BennBridge Ltd (“BennBridge” or the “Firm”) is an investment manager incorporated in England and Wales. BennBridge is authorised and regulated by the Financial Conduct Authority (“FCA”) as an Alternative Investment Fund Manager (“AIFM”) and is categorised by the FCA as a Collective Portfolio Management Investment (“CPMI”) firm.
As a CPMI firm, BennBridge is subject to BIPRU rules and adheres to the FCA’s General Prudential Sourcebook (“GENPRU”) and Prudential Sourcebooks for Banks, Building Societies and Investment Firms (“BIPRU”).
Form of Disclosures
The following Pillar 3 disclosures have been prepared by BennBridge in accordance with the requirements of BIPRU 11. The firm will make Pillar 3 disclosures annually at its last accounting reference date, following publication of its Financial Statements. which will be published on the firm’s website at www.bennbridge.com/uk.
The amount and nature of capital that a BIPRU firm must maintain is governed by The Capital Adequacy Directive which is a European Union regulatory framework.
The framework consists of three pillars:
- Pillar 1 sets out the minimum capital requirements for the investment manager;
- Pillar 2 deals with the Internal Capital Adequacy Assessment Process (“ICAAP”) undertaken by the investment manager to assess the adequacy of capital held in relation to its material risks; and
- Pillar 3 requires the investment manager to publicly disclose its policies on risk management, capital resources and capital requirements.
The disclosures below are the required Pillar 3 disclosures and apply solely to BennBridge. The disclosures do not apply to the funds managed by BennBridge, which are exposed to different risks. The disclosures reflect the arrangements and financials of the Firm as at 30 June 2020 unless otherwise stated.
The firm is required to disclose its risk management objectives and policies for each separate category of risk, which includes the strategies and processes to manage those risks; the structure/organisation of the relevant risk management function or other appropriate arrangement; scope and nature of risk reporting and management systems; and the policies for hedging and mitigating risk.
The Governing Body is responsible for the management of risk within the Firm, determines its business strategy and risk appetite. They also establish and maintain the firm’s governance arrangements, design and implement a risk management framework that recognises the risks that the business faces and assess how those risks may be mitigated in the arrangements to do so. BennBridge has an independent Risk Manager.
The Governing Body meets periodically and receives input from the relevant business areas. It meets to discuss current projections for profitability and cash flow, regulatory capital management and business planning and risk management. They manage the firm though a defined and transparent risk management framework policies and procedures having regard to relevant law, standards, principles and rules, which are updated as required. BennBridge has clearly documented policies and procedures, which are designed to minimise risks to the Firm and all staff are required to confirm that they have read and understood them.
BennBridge has developed systems and controls to manage the risk that the Firm cannot meet its liabilities as they fall due. The Governing Body has allocated responsibilities to certain individuals to ensure the effective on-going monitoring and management of liquidity risk. The Risk Manager has been allocated responsibility for the management of portfolio risk. The CEO is responsible for business and capital funding risks and he is part of and reports within the Firm’s governing body on a frequent basis.” The Governing Body formally reviews and signs off the liquidity assessment at least annually.
Operational risk is defined as the risk of loss due to system breakdowns, internal and operational control failures, staff fraud or misconduct, clerical errors, and catastrophes. Responsibility for the day-to-day performance of a significant portion of BennBridge’s functions have been outsourced under service level agreements, such as IT, accounting, and legal etc. Given the nature, scale and complexities of the Firm’s current business, the risk management structure is relatively simple. The Firm’s Governing Body manages the risks of the Firm through periodic receipt of management information on e.g., the Firm’s financial position, capital adequacy and compliance with the various rules and regulations to which the Firm is subject.
A considerable part of the Firm’s risk is the risk of a downturn in business performance by the underlying boutiques or an inability to attract additional boutiques to grow the business. The main concerns of the Firm relate to poor performance of the boutiques and their underlying fund / mandate and redemptions, but also their market conduct and investment processes.
Reputational risk is defined as the risk of damage to the Firm’s reputation that could lead to negative publicity, costly litigation, a decline in the customer base or the exit of key staff members and therefore directly or indirectly leading to a loss of revenue. There is some overlap between reputational risks and business risks, since both can result in the loss of clients and a reduction in income.
Capital Resources Requirement
BennBridge, as CPMI firm, has an initial capital requirement of €125k and an ongoing capital resource requirement which comprises the greater of:
- the funds under management requirement (the sum of the Firm’s base own funds requirements of €125k plus 0.02% of the amount by which the Firm’s funds under management (related to the Fund) exceed €250m); and
- the own funds based on fixed overheads requirement; and
- the sum of market risk and credit risk (for non-AIFM business); plus
Whichever is the applicable of:
- the professional negligence capital requirement (“additional own funds requirement”); or
- the professional indemnity insurance (“PII”) capital requirement.
BennBridge calculates the credit risk applicable to its non-AIFM activities under the simplified approach.
For the period ended 30 June 2020, BennBridge’s capital resource requirement under Pillar 1 was £361k and the Firm had surplus own funds of £389k.
The Pillar 2 capital requirement is calculated as part of the ICAAP and represents additional capital to be maintained against any risk not adequately covered by Pillar 1. The ICAAP involves consideration of a range of risks faced by BennBridge and determines the level of capital needed to cover these risks.
In the Firm’s latest ICAAP, BennBridge concluded that its capital requirement under Pillar 1 (£361k) was sufficient to withstand unexpected losses arising from the operational, business, and reputational risks identified and no additional capital was required to be held under Pillar 2.
Scenario analysis and stress testing supports the conclusion that the Pillar 1 capital requirement is sufficient.
BennBridge’s remuneration policy complies with the requirements set out in Article 14 of the Alternative Investment Fund Managers Directive (“AIFMD”) and chapter 19B (the “AIFM Remuneration Code”) of the FCA’s Senior Management Arrangements, Systems and Controls Sourcebook (“SYSC”).
BennBridge has a Remuneration Committee comprising the Governing Body, who are responsible for the policy’s adoption and implementation. The policy is reviewed at least annually. The remuneration policy should be applied to AIFM Remuneration Code staff as well as those categories of staff deemed Remuneration Code staff under any other Remuneration Code applicable to BennBridge’s business, i.e. those categories of staff whose professional activities have a material impact on the risk profiles of the firm or the AIFs the firm manages. This includes senior management, Risk takers, Staff engaged in 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 Firm’s risk profile.
The Remuneration Committee is responsible for setting the Remuneration Policy for all staff. The Remuneration Policy is designed to:
- be consistent with and promote sound and effective risk management;
- not encourage risk-taking which is inconsistent with the risk profile of the instrument constituting the fund of the AIFs the Firm manages;
- be in line with the business strategy, objectives, values and interests of the Firm alongside the AIFs the Firm manages;
- include measures to avoid conflicts of interest.
All employees are paid a fixed, base salary which is commensurate with market rates for those of their seniority, experience and qualifications. Any variable element of remuneration is performance-related, based on the results of the Firm and performance of the individual.
BennBridge had one “business area” being its investment management business. The number of current Code Staff has been established as 31. The total remuneration to Code Staff for the period ended 30 June 2020 was £5,165,681.
The information contained set out in this disclosure has not been audited by BennBridge’s external auditors and does not constitute any form of financial statement and should not be relied upon in making any judgement about the Firm.