Pillar 3 Disclosure

Overview

These disclosures are made in accordance with the rules of the Financial Conduct Authority which implement in the UK the EU directives regarding the revised capital adequacy framework agreed by the Basel Committee on Banking Supervision. It is this application of the Capital Requirement Directive and Basel ll that requires Theorema Advisors UK LLP to make these disclosures.

The FCA framework consists of three 'Pillars':

  • Pillar 1: Minimum capital requirements
  • Pillar 2: Supervisory review process: the need to assess whether the capital held under Pillar 1 is sufficient to meet the additional risks not covered by Pillar 1
  • Pillar 3: Disclosure requirements allowing market participants to assess information on a firms' risks, capital and risk management procedures

The Financial Conduct Authority, in BIPRU 11, outlines the minimum disclosure requirements. The information below satisfies Theorema Advisors UK LLP Pillar 3 requirement.

Frequency of Disclosure

Theorema Advisors UK LLP will report their Pillar 3 disclosure annually or upon material change. These disclosures are based on the company's position as at 31st December 2016. The Pillar 2 (ICAAP) capital requirements are excluded from this summary but are reviewed annually or upon material change.

Location and Verification

These disclosures have been validated by the senior partners and are published on the firm's web site. These disclosures are not subject to an audit except to the extent where they are equivalent to disclosures made under accounting requirements.

Scope of Application

This disclosure is made on an individual basis.

Risk Management

The partners of the firm, in addition to the risk mapping structure of the ICAAP, are very much involved with the day to day running of the company including the continual assessment of risk. They meet on a regular basis to discuss current projections for profitability, regulatory capital management, business planning and risk management. The partners manage the firm's risks through a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required.

The firm is relatively small with an operational infrastructure appropriate to it size.

The ICAAP has identified the most significant risk types to which Theorema Advisors UK LLP to be as follows:

  • Business Risk:
  • This is the risk associated with being able to maintain adequate business levels to conduct the business.

    The risk is mitigated by the long term investors in the funds.

  • Liquidity Risk
  • This is the risk that Theorema will have difficulty meeting its financial obligations when due.

    This risk is mitigated by a potential additional resource being available from the partners and effective financial planning.

    Capital Resources December 2016 '000s
    Core Tier 1 Capital 761
    Total Tier 2 capital 0
    Total Tier 1 and Tier 2 Capital after deductions 694
    Capital Resources Requirement 261

    Capital adequacy in compliance with BIPRU 3, 4 6, 7 & 10 (BIPRU 11.5.4)

    Theorema have forecasts in place to ensure that they will continue to meet they regulatory capital requirement on an ongoing basis.

    Theorema is a BIPRU MiFID activity restriction firm and, as such, is not required to calculate its operational risk capital requirement under Pillar 1 in accordance with BIPRU 6. Instead they are required to calculate a Fixed Overhead requirement in accordance with GENPRU 2.1.53R

    The total Market Risk requirement, (BIPRU 11.5.12), has been calculated at £19,000 which comprises solely of Foreign Currency PRR. The Commodity PRR is zero. The Credit Risk capital component is £57,000.

    Remuneration

    BIPRU 11.5.18R requires that a firm makes a disclosure of details regarding its remuneration policy.

    Given the relatively small size of the firm, remuneration policy for all code staff is set by the senior partners. The senior partners review remuneration for code staff based upon individual, both financial and non financial criteria, and overall company performance. Individual performance is also reviewed over an extended period to ensure the long term objectives of the staff and the firm are not in conflict. The overall level of remuneration is set in the form of a base salary and a bonus. The resources available for bonuses is directly linked to the performance of the funds managed by Theorema Advisors UK LLP, which minimises any potential conflict of interest.

    Aggregate information

    Theorema Advisors UK LLP has one business activity and under BIPRU 11.5.20R, the firm does not consider that it is 'significant in terms of size, internal organisation and nature and scope of its activities', so is not required to disclose the quantitative information referred to in BIPRU 11.5.18R at the level of senior personnel.

    Theorema Advisors UK LLP falls within FCA proportionality Level 3 and as such this disclosure is made in line with the requirements for a Level 3 Firm.

    The number of identified code staff equate to the number of partners and FCA registered CF30s in the firm.

    Further Enquiries

    Should you have any queries please contact:

    Chee-Won Tan
    Head of Compliance

    Theorema Advisors UK LLP
    20 Balderton St
    London
    W1K 6TL

    Contact Theorema

    UK Office

    Tel:

    +44 20 7318 5330


    Fax:

    +44 20 7318 5350



    Email:

    theorema@theoremafunds.com For details about careers or marketing, or for our Spanish/UK address, please visit the contact page.

    Our Structure

    Theorema Advisors UK LLP, based in the UK, currently manages Theorema Credit Equity Opportunity Fund and MLIS – Theorema European Equity Long-Short UCITs Fund on behalf of Theorema Advisors Ltd.

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    Our Philosophy

    We endeavour to generate a high level of alpha, irrespective of the market environment, whilst maintaining a low level of volatility and continue to have a strong emphasis on capital preservation.

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    Our Team

    Theorema has a highly experienced team, led by Giovanni Govi, Founder and Chief Investment Officer. The team also includes two portfolio managers, three analysts, one trader, a risk manager, a CEO, a COO and two support staff.

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