Serone Capital Management LLP’s (‘the firm’) pillar 3 disclosure is outlined herein as per the FCA’s “Prudential Sourcebook for Banks, Building Societies and Investment Firms” (BIPRU), in particular, BIPRU 11.3.3 R.  This requirement derives from the UK’s 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 remain subject to the UK’s implementation Regulations of CRD III.  The purpose of Pillar 3 disclosures is to improve transparency, indeed, the firm will publish this disclosure on an annual basis.  All information contained within this disclosure should be assumed to be as at the firm’s Accounting Reference Date which is 30th of November 2017.  Please note that all figures quoted herein have not been formally audited by the firm’s external auditors (as this is not a requirement), therefore reliance upon information contained within this document should not be relied upon in making any judgement or assessment of the firm.


Method of Disclosure

The firm has chosen to disclose its pillar 3 statement on its website: http://seronecapital.com/


Materiality (BIPRU 11.3.5R and 11.4.1R)

The firm may regard information as ‘material’ in this disclosure if it’s 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.  Therefore, the firm may omit one or more disclosures required under the BIPRU pillar 3 rules if the information is not considered ‘material’.

The Capital Requirements Directive

The Capital Requirements Directive (‘CRDIII’) which precedes the current CRDIV, to which the Firm remains subject as a consequence of the UK CRDIII implementing Regulations, have three pillars:

·         Pillar 1 = minimum capital requirements

·         Pillar 2 = Internal Capital Adequacy Assessment Process (“ICAAP”) undertaken by a firm and (where applicable) the Supervisory Review and Evaluation Process through which the Firm and Regulator satisfy themselves on the adequacy of capital held by the Firm in relation to the risks it faces and;

·         Pillar 3 = public disclosure of risk management policies, capital resources and capital requirements.


The Firm is a Full Scope UK AIFM of a non-EEA AIF and may undertake additional activities (such as making discretionary management decisions with respect to managed accounts) which result in the Firm being a BIPRU firm.  The Firm’s greatest risks have been identified in its ICAAP, broadly, as business and operational risk.  The ICAAP contains the firm’s detailed assessment of these risks and the appropriate actions taken to manage them.  The Firm must disclose its risk management objectives and policies for each area of risk which include the internal procedures for managing and reporting those risks; the structure and organisation of the relevant risk management function (where proportionate); and the policies for hedging and mitigating risk (including the periodic evaluation of such policies).

Several key operations are outsourced by our clients, for example by the AIF to which we are an AIFM, to third party providers such as administrators reducing our exposure to operational risk.  The Firm has an operational risk framework (described below) in place to mitigate operational risk.  Credit risk generally only applies to the firm with respect to any potential failure to receive management and performance fees.  The firm only deals with professional clients and therefore considers credit risk to be low.  Furthermore, the Firm holds all cash and performance fee balances with banks assigned high credit ratings.

Market Risk exposure has been assessed by the Firm and is limited to the Firm’s exposure to foreign currency exchange rate risk and hence to any assets held on the Firm’s Balance Sheet denominated in a foreign currency. The Firm’s Reporting Currency is GBP and all foreign currency assets are converted into GBP where possible on a regular basis.

Structure of the firm

The Firm, Serone Capital Management LLP (“Serone”) is incorporated in the UK and is authorised and regulated by the FCA as a full scope UK AIFM of a non-EEA AIF.  In addition, the Firm has MiFID permissions which give it the categorisation of a ‘BIPRU Firm’.

The Firm is a Solo regulated entity, majority owned by a UK limited company (Serone Capital Management UK Ltd).

BIPRU 11.5.1 Risk Management Objectives & Policies

Risk Management Objective

The Firm has a risk management objective to develop systems and controls to mitigate risk to within its risk appetite.  The firm also has a documented risk management policy which is reviewed periodically and in response to material changes.

Corporate Governance 

The Executive Committee is the Governing Body of the Firm and has the daily management and oversight responsibility.  It meets quarterly and is composed of:

·         Neil Servis

·         Adrian King

·         Serj Walia


The Executive Committee together with the Chief Risk Officer (“CRO”) oversee the risk management processes (at portfolio and firm level), as well as reviewing the effectiveness of the procedures on a proactive basis. In addition, the Governing Body and CRO decide the Firm’s risk appetite or tolerance for risk and ensure that the Firm has implemented an effective, ongoing process to identify risks, to measure its potential impact and then to ensure that such risks are actively managed. Senior Management are accountable to the Executive Committee and CRO for designing, implementing and monitoring the process of risk management and implementing it into the day-to-day business activities of the Firm.

Risk Management

Risk within the Firm is managed by use of the following:

BIPRU 11.5.4 (Disclosure in accordance with BIPRU 3, 4, 7 and the Overall Pillar 2 Rule.


Credit Risk (BIPRU 3)

For its Pillar 1 regulatory capital calculation of Credit Risk, under the credit risk capital component the Firm has adopted the Standardised approach (BIPRU 3.4) and the Simplified method of calculating risk weights (BIPRU 3.5).


Please note: As per GENPRU 2.1.46R, the Credit Risk Capital Requirement is only required to be calculated in respect of our designated investment business. This does not include our activities as an AIFM.


Credit Risk calculation

As our fixed overhead requirement is materially higher than the sum of credit risk and market risk requirements, and additionally on the basis of materiality (see above), no breakdown of either the credit risk or market risk capital calculation is provided. 

Advanced Credit Risk Approach (BIPRU 4)

This approach does not apply to the firm (which does not apply the Internal Ratings Based Approach – “IRB Approach”) and therefore no disclosure is required. 

Market Risk (BIPRU 7)

The Firm has Non-Trading Book potential exposure only (BIPRU 7.47.5).


The Overall Pillar 2 Rule

The Firm has adopted the “Pillar 1 plus” “Structured” approach to the calculation of its ICAAP Capital Resources Requirement as outlined in the Committee of European Banking Supervisors Paper, 25 January 2006.

The ICAAP assessment is a “live document” and is reviewed by the Executive Committee and CRO and amended where necessary, on a periodic basis or when a material change to the business occurs. The Executive Committee and CRO presents the ICAAP document to the Governing Body of the Firm which reviews and endorses the risk management objective on an annual basis or when a material change to the business occurs at the same time as reviewing and signing off the ICAAP document. 

BIPRU 11.5.8 (Disclosure: Credit Risk & Dilution Risk)

As noted above, the Firm itself is primarily exposed to Credit Risk from the risk of failing to receive management fees.  It holds all cash and performance fee balances with Banks assigned high credit ratings.  As a result, the risk of past due or impaired exposures is minimal.  A financial asset is past due when a counterparty has failed to make a payment when contractually due. Impairment is defined as a reduction in the recoverable amount of a fixed asset or goodwill below its carrying amount.

BIPRU 11.5.12 (Disclosure: Market risk)

The Firm has Non Trading Book potential exposure only (BIPRU 7.4 & 7.5).

Please note: As per GENPRU 2.1.46R, the Market Risk Capital Requirement is only required to be calculated in respect of our designated investment business. This does not include our activities as an AIFM.

Market Risk calculation

As our fixed overhead requirement is materially higher than the sum of credit risk and market risk requirements and additionally based on materiality (see above), no breakdown of either the credit risk or market risk capital calculation is provided. 

BIPRU 11.5.2 (Disclosure: Scope of Application of Directive Requirements)

The Firm is subject to the disclosures under the UK CRDIII Implementing Regulations.

The firm is not a member of a UK Consolidation Group and consequently, does not report on a consolidated basis for accounting and prudential purposes. 

BIPRU 11.5.3 (Disclosure: Capital Resources)

The Firm is a BIPRU Investment Firm without an Investment Firm Consolidation Waiver deducting Material Holdings under (GENPRU 2 Annex 4). Tier 1 Capital comprises of LLP Members’/Partners  Capital.

As a Collective Portfolio Management Investment Firm (“CPMI” firm), the Firm is subject to the capital requirements set out in IPRU(INV) Chapter 11 and BIPRU/GENPRU.  The Firm has the following capital resources:-

Tier 1 Capital/Initial Capital




Tier 2 Capital




Total Tier 1 & 2/Own Funds


Tier 3 Capital


Total Capital (GENPRU)


*As of November 2017

BIPRU 11.5.18 (Disclosure: Remuneration)

The Governing Body is responsible for the Firm’s remuneration policy. The Executive Committee set and oversee compliance with the firm’s remuneration policy including reviewing the terms of the policy at least annually.

All variable remuneration is adjusted in line with capital and liquidity requirements.

The firm has adopted a remuneration policy that complies with the requirements of chapter 19C of the FCA’s Senior Management Arrangements, Systems and Controls Sourcebook (“SYSC”), as interpreted in accordance with the FCA’s guidance publication entitled “General Guidance on Proportionality: The BIPRU Remuneration Code (SYSC 19C) & Pillar 3 Disclosures on Remuneration (BIPRU 11)” and subsequent items of guidance issued by the FCA, including its document entitled “Frequently Asked Questions on the Remuneration Code”.

The firm is not a ‘significant in terms of its size, internal organisation and the nature scope and complexity of its activities’ (as per paragraph 5.3 of the above-mentioned guidance on proportionality and BIPRU 11.5.20(2)R).  On this basis, the requirement to make pillar 3 disclosures with respect to remuneration are approached on a proportionate basis.

As at the accounting reference date, the firm currently sets the variable remuneration of its partners and members, as applicable, in a manner which considers firm performance, by reference to individual performance and the overall results of the firm. As permitted for firms to whom the proportionality tests in paragraph 5.3 of the FCA Guidance apply, Serone takes into account the specific nature of its own activities (including the fee-based nature of its revenues) in conducting any risk adjustments to awards of variable remuneration and, given the nature of its business, has disapplied the requirement under the Remuneration Code to make post risk adjustments.



This statement outlines the Firm’s position with respect to the UK Stewardship Code (the “Code”), which was published by the Financial Reporting Council (“FRC”) in July 2010 and amended in September 2012. Under Rule 2.2.3R of the FCA’s Conduct of Business Sourcebook, the Firm is required to make a public disclosure about the nature of its commitment and level of compliance to the Code or, where it does not commit to the Code, to explain its alternative investment strategy.

The Code is a voluntary code, which aims to enhance the quality of engagement between asset managers and listed companies in the UK, to help improve long-term risk-adjusted returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practice on engagement with investee companies and is to be applied by firms on a “comply or explain” basis. It also describes steps that asset owners can take to protect and enhance the value that accrues to the ultimate beneficiary.

The FRC recognises that not all parts of the Code will be relevant to all institutional investors and that smaller institutions may judge some of the principles and guidance to be disproportionate. It is of course legitimate for some asset managers not to engage with companies, depending on their investment strategy.

The seven principles of the Code provide that, so as to protect and enhance the value that accrues to the ultimate beneficiary, institutional investors should:

·   Publicly disclose their policy on how they will discharge their stewardship responsibilities;

·   Have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed;

·   Monitor their investee companies;

·   Establish clear guidelines on when and how they will escalate their stewardship activities;

·   Be willing to act collectively with other investors where appropriate;

·   Have a clear policy on voting and disclosure of voting activity; and

·   Report periodically on their stewardship and voting activities.


It should be noted that given the Firm’s specialist focus on fixed income assets, the number of occasions on which the Firm will be involved in UK equity investments, will be extremely limited.  Therefore, the Code’s relevance has limited applicability to the Firm’s investment activities.


The Firm has chosen not to formally commit to the Code given the nature of the Firm’s asset base and its investment approach.