Pillar 3 disclosure – December 2021

Regulatory context

The Pillar 3 disclosure of Oxford University Endowment Management Limited (‘the Firm’) is set out below as required by the FCA’s ‘Prudential Sourcebook for Banks, Building Societies and Investment Firms’, BIPRU 11. This is a requirement which stems from the UK’s Capital Requirements Directives (CRD) III implementing Regulations which represented the European Union’s application of the Basel Capital Accord. The Firm is no longer formally subject to CRD but remains subject to the UK’s implementation Regulations of CRD III as they stood as at 31 December 2013 per the CRDIV Derogation adopted by the UK. The regulatory aim of the disclosures is to improve market discipline.

The CRDs three pillars are as follows:

This statement is published in accordance with the FCA rules concerning Pillar 3 disclosures in BIPRU 11. If the Firm deems a certain disclosure to be not applicable or immaterial, it may be omitted from this Statement.

Background to the Firm

The Firm is incorporated in the UK and is authorised and regulated by the FCA as a Full Scope UK AIFM of UK AIFs. In addition, the Firm is permitted to undertake Additional Activities permitted by AIFMD Art.6(4) which result in the Firm being a BIPRU Collective Portfolio Management Investment (CPMI) Firm.

The Firm is a solo regulated entity and the ICAAP covers this Firm only on an unconsolidated basis. The ICAAP assessment is reviewed by the Executive Directors and amended where necessary, on at least an annual basis or when a material change to the business occurs. The Executive Directors present the ICAAP document to the Board which reviews and endorses the risk management framework annually, or when a material change to the business occurs, at the same time as reviewing and signing off the ICAAP document.

The Firm is subject to the disclosures under the UK CRD III Implementing Regulations. However, it is not a member of a UK Consolidation Group and consequently, does not report on a consolidated basis for accounting and prudential purposes.

Risk management framework, 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 with the overriding aim 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.

The Firm has a permanent risk management function, which is headed by the Chief Operating Officer (COO) who is also the Compliance Officer and a member of the Firm’s Board. The Firm maintains a risk management framework, which 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. This framework incorporates all identified risks, an analysis of the impact of each risk on the business, the probability of each risk occurring and the procedures in place in mitigation.

The Firm’s Executive Directors review all functions within the business on a regular basis to ensure all risks have been identified within the framework. 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. The Firm has also engaged an independent compliance consultant to provide independent FCA regulatory assistance which includes quarterly compliance and risk monitoring services.

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.

Operational risk

The Firm has identified several key operational risks relating to trade error, failure of third party service providers, system failures and cyber security threats. The Firm places strong reliance on the operational procedures and controls that it has in place in order to mitigate these risks and seeks to ensure that all staff are aware of their responsibilities.

Credit risk

The Firm is exposed to the risk of the non-payment of investment management fees arising from the Firm’s management of various products and counterparty exposure relating to bank deposits. The Firm raises invoices and monitors receipt of payments on a monthly basis. In the case of bank deposits, money is deposited with highly rated counterparties.

For its Pillar 1 regulatory capital calculation of Credit Risk, under the credit risk capital component the Firm has adopted the Standardised approach and the Simplified method of calculating risk weighting.

Please note: the Credit Risk Capital Requirement is only required to be calculated in respect of the Firm’s designated investment business (ie non-AIF business). Numerical disclosures relating to credit risk are considered to be immaterial.

Market risk

The Firm’s market risk is not material as it has no significant assets or liabilities which have market exposure (ie exposure to foreign exchange rate movements) and no positions in CRD financial instruments and commodities (ie trading book exposure).

Please note: the Market Risk Capital Requirement is only required to be calculated in respect of the Firm’s designated investment business (ie non-AIF business). Numerical disclosures relating to market risk are considered to be immaterial.

Capital resources

The Firm is a BIPRU Investment Firm without an Investment Firm Consolidation Waiver deducting Material Holdings. Tier 1 Capital comprises Share Capital and Audited Reserves/Losses.

As a CPMI Firm, the Firm is subject to the capital requirements set out in IPRU(INV)11 and also BIPRU/GENPRU.  The Firm has the following capital resources:

Capital Resources £’000
Share capital 2,369
Audited reserves 22,918
Total tier 1 capital 25,287

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.

Oxford University Endowment Management Limited (the ‘Firm’) has proportionately implemented the Code based on the FCA’s general guidance on the AIFM Remuneration Code.

Remuneration policy

The Firm has adopted a remuneration policy which addresses potential conflicts of interest by taking account of the controls in place to guard against those persons with authority to make investment decisions and persons undertaking significant influence functions being rewarded for taking inappropriate levels of risk.

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

The decision making process

The Firm’s Policy is determined by the Remuneration Committee, comprised of non-executive directors of the Firm.

Link between pay and performance

In addition to salary, there is a discretionary award scheme in place for all staff and a formulaic remuneration scheme in place for eligible members. Both discretionary and formulaic awards are capped and linked to individual and fund performance respectively. All awards are at the discretion of the Remuneration Committee and staff have no entitlement to them.

Quantitative remuneration disclosures

Based on the Firm’s profile, the Executive Directors consider that the Firm has one business area, investment management. For the purposes of the remuneration disclosures required, the Executive Directors have identified staff who have a material impact on the risk profile of the Firm (“Code Staff”). For the year ended 31 December 2021, the total remuneration for Code Staff was £2.2m.

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 Firm continues to support the general objectives that underlie the Code following the scope of the Code changing substantially in 2020. Prior to these changeswhilst supporting the Code’s objectives, the Firm did not believe its principles to be relevant to the type of investing it undertakes. In light of the changes, it is currently conducting a review to establish the applicability of the principles of the updated Code to its investment strategy and assessing whether it is possible to sign up.   

Shareholder Rights Directive (SRD II)

SRD II aims to promote effective stewardship and long-term investment decision making, in respect of shares traded on EEA regulated markets and comparable regulated markets outside the EEA. It came into effect on 10 June 2019.  

The rules require asset managers, who invest in shares traded on a regulated market detailed above, to:  

The investment strategies pursued by Oxford University Endowment Management Limited (the “Firm”) do not currently include the direct investment in shares which are traded on an EEA regulated market, or on a comparable regulated market outside the EEA, and so the SRD II rules do not apply to it. Therefore, we have not developed a shareholder engagement policy and nor are we required to make the disclosures outlined above. 

Website general terms of use

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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”).

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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
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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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