Legal

Pillar 3 Disclosure – December 2017

Background

The European Union’s Capital Requirements Directive (“CRD”) imposes a set of regulatory capital adequacy standards and associated supervisory framework across the European Union based on the Basel II Accord. The Basel II Accord comprises recommendations issued by the Basel Committee on Banking Supervision which aimed to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against various financial and operational risks. The Financial Conduct Authority (FCA) is the competent authority for the prudential regulation of non-major investment firms subject to the CRD.

The CRD uses the concept of three pillars that also form the basis of the Basel II Accord and extends the requirements to cover a wide range of financial institutions. These three pillars are also embedded in the FCA’s rules that implement the CRD.

Pillar 1 specifies the minimum capital resources Oxford University Endowment Management Limited (“the Firm”) is required to hold. In the case of the Firm this is the highest of €50,000, the sum of its market and credit risk requirements, and its Fixed Overhead Requirement (“FOR”). In the case of the Firm, the latter is the highest as at the date of this disclosure.

Pillar 2 sets out the review process to be used by the Firm and the FCA to determine whether additional capital should be held against any risks not adequately covered by Pillar 1. Under Pillar 2, the Firm is required to analyse a wide range of risks to its business and then consider whether the mitigation in place to address these risks is sufficient or whether additional capital in excess of that available under Pillar 1 is required to provide a buffer against specific risks. This procedure forms part of the Firm’s Internal Capital Adequacy Assessment Process (“ICAAP”).

Pillar 3 requires the Firm to develop a set of disclosure requirements which enable market participants to assess information on the risks facing the Firm, its capital resources and risk management procedures.

This statement is published in accordance with the FCA rules concerning Pillar 3 disclosures.

Scope of disclosure

The disclosures in this document are made in respect of Oxford University Endowment Management Limited, an investment management firm providing services to a number of funds comprising assets of the University of Oxford, its colleges and related entities. The Firm is authorised and regulated by the FCA and is categorised as a Limited Licence €50,000 firm. The Firm is not permitted to hold client money or client assets. The Firm does not fall within the definition of a UK consolidation group and is thus not required to prepare disclosures on a consolidated basis.

Risk management objectives and policies

The Firm’s approach to risk management is predicated on the need to manage the full range of risks facing the Firm including credit, market, business, operational and liquidity risks. The Firm’s overriding aim in this area is to minimise the risks to the Firm’s clients, its counterparties and other stakeholders and to ensure it remains in full compliance with regulatory and legal requirements.

Operational risk

The Firm’s risk management framework incorporates an analysis of the impact of each risk on the business, the probability of each risk occurring and the procedures in place in mitigation. This risk management framework is a core component of the Firm’s high level systems and control arrangements and ensures all areas of the business are subject to senior management oversight. The Firm’s directors review all aspects of the business on a regular basis to ensure operational risks have been identified, recorded in the Firm’s register of risks and effective controls put in place to mitigate the risks identified in order that the combination of the impact assessment and probability of each risk is kept to an acceptable level. The risk management framework is supported by a wide range of real-time management information systems that monitor performance. The Firm has embedded within its business processes, at all levels, robust and effective risk management processes that are subject to regular appraisal. These appraisals are supported and enhanced by compliance through its independent and risk orientated monitoring procedures, the output from which is communicated to senior management through regular reports including those from the Firm’s independent compliance consultant
.

In order to ensure the Firm has sufficient capital to cover some of these operational risks the company may be exposed to, the Firm also maintains insurance policies to cover a range of eventualities. There is an annual review of all policies to ensure that the cover provided is sufficient.

Business risk

The Firm’s main business risk relates to a possible fall in assets under management as a result of turbulence in markets or substantial redemptions by investors and a consequent diminution in investment management fees.

Liquidity risk

The risk that the business will be unable to meet its financial obligations as they fall due is not considered material for the purposes of this disclosure.

Credit risk

The risk of the non-payment of investment management fees arising from the Firm’s management of various funds is mitigated by the funds’ appointment of an independent administrator. In the case of bank deposits, money is only deposited with highly rated approved counterparties.

Market risk
The Firm’s market risk is not material as it has no significant assets or liabilities which have market exposure (eg an exposure to foreign exchange rate movements).

Capital resources

The table below illustrates the current Tier 1 capital structure.

The Firm has assessed its Pillar 2 requirements under the FCA rules and as a result of this assessment the Firm has determined additional capital of £352k is required in addition to its Pillar 1 capital requirement of £1,252k.

Remuneration Code

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 Code, Oxford University Endowment Management Limited (the “Firm”) is classified as a Proportionality Level 3 firm, the lowest risk category. This means that the Firm can dis-apply many of the technical requirements of the Code and proportionately apply the Code’s rules and principles.

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

The disclosure obligations applicable to remuneration which is subject to the Code includes all forms of fixed remuneration and variable remuneration.

Remuneration policies
The Firm has adopted policies in relation to the Firm’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 Firm’s authorised persons being rewarded for taking inappropriate levels of risk.

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

The decision making process
The Firm’s Policy is determined by the Remuneration Committee of the Firm, consisting of the three non-executive directors of the Firm and an external member. The Remuneration Committee is chaired by the Chairman of OU Endowment Management.

Link between pay and performance
Remuneration subject to the Code is based on an assessment of the profitability of the Firm, an individual’s performance and their contribution to the business carried on by the Firm.

In addition to salary, staff are incentivised with the opportunity of receiving a discretionary bonus based on performance subject to the discretion of the Remuneration Committee.

Quantitative remuneration data
Disclosure of the aggregate remuneration for staff permits firms to take account of the provisions of the Data Protection Directive (Directive 95/46/EC) regarding the protection of individuals in relation to the processing of personal data. Due to the low number of staff assessed as Code Staff for the Firm, the Board has relied upon BIPRU 11.5.20R(2) and determined that aggregate quantitative disclosure for Code Staff is inappropriate.

UK Stewardship Code

Under Rule 2.2.3R of the Financial Conduct Authority’s Conduct of Business Sourcebook, Oxford University Endowment Management Limited (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. The Code is a voluntary code and sets out a number of principles relating to engagement by investors with UK equity issuers.

The Funds which the Firm manage invest predominantly via other investment managers and hold only a small number of equities directly. Consequently, while the Firm supports the general objectives that underlie the Code, the provisions of the Code are not relevant to the type of investing currently undertaken by the Firm. If the investment strategy of the Funds which the Firm manage changes in such a manner that the provisions of the Code become more relevant, the Firm will amend this disclosure accordingly.

Website General Terms Of Use

ATTENTION: These terms apply to your use of the website under the domain name www.ouem.co.uk (the “Website”). Please read these terms carefully before using the Website.

1. Introduction
1.1 The Website is operated by OU Endowment Management Limited, a company registered in England and Wales under number 06242141 with its registered office at University Offices, Wellington Square, Oxford, OX1 2JD (the “Company”).

1.2 By accessing any part of the Website, you shall be deemed to have accepted these terms in full. If you do not accept these terms in full, you must leave the Website immediately.

1.3 The Company may vary these terms at any time by updating this posting. You should check the Website from time to time to review the then current terms, because they are binding on you.

2. Licence
2.1 You are permitted to print and download extracts from the Website for your own use on the following basis:

2.1.1 no documents or related graphics on the Website are modified in any way;

2.1.2 no graphics on the Website are used separately from the corresponding text; and

2.1.3 the Company’s copyright and trade mark notices and these terms appear in all copies.

2.2 Unless otherwise stated, the copyright and other intellectual property rights in all material on the Website (including without limitation photographs and graphical images) are owned by the Company or its licensors. For the purposes of these terms, any use of extracts from the Website other than in accordance with clause 2.1 for any purpose is prohibited. If you breach any of these terms, your permission to use the Website automatically terminates and you must immediately destroy any downloaded or printed extracts from the Website.

2.3 Subject to clause 2.1, no part of the Website may be reproduced or stored in any other website or included in any public or private electronic retrieval system or service without the Company’s prior written permission.

2.4 Any rights not expressly granted in these terms are reserved.

3. Website access
3.1 The Company shall not be liable if for any reason the Website is unavailable at any time or for any period.

3.2 Access to the Website may be suspended temporarily and without notice for any reason, including, without limitation, in the case of system failure, maintenance or repair or for reasons beyond the Company’s control.

4. Visitor material and conduct
4.1 The Company may process information about you in accordance with its Privacy Policy. By using the Website you consent to such processing and you warrant that all data provided by you is accurate.

4.2 Other than personally identifiable information, which is covered under our Privacy Policy, any material you transmit or post to the Website shall be considered non-confidential and non-proprietary. The Company shall have no obligations with respect to such material. The Company and its designees shall be free to copy, disclose, distribute, incorporate and otherwise use such material and all data, images, sounds, text and other things embodied therein for any and all commercial or non-commercial purposes.

4.3 You may not misuse the Website (including, without limitation, by hacking) and are prohibited from posting or transmitting to or from the Website any material:

4.3.1 that is threatening, defamatory, obscene, indecent, seditious, offensive, pornographic, abusive, liable to incite racial hatred, discriminatory, menacing, scandalous, inflammatory, blasphemous, in breach of confidence, in breach of privacy or which may cause annoyance or inconvenience;

4.3.2 for which you have not obtained all necessary licences and/or approvals;

4.3.3 which constitutes or encourages conduct that would be considered a criminal offence, give rise to civil liability, or otherwise be contrary to the law of or infringe the rights of any third party, in any country in the world; or 4.3.4 which is technically harmful (including, without limitation, computer viruses, logic bombs, Trojan horses, worms, harmful components, corrupted data or other malicious software or harmful data).

4.4 The Company shall fully co-operate with any law enforcement authorities or court order requesting or directing the Company to disclose the identity or locate anyone posting any material in breach of clause.

5. Links to and from other websites
Links to third party websites on the Website are provided solely for your convenience. If you use these links, you leave the Website. The Company has not reviewed any of these third party websites, does not control and is in no way liable for these websites or their content or availability. The Company does not endorse or make any representations about such websites, or any material found there, or any results that may be obtained from using them. If you decide to access any of the third party websites linked to the Website, you do so entirely at your own risk.

6. Disclaimer
6.1 The Company does not warrant the accuracy and completeness of the material on the Website. The Company may make changes to the material on the Website, or to the products and prices described in it, at any time without notice. The material on the Website may be out of date, and the Company makes no commitment to update such material.

6.2 Whilst the Company has taken reasonable care to ensure the material on this Website is reliable, all material is provided “as is”, without any conditions, warranties or other terms of any kind. To the maximum extent permitted by law, the Company excludes all representations, warranties, conditions and other terms (including, without limitation, the conditions implied by law) which, but for these terms, might have effect in relation to the Website.

7. Liability
7.1 The Company, any other party (whether or not involved in creating, producing, maintaining or delivering the Website), and any of the Company’s group companies and the officers, directors, employees, shareholders or agents of any of them, exclude all liability and responsibility for any amount or kind of loss or damage that may result to you or a third party (including without limitation, any direct, indirect, punitive or consequential loss or damages, or any loss of income, profits, goodwill, data, contracts, use of money, wasted management or office time or loss or damages arising from or connected in any way to business interruption, and whether in tort (including without limitation negligence), contract or otherwise) in connection with the Website in any way or in connection with the use, inability to use or the results of use of the Website, any websites linked to the Website or the material on such websites, including but not limited to loss or damage due to viruses that may infect your computer equipment, software, data or other property on account of your access to, use of, or browsing the Website or your downloading of any material from the Website or any websites linked to the Website.

7.2 Nothing in these terms shall exclude or limit the Company’s liability for:

7.2.1 death or personal injury caused by negligence;

7.2.2 fraud;

7.2.3 misrepresentation as to a fundamental matter;

7.2.4 any duty or liability it may have to a client under the regulatory system (as defined by FCA Rules); or

7.2.5 any other liability which cannot be excluded or limited under applicable law.

7.3 If your use of material on the Website results in the need for servicing, repair or correction of equipment, software or data, you assume all costs thereof.

8. Governing law and jurisdiction
This legal notice shall be governed by and construed in accordance with English law. Disputes arising in connection with these terms shall be subject to the exclusive jurisdiction of the English courts.

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