The Financial Conduct Authority (“FCA” or “regulator”) in the Prudential sourcebook for MiFID Investment Firms in the FCA Handbook (“MIFIDPRU”) sets out the detailed prudential requirements that apply to Pharo Management (UK) LLP (“Pharo” or the “Firm”) (FRN 401546). Chapter 8 of MIFIDPRU (“MIFIDPRU 8”) sets out public disclosure rules and guidance with which the Firm must comply, further to those prudential requirements. Pharo is classified under MIFIDPRU as a non-small and non-interconnected MIFIDPRU investment firm (“Non-SNI MIFIDPRU Investment Firm”). As such, the Firm is required by MIFIDPRU 8 to disclose information on the following areas:

  • Risk management objectives and policies;
  • Governance arrangements;
  • Own funds;
  • Own funds requirements; and
  • Remuneration policy and practices.

The disclosure for Pharo is prepared at least annually on a solo entity basis.  The disclosed information is proportionate to Pharo’s size, scope, nature, and complexities of Pharo’s activities. 

All figures are as at the Firm’s 31 December 2022 financial year-end.

Significant Changes Since Prior Disclosure

In accordance with when the provisions of MIFIDPRU were first applied to Pharo, this is Pharo’s first such disclosure and therefore there are no significant changes to prior disclosures which require to be set out herein. 

Business Strategy

The Firm received its FCA authorisation in 2004. The Firm is an investment manager which provides discretionary portfolio management services, and related execution services.

Risk Management Objectives and Policies

This section describes Pharo’s risk management objectives and policies for the categories of risk addressed by the requirements of the Firm in the following areas:

  • Own funds.
  • Concentration risk.
  • Liquidity

Own Funds Requirement

Pharo is required to maintain own funds that are at least equal to the Firm’s own funds requirement. The own funds requirement is the higher of the Firm’s:

  • Permanent minimum capital requirement (“PMR”): The level of own funds required to operate at all times. Based on the MiFID investment services and activities that the Firm currently has permission to undertake this is set at £75,000;
  • Fixed overhead requirement (“FOR”): The minimum amount of capital that Pharo would need to have to absorb losses if the Firm has cause to wind down and exit the market. This is equal to one quarter of the Firm’s relevant expenditure; and
  • K-factor requirement (“KFR”): The KFR is intended to calculate a minimum amount of capital that Pharo would need for the ongoing operation of its business. The K-factors that apply to the Firm’s business are K-AUM (calculated on the basis of the Firm’s assets under management (“AUM”)) and K-COH (calculated on the basis of the client orders handled by the Firm).

Pharo’s own funds requirement is currently set by its FOR, as this is the highest of the three metrics. The potential for harm associated with Pharo’s business strategy, based on the Firm’s own funds requirement, is low. This is due to the relatively consistent and excess above the breakeven revenues and asset base.

A method adopted by the Firm to manage the risk of breach of the Firm’s own funds requirement is the maintenance of an own funds surplus above the own funds requirement. In the event that the Firm’s own funds drop to an amount equal to 110% of the Firm’s own funds threshold requirement, the Firm will immediately notify the UK Governance Committee, as well as the regulator. The UK Governance Committee will consider the necessary steps required in order to increase the own funds buffer; this may include injecting more own funds into the Firm.

Concentration Risk

The Firm monitors and controls its concentration risk using sound administrative and accounting procedures and robust internal control mechanisms. Cash is diversified across several UK banks and Money Market Funds

The potential for harm associated with Pharo’s business strategy, based on the Firm’s concentration risk, is low.

The Investors are typically institutional investors investing for the medium to long term such as pension funds, insurance companies, and other professional investors provide a diversified stream of revenue.


The Firm is required to maintain sufficient liquidity to ensure that there is no significant risk that its liabilities cannot be met as they fall due and to ensure that it has appropriate (liquid) resources in the event of a stress scenario.

The potential for harm associated with Pharo’s business strategy, based on the Firm’s basic liquid assets requirement, is low.  The Firm retains an amount it considers suitable for providing sufficient liquidity to meet the working capital requirements under various conditions. Pharo has always had sufficient liquidity within the business to meet its obligations and there are low threats to this given the cash deposits it holds.

The Finance Manager is responsible for the day-to-day monitoring and management of the Firm’s cash position. Cash flow forecasts are prepared on a regular basis and project both fee income and expenditures of the Firm, including known future events such as fee reductions from lower Fund AUM, new hires, capital purchases, and system enhancements.

The Finance team manages liquidity levels to ensure cash held in specific bank accounts, not used for operating expenses, are greater than the basic liquid assets requirement as set out under MiFIDPRU 6. This is reviewed and cash levels updated upon any changes to the basic liquid asset requirement figure.

Risk Management Structure

The Firm has in place arrangements in relation to all aspects of its business. These arrangements are grouped into five broad areas:

Organisation and Management

The Firm maintains a clear organisational structure which is organised to maximise independence of function and to avoid internal conflicts. Should an actual or potential conflict be identified, this would be documented and mitigated where possible.

People and Responsibilities

Individuals have clearly defined roles and responsibilities. Openness and communication is encouraged across all functions, particularly in respect of any suspected breach of the Firm’s legal, ethical, and regulatory obligations. There is also an appraisal process in place for all staff which includes mid-year and annual reviews with 360-degree feedback.

Business Processes

Business risk is managed through the appointment of skilled senior personnel together with management oversight arrangements and a combination of formal and informal checks and balances. The Firm maintains a close working relationship with its clients, prime brokers, administrators, and certain other key advisers such as auditors, tax advisors, and lawyers.

Management Information and Reporting

The importance of information as a governance tool is recognised by the UK Governance Committee. The Firm has adopted management information systems that are designed to ensure that senior management have the required information that they need for reporting.

Compliance Arrangements

The Firm has sought to embed a culture of compliance throughout the business through a combination of education and training for staff and clarity of responsibility for management. In addition, there are detailed compliance manuals and policies covering compliance on an individual and firm wide basis which include, but are not limited to, best execution, trade allocation, trade errors, conflicts of interest, market abuse prevention, anti-money laundering and financial crime prevention, personal account dealing, and gifts and entertainment. All staff are required to confirm that they have read and complied with these on a regular basis. There is a risk-based monitoring plan in place which is an on-going process to monitor compliance with existing procedures and to ensure regulatory changes are addressed as they arise.  

Governance Arrangements – Overview

The UK Governance Committee of Pharo is composed of: Guillaume Fonkenell – Member and Managing Partner (SMF1 and SMF27); Jeff Hanlon, Senior Partner, Global Chief Operating Officer and Chief Financial Officer of the Pharo Group (SMF27); Kevin Tolan, UK Compliance Officer (SMF16 and SMF17) and Scott Ferraro, Pharo Group CAO. Michael Strashinsky, Pharo Group CCO, although not a member, is a standing invitee.


Guillaume Fonkenell oversight of the company alongside the other business partners and manages the investment areas. Jeff Hanlon manages all non-investment related areas.

The UK Governance Committee retains ultimate oversight over the governance of the Firm and is ultimately responsible for instilling an appropriate risk culture within the Firm, aligning risk with the business strategy, defining the Firm’s risk appetite and approving risk policies and infrastructure.

The UK Governance Committee Members and Directorships  

Management Body Member


Position at Firm

Number of Directorships Held



 Guillaume Fonkenell

Member and Managing Partner (SMF1 and SMF27)



 Jeff Hanlon

Partner and Global COO/CFO of the Pharo Group (SMF27)



 Kevin Tolan

Compliance Officer (SMF16 and SMF17)



 Scott Ferraro

Pharo Group CAO



The Firm has a written equal employment opportunity (EEO) policy. As an Equal Employment Opportunity employer, the Firm does not discriminate on the basis of race, religion, colour, sex, age, sexual orientation, national origin, marital status, disability, status with regard to military service, or any other legally protected category.

Operational Risk Committee

Due to the nature, size, and complexity of the Firm, Pharo does not have an independent operational risk management function. The Governing Committee is responsible for the management of operational risk within the Firm and the individual responsibilities of the UK Governance Committee members are clearly defined.

Own Funds

As at 31 December 2022, Pharo maintained own funds of £17,386,354. The below regulator-prescribed tables provide a breakdown of the Firm’s own funds:

Composition of Regulatory Own Funds



Amount (GBP Thousands)

Source Based on Reference Numbers/Letters of the Balance Sheet in the Audited Financial Statements




Members' capital and audited reserves




Members' capital and audited reserves






Fully paid up capital instruments




Share premium




Retained earnings




Accumulated other comprehensive income




Other reserves




Accumulated other comprehensive income




Accumulated other comprehensive income








CET1: Other capital elements, deductions and adjustments








Fully paid up, directly issued capital instruments




Share premium








Additional Tier 1: Other capital elements, deductions and adjustments








Fully paid up, directly issued capital instruments




Share premium








Tier 2: Other capital elements, deductions and adjustments



Own Funds: Reconciliation of Regulatory Own Funds to Balance Sheet in the Audited Financial Statements



Balance Sheet as in Published/Audited Financial Statements

Cross-Reference to Above Template



As at 31 December 2022


Assets - Breakdown by Asset Classes According to the Balance Sheet in the Audited Financial Statements (in £’000)






Cash at bank and in hand




Total Assets



Liabilities - Breakdown by Liability Classes According to the Balance Sheet in the Audited Financial Statements (in £’000)






Total Liabilities



Shareholders' Equity (in £’000)


Amounts due to Members’




 Member’s capital (equity)




 Other reserves




Total Shareholders' Equity



Own Funds Requirements

Pharo is required to at all times maintain own funds that are at least equal to the Firm’s own funds requirement. The own funds requirement is the minimum requirement of capital the Firm is required to hold, taken as the higher of the PMR and FOR.

The below illustrates the core components of Pharo’s own funds requirements:



(A) Permanent Minimum Capital Requirement ("PMR")


(B) Fixed Overhead Requirement (“FOR”)


(C) K-Factor Requirements (“KFR”)


-       K-AUM – Risk arising from managing and advising on investments


-       K-COH – Risk arising from order execution and reception and transmission of orders


(D) Own Funds Requirement (Max. [A, B, C])


Pharo is also required to comply with overall financial adequacy rule (“OFAR”). This is an obligation on Pharo to hold own funds and liquid assets which are adequate, both as to their amount and quality, to ensure that:

  • The Firm is able to remain financially viable with the ability to address any material potential harm that may result from its ongoing activities; and
  • The Firm’s business can be wound down in an orderly manner, minimising harm to consumers or to other market participants.

Where Pharo determines that the FOR is insufficient to mitigate the risk of a disorderly wind-down, the Firm must maintain ‘additional own funds required for winding down’, above the FOR, that are deemed necessary to mitigate the risks of a disorderly wind-down. Similarly, where the Firm determines that the KFR is insufficient to mitigate the risk of harm from ongoing operations, the Firm must maintain an amount of ‘own funds required for ongoing operations’, above the KFR, that is deemed sufficient to ensure the viability of the Firm throughout economic cycles.

The Firm’s own funds threshold requirement is the higher of:

  • The Firm’s PMR;
  • The sum of the Firm’s FOR and its additional own funds required for winding down; and
  • The sum of the Firm’s KFR and its additional own funds required for ongoing operations.

This is the amount of own funds that Pharo is required to maintain at any given time to comply with the OFAR.

To determine the Firm’s own funds threshold requirement, Pharo identifies and measures the risk of harm faced by the Firm and considers these risks in light of its ongoing operations and also from a wind-down planning perspective. The Firm then determines the degree to which systems and controls alone mitigate the risk of harm and the risk of a disorderly wind-down, and thereby deduces the appropriate amount of additional own funds required to cover the residual risk.

This process is documented and presented to, and ratified by, the UK Governance Committee on at least an annual basis.

Remuneration Policy and Practices


As a Non-SNI MIFIDPRU Investment Firm, Pharo is subject to the basic and standard requirements of the MIFIDPRU Remuneration Code (as laid down in Chapter 19G of the Senior management arrangements, Systems and Controls sourcebook in the FCA Handbook (“SYSC”)). The purpose of the remuneration requirements is to:

  • Promote effective risk management in the long-term interests of the Firm and its clients;
  • Ensure alignment between risk and individual reward;
  • Support positive behaviours and healthy firm cultures; and
  • Discourage behaviours that can lead to misconduct and poor customer outcomes.

The objective of Pharo’s remuneration policies and practices is to establish, implement and maintain a culture that is consistent with, and promotes, sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profile of the Firm and the services that it provides to its client.

In addition, Pharo recognises that remuneration is a key component in how the Firm attracts, motivates, and retains quality staff and sustains consistently high levels of performance, productivity, and results. As such, the Firm’s remuneration philosophy is also grounded in the belief that its people are the most important asset and provide its greatest competitive advantage.

Characteristics of the Firm’s Remuneration Policy and Practices

Remuneration at Pharo is made up of fixed and variable components. The fixed component is set in line with market competitiveness at a level to attract and retain skilled staff. Variable remuneration is paid on a discretionary basis and takes into consideration the Firm’s financial performance as well as the financial performance of each business unit, and the financial and non-financial performance of the individual in contributing to the Firm’s success. All staff members are eligible to receive variable remuneration.

Governance and Oversight

The UK Governance Committee is responsible for setting and overseeing the implementation of Pharo’s remuneration policy and practices. In order to fulfil its responsibilities, the UK Governance Committee:

  • Is appropriately staffed to enable it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk, capital, and liquidity.
  • Ensures that the Firm’s remuneration policy and practices take into account the public interest and the long-term interests of investors.
  • Ensures that the overall remuneration policy is consistent with the business strategy, objectives, values, and interests of the Firm and of its clients.

Pharo’s remuneration policy and practices are reviewed annually by the UK Governance Committee.

Material Risk Takers

Pharo is required to identify its material risk takers - those members of staff whose professional activities have a material impact on the risk profile of the Firm (and of the assets that the Firm manages). The types of staff that have been identified as material risk takers at Pharo are:

  • Members of the management body in its management function;
  • Members of the senior management team;
  • Those with managerial responsibilities for the activities of a control function[1];
  • Those with managerial responsibilities for the prevention of money laundering and terrorist financing;
  • Those that are responsible for managing a material risk within the Firm;


Quantitative Remuneration Disclosure

The below table quantifies the remuneration paid to staff in the financial year e.g., 1 January 2022 to 31 December 2022. For these purposes, ‘staff’ is defined broadly, and includes, for example, employees of the Firm itself, members, employees of other entities in the group, employees of joint service companies, and secondees:

Period: 31 December 2022



Senior Management

Other Material Risk Takers

Other Staff

Total Number of Material Risk Takers



Remuneration Awarded

Fixed (£)




Variable (£)




Total (£)




Guaranteed Variable Remuneration

Amount (£)




# Staff Awarded




Severance Payments

Amount (£)




# Staff Awarded



Highest Severance Payment Awarded to an Individual (£)



MIFIDPRU investment firms are typically required to split the quantitative data in the above table, where relevant, into categories for senior management and other material risk takers. However, the regulator allows firms to aggregate or altogether omit the information to be disclosed for senior management and other material risk takers where splitting the information between these two categories would lead to the disclosure of information about only one or two individuals.

Pharo has relied upon this exemption and has omitted the disclosure of severance payments for other material risk takers and the highest severance payment awarded to an individual in order to prevent the identification of individual material risk takers.


[1] A control function is defined as a function (including, but not limited to, a risk management function, compliance function and internal audit function) that is independent from the business units it controls and that is responsible for providing an objective assessment of the Firm’s risks, and for reviewing and reporting on those risks.

Published: September 2023