DSAM Partners (London) Limited - Pillar 3 Disclosure
The Pillar 3 disclosure of DSAM Partners (London) Limited (“DSAM or “the Firm””) is set out below as required by the Financial Conduct Authority’s (“FCA”) “Prudential Sourcebook for Banks, Building Societies and Investment Firms” (“BIPRU”), specifically BIPRU 11. The regulatory aim of the disclosures is to improve market discipline.
DSAM makes Pillar 3 disclosures annually via its audited financial statements. This information contained in this disclosure is accurate as at 31 December 2019.
The information contained in this document has not been audited by DSAM’s external auditors and does not constitute any form of financial statement.
Certain information relating to BIPRU 11.5 that is deemed immaterial or confidential may be omitted. The Firm regards information as material in disclosures if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions
The Firm regards information as proprietary/confidential if sharing that information with the public would undermine its competitive position. Proprietary/confidential information may include information on products or systems which, if shared with competitors, would render the Firm’s investments therein less valuable. Furthermore, the Firm must regard information as confidential if there are obligations to customers or other counterparty relationships binding the Firm to confidentiality.
The Firm is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. The Firm is categorised by the FCA, for capital purposes, as a Collective Portfolio Management Investment (“CPMI”) firm. It is an investment management firm and has no trading book exposures. The Firm is not required to prepare consolidated reporting for prudential purposes.
The prudential framework for investment management firms 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 Firm to assess the adequacy of capital held in relation to its material risks; and
Pillar 3 – requires the Firm to publicly disclose its policies on risk management, capital resources and capital requirements.
As a CPMI firm for the Pillar 1 regulatory capital calculation of credit risk, DSAM has adopted the standardised approach.
The Pillar 1 capital requirement for a CPMI firm is calculated as the higher of the:
Fixed Overhead Requirement (“FOR”),
The funds under management requirement (the sum of the Firm’s own funds requirement of €125k plus 0.02% of the amount by which the Firm’s funds under management (related to AIFs) exceed €250m); and
The sum of market risk and credit risk (for non-AIFM business); plus
Whichever is applicable of:
The professional negligence capital requirement (“additional own funds requirement”); or
The professional indemnity insurance (“PII”) capital requirement
The Firm has deemed the FOR to be the higher and this is therefore used for the purposes of the Pillar 1 calculation.
The main features of the Firm’s Capital Resources (as at 31 December 2019) are as follows:
Capital Item (USD’000s)
Tier 1 capital less innovative tier 1 capital – 3,261
Tier 2 capital - 0
Tier 3 capital - 0
Total capital resources, net of deductions – 3,261
Risk management objectives and policies
Due to the nature, size and complexity of the Firm, DSAM does not have an independent risk management function. Senior management, and ultimately the Chief Operating Officer (“COO”) is responsible for the management of risk within the Firm and their individual responsibilities are clearly defined. Senior management reports to the Firm’s governing body on a frequent basis regarding the risks. DSAM has clearly documented policies and procedures which are designed to minimise risks to the Firm and all members of staff are required to confirm that they have read and understood them.
The FCA’s BIPRU rules require DSAM to conduct an ICAAP assessment. The ICAAP is the process through which DSAM determines that it is able to identify and manage its key risks on an ongoing basis and that it has sufficient capital in respect of such risks. The process is forward looking and is an integral part of the management of the Firm. The COO is responsible for the ICAAP within DSAM and consults with senior management to ensure the accuracy of his findings. An analysis of all (as far as this is possible) risks posed to the Firm was undertaken, in particular those that relate to the Firm’s investment management activities, and the likelihood and impact of the risk was examined and rated (High/Medium/Low). The systems and controls in place to control the risk were then examined and whether there were any other mitigating factors which might lower the risk. The final analysis examined whether, after considering the systems and controls and mitigating factors, there was a residual risk which was not compatible with the Firm’s risk appetite and if there was how much capital needed to be allocated against that risk.
The Firm has concluded that its Tier 1 capital is sufficient to cover its Pillar 1 and Pillar 2 requirements.
The ICAAP identifies the major sources of risk to the regulated entity, how the Firm intends to deal with those risks and details of the stress tests and scenario analyses carried out and the resulting financial resources estimated to be required.
The ICAAP is reviewed and updated periodically and at least annually. The ICAAP was last reviewed and approved in April 2020.
DSAM must comply with the FCA’s Remuneration Code (“the Code”) as set out in Article 14 of the Alternative Investment Fund Managers Directive (“AIFMD”) and SYSC 19B (The AFIM Remuneration Code) and SYSC 19C (the BIPRU Remuneration Code) of the FCA Handbook. The purpose of the Code is to ensure that firms have risk focused remuneration policies, which are consistent with and promote effective risk management and do not expose themselves to excessive risk. The code applies to all “Remuneration Code Staff” of the Firm who comprise of senior management, controlled function staff, risk takers, staff whose professional activities have a material impact on the Firm’s profile and any staff whose remuneration is on the same level as staff who hold control functions. DSAM has reviewed all existing employment contracts to ensure they comply with the Code.
Senior management is responsible for setting the Remuneration Policy Statement for all members of staff and the COO is a member of the senior management team.
The Code can be applied in a proportionate way and. as such, Senior Management has determined that the following rules are not proportionate to DSAM and have not implemented these detailed rules:
SYSC 19B 1.17 – Retained units, shares and other instruments;
SYSC 19B.1.18 – Deferral; and
SYSC 19B.1.19, 19B 1.20 – Performance adjustment
Variable remuneration is not based solely on the financial performance of the individual. Senior management also considered the individuals overall (non-financial) performance to the whole team and the overall results of the fund/firm. The performance of the individual is assessed over the entire year.
The aggregate remuneration paid to the Firm’s Code Staff during the financial year ending on 31 December 2019 was £3,777,083 of which £665,393 was paid to Senior Management Code Staff.
Under Rule 2.2.3R of the FCA’s Conduct of Business Sourcebook, the Firm is required to include on this website a disclosure about the nature of its commitment to the UK Financial Reporting Council's Stewardship Code (the “Code”) or, where it does not commit to the Code, its alternative investment strategy.
As an investment manager the Firm endeavours to apply its approach on stewardship to all companies that we invest in on behalf of our clients. Our approach is consistent with the Firm’s overall aims, which are to provide good long-term performance to our clients and keeping clients’ interests paramount.
The Firm monitors all investee companies as part of its general investment policy and approach. The Firm acts in line with its investment objectives where its research of publicly available information warrants such action.
However, our investments within UK investee companies are normally held in instruments that they do not result in voting rights. Additionally, one of our main investment strategies is short term in nature and therefore results in limited or no interactions with these investee companies and nor do we consider that our clients would expect such engagement with regard to this particular investment strategy.
Where we have a right to vote in relation to investee companies, we will take decisions in the best interest of our investors and their long term interests and record what decisions we have taken in this respect. However, we do not normally make those decisions public.
If the Firm investment strategy changes in such a manner that the provisions of the Code become relevant, the Firm will amend this disclosure accordingly.
SHAREHOLDER RIGHTS DIRECTIVE (“SRD II”)
While the Firm generally supports the objectives of the Shareholder Rights Directive (“SRD II”), our investments within EU investee companies are normally held in instruments that they do not result in voting rights. Additionally, one of our main investment strategies is short term in nature and therefore results in limited or no interactions with these investee companies.
As such, we have made the decision not to comply with the requirements of the SRD II. Moreover, the Firm ensures that all our clients are regularly and routinely apprised of the investment strategies employed by the Firm and as such, it is felt that our clients would not expect us to achieve compliance with the core requirements of the SRD II.
RTS 28 DISCLOSURE 2018
Please download the following PDF file for RTS 2018 disclosure.
RTS 28 DISCLOSURE 2019
Please download the following PDF file for RTS 2019 disclosure.
In the context of the business of DSAM Partners (London) Limited (“DSAM” or “the Firm”) as an alternative investment fund manager (“AIFM”), “eligible complainants” are underlying investors in the alternative investment funds (“AIFs”) managed by DSAM who are individuals “acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession”.
A “MiFID complaint” is separately defined by the FCA, and relates to the Firm’s MiFID business. A complainant for the purposes of the Firm’s MiFID business includes professional clients and eligible counterparties, as well as potential investors.
You should contact us if there are any aspects of the AIF management services, or MiFID business provided by DSAM that you are not satisfied with. You can do this in a number of ways:
By phone: +44 207 016 8600
By letter: Compliance Officer, DSAM Partners (London) Limited, 14-15 Conduit Street, London W1S 2XJ.
In the event that you are an eligible complainant, and we are unable to resolve your complaint to your satisfaction, you may also be entitled to refer your complaint to the Financial Ombudsman Service (“FOS”). The FOS is a UK agency for arbitrating on complaints between regulated firms and their clients. Full FOS details can be found on its website at www.financial-ombudsman.org.uk.
We take every complaint seriously and your complaint will be handled in accordance with the relevant FCA rules. DSAM has a written complaints handling policy, a copy of which is available from the firm’s Compliance Officer upon request.