The following disclosures are provided in accordance with the FCA Pillar III disclosure rules in section 11 of its Prudential sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”).


Pharo Management (UK) LLP (“the Firm” or “Pharo”) is a UK incorporated Investment Management firm, authorised and regulated by the FCA. As such, the Firm is required to meet the requirements of the FCA’s capital adequacy framework. This framework consists of three pillars:

  • Pillar I sets out minimum capital requirements for firms;
  • Pillar II requires that regulated firms take a view on the amount of capital required to cover existing or potential risks arising from its activities (this is often referred to as the Internal Capital Adequacy Assessment Process (“ICAAP”)); and
  • Pillar III requires the publication of a firm’s risks, risk management processes and capital position.

The Firm’s activities give it the BIPRU categorisation of a “Limited Licence BIPRU €50K” firm. The Firm is a solo regulated entity with a non-EEA parent.

The FCA rules provide that disclosures are only required where the information would be considered material to a user relying on that information to make economic decisions. The disclosures apply solely to the Firm.

The Firm has a 31 December accounting reference date and intends to publish its disclosures as soon as possible after signing the annual financial statements.

Risk Management Objectives and Policies

Governance Framework

The Firm is a limited liability partnership and has structured itself as having a Governing Body made up of Guillaume Fonkenell (CEO, based in London) and Jeffery Hanlon (CFO, based in New York). Together, they recognise that the Firm’s risks need to be effectively identified and monitored, and they place a high importance on managing risk.

The Governing Body has overall management and oversight responsibility. However, the day-to-day risk monitoring and management has been delegated to certain senior individuals. Meetings are held with the Governing Body on a periodic basis to review any material risks and the actions taken to mitigate those risks.

Risk Framework

Risk management and control is one element in the Firm’s overall system of internal controls within its corporate governance framework. The Firm manages its risk as follows:

  • A compliance monitoring programme is conducted on a periodic basis.
  • Any material risks identified are discussed with the Governing Body on a real time basis. A summary of the Firm’s risks is formally reported to/discussed with Governing Body on a periodic basis.

Although the Firm believes that its risk management framework is appropriate for the size and complexity of the Firm and that the Firm’s capital is adequate to meet the risks assessed, it cannot guarantee that this will actually be the case, particularly if an unlikely but high impact risk arises. In such a case, additional capital may be required in order that the Firm does not fail.

Material Risks

The types of risk faced by the Firm are:

  • Operational risk – this is the risk of loss resulting from inadequate or failed internal processes or systems, or from human error. The Firm continuously reviews its policies and procedures to ensure that they are robust and guard against operational failures.
  • Business risk – this risk arises from external sources such as changes to the economic environment, and also from internal sources such as poor decision making. Various different scenarios have been modelled in the Firm’s ICAAP in order to assess the impact of adverse economic conditions on the Firm’s financial position. This has enabled the Firm to monitor its business risk and to assist in its capital planning. The Firm is managed prudently and holds sufficient capital to withstand adverse changes in the business environment. The notice periods on Fund redemptions provide the Firm with warning of any material impact on its management fee income, and allow the Governing Body time to make appropriate decisions in respect of any additional capital needs.
  • Credit risk – the Firm is exposed to credit risk in respect of fees which are due but not yet received and cash it holds on deposit. The risk of bad debts is not considered to be material because management fees are received monthly and performance fees are accrued at year end and received shortly afterwards. The credit risk arising from cash deposits is also assessed as immaterial on the basis that the cash is held at banks that are assigned high credit ratings.
  • Liquidity risk – the Firm maintains sufficient cash to meet its working capital requirements and other immediate cash requirements that can reasonably be foreseen. Liquidity is monitored on a weekly basis and the associated risk is not considered to be material.
  • Market risk – the Firm’s fee income is received in currencies other than British Pounds Sterling so the Firm is exposed to foreign exchange risk. The Firm has calculated its foreign exchange risk under Pillar I.

Capital Resources

The Firm’s total capital resources and the type of capital as at 31 December 2020 are set out in the table below:

Tier 1 Capital (consisting of members' capital and audited reserves) £15,677
Tier 2 Capital 0
Tier 2 Capital 0
Tier 3 Capital 0
Total Capital £15,677


Capital Adequacy

The Firm closely monitors its capital base and ensures that at all times it has sufficient capital to meet its regulatory and working capital requirements. The Firm conducts monthly reviews of its capital requirements relative to its capital resources.

For its Pillar 1 regulatory capital calculation of Credit Risk the Firm has adopted the Standardised Approach (BIPRU 3.4) and the Simplified Method of calculating risk weights (BIPRU 3.5). This means that the Pillar I capital requirement is calculated as the higher of the Fixed Overhead Requirement, the sum of the market and credit risk requirements, and the base capital requirement of €50,000.

Capital requirements   £'000
Fixed overhead requirement (A) 25% of non-variable annual expenses £2,994
Market risk (B) 8% of net open positions £1,849
Credit risk (C) 8% of risk-weighted exposures £397
Base capital requirement (D)   £45
Pillar I requirement Higher of A, B+C or D £2,994


Overall Pillar II Rule

The Firm has adopted the bottom up approach to the calculation of its ICAAP Capital Resources Requirement as outlined in the Committee of European Banking Supervisors Paper, 27 March 2007 paragraph 2.2.2.

As the Pillar II resources requirement is higher than its Pillar I requirement, Pillar II has been used to calculate the Firm’s surplus financial resources.

Remuneration Disclosure

In line with BIPRU 11.5.18R our remuneration disclosure for the performance year ended 31st December 2020 is as follows:

Pharo is a BIPRU firm and benefits from the proportionality guidance at Part E of the FCA’s General Guidance on Proportionality: The Remuneration Code (SYSC 19C) and Pillar 3 Disclosures on Remuneration (BIPRU 11). The number of current Code Staff has been established as 5.


The Governing Body is responsible for the Pharo Group’s remuneration policy. Remuneration levels are set and agreed by the Governing Body.

A discretionary bonus is paid annually to staff based on the performance of the Pharo Group and each individual’s performance. Remuneration is all derived from Investment Management. Total rewards are set at levels that are competitive within the relevant market.

Total remuneration to Code Staff for the performance year ended 31st December 2020 was £142.5m.

Commitment to the UK Stewardship Code