requirements and the long-term health of the business. 

Castlebay is satisfied that the policies in place are appropriate to its size, internal organization and the nature, scope and complexity of its activities.

Decision Making Process 

The Partnership’s Remuneration Policy is set by the Partners of Castlebay. The Partners have assessed its team and concludes that 2 Partners qualify as Code Staff. Each year the Firm assesses the amount of capital it considers necessary to run its business and if necessary uses some or all of the profits available to increase its capital resources.

 

Stewardship and Social Responsible Investing (SRI)

Castlebay takes its management and stewardship responsibilities seriously. We believe it is important to remain up to date on issues impacting our investee companies and to engage with them where appropriate. We assess any issue in terms of its impact to the long term value of an underlying company and thus the value of our clients’ holdings. 

We believe that good long-term performance of companies is directly related to their approach to good governance, ethical and environmental responsibility and consideration of social impact. As such, when specific SRI issues are identified Castlebay will consider these in relation to other investment factors.  

Our approach to stewardship and SRI is encapsulated in the following principles which are embedded in our investment philosophy:

  • We regularly monitor our investee companies.
  • We evaluate any situation which arises and are willing to engage with the company directly. 
  • We are willing to act collectively with other investors where appropriate.
  • We will always vote in the long term interests of our clients and will record what decisions we have taken in this respect. We do not normally make those decisions public.

 

Treating Customers Fairly (TCF)

We are committed to delivering the highest level of client service and ensuring that our clients and fund investors are treated fairly in accordance with the Financial Conduct Authority’s (FCA) Treating Customers Fairly (TCF) guidelines.

We work hard to ensure that:

  • Clients receive a prompt and courteous service, provided by competent and professional staff members
  • Clients receive a clear description of our investment approach and our performance objectives
  • Our fees and charges are transparent and clearly described on our web-site an in all marketing literature.
  • All client questions and complaints are dealt with fairly and honestly

Fundamental to this commitment are our robust compliance and risk monitoring procedures carried out by our well qualified operation team who work closely with the industry specialists we have appointed.

Castlebay Investment Partners LLP is authorised and regulated by the Financial Conduct Authority (624445)
Registered Office: Crosstrees House, 14 Sandyford Place, Glasgow  G3 7NB  Tel: 0141 212 7930
Castlebay Investment Partners LLP is a Scottish Registered Limited Liability Partnership SO304149

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