In accordance with its obligations under the UCITS V Directive (“UCITS V”) as transposed into Irish law by the European Communities (Undertakings for Collective Investment in Transferable Securities) Amendment Regulations 2016 (S.I. No. 143 of 2016) as amended, Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015, and the Alternative Investment Fund Managers Directive 2011/61/EU (together the “Regulations”) and the European Securities Markets Authority Guidelines on Sound Remuneration Policies under the UCITS Directive and AIFMD dated 31 March 2016 (“ESMA’s Guidelines”), SMT Fund Services (Ireland) Limited (the “Manager”) is required to have remuneration policies and practices for those categories of staff, including senior management, risk takers, control functions, and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and risk takers, whose professional activities have a material impact on the risk profile of the Manager or each AIF (the “Fund”), that are consistent with and promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the AIF.
The AIF has appointed the Manager as its Alternative Investment Fund Manager (“AIFM”) for the purposes of the Directive and the Regulation.
The Manager has appointed Mr. Killian Buckley as a designated individual (the “Designated Individual) with responsibility for oversight of this remuneration policy.
This remuneration policy has been approved by the Board of Directors of the Manager and the Board of Directors will be held ultimately responsible for its implementation. Any amendments to this policy will be subject to the prior approval of the Board of Directors.
The policy reflects the Manager’s objective for good corporate governance and:
The policy is consistent with and promotes sound and effective risk management by –
This remuneration policy (together with compliance herewith) will be subject to both internal and
independent annual review. These reviews will ensure that –
The Designated Individual will take appropriate measures to address any deficiencies.
3. Categories of staff of the Manager to which the Guidelines apply
The ESMA Guidelines relating to governance, the remuneration committee and transparency, and certain of the risk-alignment guidelines, apply to the Manager as a whole.
The risk alignment guidelines apply only to Identified Staff. It is primarily the responsibility of the Manager to decide the categories of staff whose professional activities have a material impact on the Manager’s or the AIF’s risk profile (“Identified Staff”). Identified Staff whose compensation falls under the Directive’s provisions typically include:
4. Type of remuneration that is subject to the Guidelines
Under the Directive, fund remuneration consists of all forms of payments or benefits paid by the Manager in exchange for professional services rendered by “Identified Staff” to the AIF, including:
Dividends or similar distributions are not categorised as remuneration for these purposes unless the material outcome of such dividends results in a circumvention of the relevant remuneration rules.
The “investment” of the staff member referred to above must be represented by an actual cash disbursement; any loans granted by the Manager to the staff member and then “invested” in the AIF does not qualify as an investment and any related profit is considered compensation under the Directive.
Taking the nature, scale and complexity of the Manager into consideration, the Board of Directors believes that the approach to performance-based pay as outlined above is appropriate and reflects the risk profile, appetite and strategy of the Manager and of the AIF.
5. Remuneration Policy
The Manager does not impose a limit with regard to variable compensation versus fixed compensation. However, the Manager’s policy is to pay all staff a fixed component representing a sufficiently high proportion of the total remuneration of the individual to allow the Manager to operate a fully flexible policy, with the possibility of not paying any variable component.
Where the Manager pays its staff performance related pay, the following requirements will be applied:
(a) staff will not receive any remuneration based on the performance of the Funds which are managed.
(b) where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual and of the business unit or the AIF and of the overall results of the Manager, and when assessing individual performance, financial as well as non-financial criteria are taken into account;
(c) the assessment of performance is set in a multi-year framework appropriate to the life-cycle of the AIF in order to ensure that the assessment process is based on longer term performance and that the actual payment of performance-based components of remuneration is spread over a period which takes account of the performance fee calculation period of the relevant AIF, the AIF’s redemption policy and its investment risks (as set out in the AIF’s Prospectus/Supplement); Taking into account paragraph (a) above this section will not apply to staff of the Manager.
(d) the Manager does not pay guaranteed variable remuneration except in an exceptional case in the context of hiring new staff and is limited to the first year;
(e) payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure;
(f) the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks;
(g) not less than 50% of any variable remuneration consists of shares of the AIF or equivalent ownership interests or share-linked instruments or equivalent non-cash instruments, for as long as the AIF represents 50% or more of the total assets managed by the Manager. (As and when that ceases to be the case, the 50% requirement does not apply). Taking into account paragraph (a) above this section will not apply to staff of the Manager; The instruments referred to in this point shall be subject to an appropriate retention policy designed to align incentives with the interests of the Manager and the AIF and the investors in the AIF.
(h) at least 40%, of the variable remuneration component is deferred over a period of at least three years; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; in the case where the Directors determine that a variable remuneration component is of a particularly high amount, at least 60% of the amount shall be deferred over this period. Taking into account paragraph (a) above this section will not apply to staff of the Manager;
(i) the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the Manager as a whole, and justified according to the performance of the business unit, the AIF and the individual concerned. The total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the Manager occurs, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements;
(j) the Manager currently provides pension benefits to its staff and confirms that its policies are in line with the business strategy, objectives, values and long-term interests of the Manager and the AIF.;
(k) staff are required to undertake not to use personal hedging strategies or remuneration – and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;
(l) variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements of the Directive’s requirements.
* 1 Carried interest is defined as a share in the AIF’s profits accrued to the AIFM as compensation for the management of the AIF.
When delegating portfolio management (or any part thereof) and/or risk management activities, the Manager requires that:
a) the entities to which such activities have been delegated are subject to regulatory requirements on remuneration that are equally as effective as those applicable under the ESMA Guidelines/Annex II of the Directive; or
b) appropriate contractual arrangements are put in place with entities to which such activities have been delegated in order to ensure that there is no circumvention of the remuneration rules set out in the ESMA Guidelines/Annex II of the Directive.
The remuneration of those engaged in the performance of the risk management function reflects the achievement of the objectives linked to the risk management function, independently of the performance of the business areas in which they are engaged.
7. Remuneration of the Risk Officer and the Compliance Officer
The remuneration of the Risk Officer in relation to the risk management function reflects the achievement of the objectives linked to the risk management function, independently of the performance of the business areas in which they are engaged.
The Manager is satisfied that the method of determining the remuneration of the Risk Officer and the Compliance Officer do not affect their objectivity and are not likely to do so as there remuneration is not linked in any way to the AIF’s performance.
8. Remuneration of Non-Executive Directors
The Non-Executive members of the Board of Directors receive a fixed fee only and do not receive performance-based remuneration therefore avoiding a potential conflict of interest. The basic fee of a Non-Executive Board member is set at a level that is on par with the rest of the market and reflects the qualifications and contribution required in view of the AIF’s complexity, the extent of the responsibilities and the number of board meetings. No pension contributions are payable on Non-Executive Board members’ fees.
9. Internal governance arrangements which must be applied to remuneration
The Manager believes that it is not sufficiently significant in terms of its size, internal organisation or the nature, the scope and the complexity of its activities to warrant the establishment of a remuneration committee for the purposes of the Directive and Regulation.
The Designated Individual and ultimately the Board of Directors are responsible for overseeing the central and independent review of the implementation of the remuneration policies and practices.
The Board of Directors is constituted in a way that enables it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk. The Board of Directors is responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the Manager or the AIF. The remuneration of the Chief Executive Officer, the Risk Officer and the Compliance Officer is directly overseen by the Board of Directors.
The Manager will comply with the disclosure requirements set out in the Directive and Regulation.
11. Annual Review
The Policy adopted herein will be reviewed on an annual basis by the Company to ensure that the provisions are suitable and reflect accepted best practice. The Policy will also be provided to the Board of Directors of the Company for their review and approval on this basis.