SandAire Family Investment Office

We specialise in strategic wealth management for families, trusts and charities. Our clients gain access to leading independent advice, investment skills and administration services.

SandAire limited ('sal') - pillar 3 disclosure policy

Overview

The Capital Requirements Directive (“the Directive”) of the European Union introduced a revised regulatory capital framework across Europe based on the Basel II rules. Implementation of the Directive in the United Kingdom was by the way of rules introduced by the Financial Services Authority (“the FSA”) through the Prudential Sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”).

The disclosure requirements of Pillar 3 aim to compliment the minimum capital requirements of Pillar 1 and the supervisory review process of Pillar 2 and aim to encourage market discipline by allowing market participants to assess key pieces of information on risk exposures and the risk assessment processes of the company.

The FSA framework consists of three ‘Pillars’:

  1. Pillar 1 establishes the minimum capital retention requirements that we must have to meet credit, market and operational risk exposures;
  2. Pillar 2 involves an assessment by us, and the FSA, of whether our Pillar 1 capital is adequate to meet our risk exposures and whether there is any requirement to hold additional capital in respect of any risks not covered by Pillar 1; and
  3. Pillar 3 requires us to disclose our policies for managing risk and our capital requirements.

The rules of BIPRU chapter 11 provide that the firm may omit one or more of the required disclosures if it believes that the information is immaterial. The company believes information should be considered as material if its omission or misstatement could change or influence the assessment or decision of a user relying on it to make economic decisions.

Additionally the company is permitted to omit one or more of the required disclosures where it believes that the information is regarded as proprietary or confidential. The company considers proprietary information to include information on products or systems which, if shared with competitors, would render the company’s investments therein less valuable. Confidential information is considered to be where the company has obligations to customers, supplier or other counterparty relationships binding the company to confidentiality.

The company considers that it has made the disclosures in accordance with BIPRU 11.

Frequency of Disclosure

This disclosure document has been prepared by SAL in accordance with the requirements of Pillar 3.

Future disclosures will be made on an annual basis and published as soon as practicable after the audit of the annual financial statements.

Location and verification

These disclosures were approved by the Board of Directors and published on the firm’s website www.sandaire.com. The disclosures are not subject to audit.

Scope of application

SAL prepares its disclosures on an individual basis.

Risk management

The main areas of risk to which SAL is exposed are market risk, credit risk, operational risk and concentration risk. These risks are reviewed at least annually as part of the Internal Capital Adequacy Assessment Process (“ICAAP”). Individual risks are identified and their impact on the business and likelihood of occurring are recorded. Controls are then identified which mitigate the impact of each risk.

SAL performs detailed stress testing based upon a business plan. This testing assesses the impact of a business downturn event on the company’s ability to continue trading.

The ICAAP is formally approved by the Audit and Risk Committee, a sub-committee of the Statutory Board.

Market risk

SAL is exposed to market risk as a significant proportion of its income is based on funds under management. As such a downturn in markets would impact revenues. The risk is reduced by using asset allocation strategies which provide well diversified offerings with limited exposure to any one asset class.

Credit risk

SAL’s principal exposure to credit risk relates to non settlement of fees by clients and the Funds which Sand Aire manages. Fees from Funds are paid on a monthly basis and there are financial systems and controls in place to manage late payment.

With respect to client fees, the small number of clients and the close relationship with each means that any misunderstandings are quickly resolved.

Operational risk

Operational risk refers to inadequacies or failures in processes, people or systems or from external events.

SAL operates a robust risk management control system to identify and reduce the company’s exposure to risks.

Concentration risk

Concentration risk arises from a lack of diversity in business activities where, for example, there is reliance on a substantial client or an individual commercial relationship. SAL has a fully resourced front office team which enables it to provide the desired level of service to existing clients and to seek new business opportunities. SAL regularly evaluates the impact of losing a significant client on the business.

Capital Resources

At 31 December 2010 and throughout the year, SAL complied with the Capital Requirements Directive.

SAL is a UCITS investment firm. As such its capital resources requirements are the greater of:

The capital resources of SAL as at 31 December 2010 are detailed in the following table:

  £'000
Tier 1 Capital  
Permanent share capital 1,322
Perpetual non-cumulative preference shares 0
Profit and loss account and other reserves 484
Share premium account 1,782
Total Tier 1 Capital 3,588
Total Tier 2 Capital 0
Total Tier 3 Capital 0
Deduction from Tier 1, 2 and 3 -939
Total Capital Resources after Deductions 2,649
   
Capital resources requirement 981
Surplus of own funds 1,668

 

UK Stewardship Code 

This statement is issued by Sand Aire Limited (“SAL”), a company incorporated under the laws of England and Wales, which is authorised and regulated by the Financial Services Authority (“FSA”) in the United Kingdom.

At Sand Aire Limited we seek to preserve our clients’ wealth and provide high quality investment management service on behalf of our clients.

Detailed below is an overview on how we comply with the Principles of The UK Stewardship Code.

Principle 1 – Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities

As an investment manager we have a duty to act in the best interests of our clients.
Key elements in our stewardship process are set out in this statement including the activities we undertake to meet the UK Stewardship Principles.

Principle 2 - Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed

As SAL is an investment management company responsible for managing the investments of a small number of clients, potential conflicts of interest can arise. In line with other firms subject to the European regulatory regime derived from the Markets in Financial Instruments Directive, we have a conflicts of interest policy which is available on request.

The policy sets out the circumstances which may constitute actual or potential conflict of interests in the business of SAL that may entail a material risk of damage to the interest of one or more of SAL’s clients. For each area identified, it specifies the policy or procedures followed and measures adopted by SAL to manage such conflicts to ensure with confidence that any material risk of damage to clients is prevented.

It should be noted that SAL strives to ensure that it manages conflicts of interest and will only seek to disclose a conflict where it is not possible to put in place policies and procedures to adequately manage it.

Principle 3 – Institutional investors should monitor their investee companies

As a long-term investor, SAL actively engages with the management of the issuers and companies in which we invest on behalf of our clients. Our analysts and portfolio managers consider the financial implications of corporate governance risks as part of the fundamental research process. SAL also encourages good corporate governance and disclosure policies.

Principle 4 – Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value

As indicated previously, we actively engage with external advisers in conversations on corporate governance or other issues in our clients' best interests. In certain situations, we may elevate these discussions to shareholder boards or their respective members, and potentially through proxy solicitation.

We review all current managers at least annually. In addition to their fundamental analysis, the investment team is required to visit/communicate with senior management once a year for every company considered being an elevated risk.. We supplement these visits with ongoing discussions with suppliers and counterparties where appropriate.

We do not generally invest in companies without having face to face meetings with management; however there are situations, particularly where the company is not located in the UK, where this may be accommodated by at least three meetings/discussions with the relevant company.

While SAL utilises large amounts of external research, we never rely solely on rating agencies or upon external sources of investment research. We place a great deal of importance on our own analysis as well as external analysis when evaluating the businesses in which we invest.

Principle 5 – Institutional investors should be willing to act collectively with other investors where appropriate

When it is in the best interest of our clients we may invest collectively with other investors when we believe it is likely to enhance our ability to engage with a company when a single client may not reach the normal minimum investment size.

Principle 6 – Institutional investors should have a clear policy on voting and disclosure of voting activity

Except to the extent required by applicable law or otherwise approved by SAL, SAL will not disclose to third parties how it voted a proxy on behalf of a client. However, upon request from an appropriately authorised individual, SAL will disclose to its clients or the entity delegating the voting authority to SAL for such clients (e.g., trustees or consultants retained by the client), how SAL voted such client’s proxy.

Principle 7 – Institutional investors should report periodically on their stewardship and voting activities

We intend to update this information as and when developments occur.

December 2010