MIFIDPRU Disclosure

1. Introduction and Context

Sona Asset Management (UK) LLP (“the Firm” or “Sona”) is a CPMI firm, and as such qualifies for the requirements set out under MIFIDPRU 8.

The public disclosure requirements of IFPR are set out in MIFIDPRU 8, replacing the previous Pillar 3 requirements Sona is classified as a SNI firm given it does not breach any requirements set out in MIFIDPRU 1.2.1 R, and as such is only required to disclose of quantitative and qualitative information in respect of the firm’s remuneration arrangements.

2. Remuneration

2.1. Qualitative Disclosures

2.1.1. Approach to remuneration

• The Firm implements remuneration that promotes sound and effective risk management and do not encourage risk taking which is inconsistent with the risk profiles, rules or instruments of the fund.
• In order to support the Firm’s long-term business strategy, the Firm has adopted a top-down multi-year remuneration framework. This ensures that variable remuneration is only paid from risk adjusted profits based upon the performance of the business as a whole, the relevant business line and the individual, and only after the Firm’s liquidity and capital requirements have been considered on a rolling three-year period.
• The Firm has also adopted policies and procedures aimed at mitigating any potential conflicts that may arise between staff members and the Firm, staff members and the AIF it manages and between one AIF/managed account and another. The Firm also maintains a Conflict of Interests Register which includes potential conflicts relating to remuneration, as well as the procedures the Firm has implemented to mitigate these conflicts. The Firm applies this Principle on a Firm-wide basis.
• All staff benefit from some sort of remuneration, this varies between firm-wide remuneration, and remuneration only applicable to AIFM Remuneration staff code (which includes senior management, certified staff and other risk takers).

2.1.2. Governance

The Governing Body is responsible for the total process of risk management, which includes remuneration risk. The Governing Body set the risk profile and risk tolerance of the Firm and its related policies and procedures. In addition, the Governing Body ensures that the Firm has implemented an effective, ongoing process to identify risk, to measure its potential impact against a broad set of assumptions and subsequently to ensure that risks are actively managed. The Governing Body has adopted a Statement of Responsibilities setting out the powers and responsibilities of the Governing Body. Due to the size of the Firm, it does not consider it appropriate to have a separate remuneration committee. Instead, this function is undertaken by the Governing Body. This will be kept under review and, should the need arise; the Firm will establish such a committee.

2.1.3. Objectives of financial incentives

The objective of the Firm’s remuneration arrangements is to ensure the Firm retains premium talent and ultimately is able to deliver high-quality investment services to its clients, thereby driving the profitability and performance of the Firm.
In order to support the Firm’s long-term business strategy, the Firm has adopted a top-down multi-year remuneration framework. This ensures that variable remuneration is only paid from risk adjusted profits based upon the performance of the business as a whole, the relevant business line and the individual, and only after the Firm’s liquidity and capital requirements have been considered on a rolling three-year period.

2.1.4. Links from variable remuneration to performance

The variable remuneration of staff members is determined on an individual basis within a set framework determined by the Governing Body. Any variable remuneration award is subject to an assessment of the individual’s financial and non-financial performance. A weighted rating in favour of effective risk and compliance with the Firm’s policies and procedures is used to ensure an individual’s remuneration promotes effective risk management.
The Firm utilises a balanced scorecard technique to document the results of the review and the evaluation is discussed with the individual during annual suitability assessments.

2.1.5. Main performance objectives

The firm’s remuneration performance objectives include:

• Non-financial criteria are a combination of the following:
  •  effective risk management; and
  • compliance with the Firm’s policies and procedures.
• Financial criteria include Firm performance and profitability and maintenance of capital and liquidity ratios but are subject to be overridden by poor performance in non-financial criteria.

2.1.6. Risk profile and risk adjustment

The Firm has implemented policies, procedures and practices in order to identify, measure, manage and monitor risk. These are proportionate given the nature, scale and complexity of the Firm’s activities and its risk tolerance.
The Firm has conducted a thorough risk and capital planning assessment of the business for the next three years. This is reviewed annually by the Governing Body. The Governing Body determines the size of the variable remuneration pool available, taking into consideration:

• The remuneration required to retain qualified and experienced staff;
• The capital requirements for the next three years;
• Any potential liabilities;
• The Firm’s liquidity requirements; and
• Stress testing.

The Firm’s risk analysis is incorporated into the Firm’s Business Risk Framework and takes into account actual and  potential risks faced by the Firm on an ongoing basis. The size of the Firm’s variable remuneration pool is based upon risk adjusted profits, rather than revenues, and takes into account the risks identified in the Business Risk Framework and the cost of and requirement for capital in both the short and long-term future.

2.1.7. Overview of incentives

Fixed remuneration includes the following:

• Fixed salary
• Pension
• Other employment benefits

Components of variable remuneration are:

• Discretionary bonuses
• Deferral plan offered to all staff
• Sale commission

Deferral plan:

The firm has two deferral plans, one for partners and one for staff. Any compensation provided above a certain threshold is deferred into a flagship fund. One third vests every year, over three years. The partner/employee is then able to claim the cash or the fund will be transferred into their own name.

2.1.8. Components of remuneration

The Governing Body balances the fixed and variable component of remuneration of the Firm’s Remuneration Code Staff, such that the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy, on variable remuneration components, including the possibility to pay no variable remuneration component.

2.1.9. Financial and non-financial performance:

In establishing the Firm’s top-down remuneration framework, the Governing Body will take into consideration the performance of:

• The Firm overall;
• The business line; and
• The individual (both financial and non-financial).

The Firm is dedicated to ensuring that individuals are not remunerated for exceeding the risk tolerances of the Firm. When assessing individual performance, the Firm takes account of financial as well as non-financial criteria.
The Firm’s non-financial criteria are a combination of effective risk management and compliance with the Firm’s policies and procedures. Poor performance in the Firm’s non-financial criteria may pose a threat to the Firm’s financial soundness. The Firm places a weighted value on the non-financial criteria overriding the metrics of financial performance.
The Firm ensures that individuals making subjective judgements remain objective by referring to an established framework for making such judgements. This framework includes:

• Clearly documented parameters and key considerations;
• Documented final decisions regarding risk and any performance adjustments;
• Input from individuals in Controlled Functions; and
• Sign-off by the Governing Body for any performance adjustments.

The Firm recognises that performance can be exaggerated within any single year resulting in disproportionate results. The Firm has adopted a multi-year framework which considers the underlying business cycles of the Firm and benchmarks its performance against an industry average.

2.2. Quantitative Disclosures

The table below sets out the split between fixed and variable remuneration for the financial year end March 2023.