Stewardship Code

Updated November 2022

The Firm has considered the recent updates to the Stewardship Code in January 2020 and the Shareholder Rights Directive II that took effect in June 2019.

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At Lyxor Asset Management, we recognize the importance of responsible stewardship and the role it plays in promoting good corporate governance and sustainable investment practices. As a signatory to various stewardship codes and frameworks, we are committed to upholding the highest standards of stewardship and actively engaging with investee companies to protect and enhance the long-term value of our clients' investments.. 

We maintain a robust monitoring and reporting framework to assess the effectiveness of our stewardship activities. We regularly review our engagement and voting activities, monitor investee companies' progress on agreed-upon actions, and report on our stewardship activities to our clients and stakeholders.

In ESG related matters the Firm is committed to creating real ESG impact in accordance with the principles of UNPRI.

The Firm’s Executive Board will continue to review the Code’s applicability.

Pillar 3 Disclosure

Updated May 2021

Introduction

Lyxor Asset Management (“ Lyxor” or the “Firm”) is a international discretionary investment manager to professional clients and unregulated collective investment schemes. The Firm is required to make its Pillar 3 disclosure at least annually, and is made as at the Firm’s Accounting Reference Date.

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The disclosure may be published on our website or as an appendix to our statutory audited annual accounts. The purpose of this disclosure is to encourage market discipline.

The Capital Requirements Directive (CRD) created a revised regulatory capital framework across Europe covering how much capital financial services firms must retain. In the United Kingdom, rules and guidance are provided in the General Prudential Sourcebook (GENPRU) and the Prudential Sourcebook for Banks, Building Societies and Investments Firms (BIPRU).

The FCA framework consists of three “Pillars”:

Pillar 1 sets out the minimum capital requirements that companies need to retain to meet their credit, market and operational risk;

Pillar 2 requires companies to assess whether their Pillar 1 capital is adequate to meet their risks and is subject to annual review by the FCA;

Pillar 3 requires companies to develop a set of disclosures which will allow market participants

to assess key information about its underlying risks, risk management controls and capital position. These disclosures are seen as complementary to Pillar 1 and Pillar 2.

BIPRU 11 sets out the provisions for Pillar 3 disclosure. The rules provide that companies may omit one or more of the required disclosures if such omission is regarded as immaterial. Information is considered material if its omission or misstatement could change or influence the decision of a user relying on the information. In addition, companies may also omit one or more of the required disclosures where such information is regarded as proprietary or confidential.

The information contained in this document has not been audited, and as such does not constitute any form of financial statement and must not be relied upon.

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Firm Overview

Lyxor Asset Management is incorporated in the UK and is authorized by the (FCA) Financial Conduct Authorities 

as a Full-Scope Alternative Investment Asset Manager with the Collective Portfolio Management Firm (“CPMI”) designation, which also makes the Firm a BIPRU firm. 

The Governing Body of Lyxor Asset Management has management and oversight responsibility.  It generally meets monthly and is composed of:

Mr. Robert Downing – Chairman of Lyxor Asset Management – SMF 9

Mr. Shenan Dhanata– Co-head of Lyxor Asset Management – SMF27 & Certified Person

Mr. James Reed – Co-head of Lyxor Asset Management – SMF27 & Certified Person

Mr. Fredrik Osbourne– Head of Compliance – SMF 16 & 17

Dr. Patrick Chang – Chief Operating Officer – SMF27

Mr. James Dean – Head of Research – SMF27 & Certified Person

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Mr. Onno de Kupter – Head of Risk – Certified Person

Mr. Scott Collins – Head of UCITS – SMF 27 

Mr. Richard Atkinson – Investor Director

The Governing Body is responsible for the entire process of risk management, as well as forming its own opinion on the effectiveness of the process. In addition, the Governing Body decides Lyxor Asset Management’s risk appetite or tolerance for risk and ensures that Lyxor Asset Management has implemented an effective, ongoing process to identify risks, to measure its potential impact, and then to ensure that such risks are actively managed. Senior Management is accountable to the Governing

Body for designing, implementing, and monitoring the process of risk management and implementing it into the day-to-day business activities of Lyxor Asset Management.

Capital Resources and Requirements

Pillar 1

As a limited liability partnership, its capital arrangements are as follows: The Firm is a BIPRU Investment Firm without an Investment Firm Consolidation Waiver deducting Material Holdings under (GENPRU 2 Annex 4). Tier 1 Capital comprises of Members’ Capital.

As a CPMI, the Firm is subject to the capital requirements set out in IPRU (INV) Chapter 11 and also BIPRU/GENPRU.  The Firm has the following capital resources:

Pillar 2

The Firm has adopted the “Structured” approach to the calculation of its Pillar 2 Minimum Capital Requirement as outlined in the Committee of European Banking Supervisors Paper, 27 March 2006 which takes the higher of Pillar 1 and 2 as the ICAAP capital requirement.  It has assessed Business Risks by modelling the effect on its capital planning forecasts and assessed

Operational Risk by considering if Pillar 2 capital is required taking into account the adequacy of its mitigation.

Risk Management

The Firm has established a risk management process in order to ensure that it has effective systems and controls in place to identify, monitor and manage risks arising in the business. The risk management process is overseen by the Firm’s members.

As risks are identified within the business, appropriate controls are put in place to mitigate these and compliance with them is monitored on a regular basis. The frequency of monitoring in respect of each risk area is determined by the significance of the risk. The Firm does not intend to take any risks with its own capital and ensures that risk taken within the portfolios that it provides investment services to is closely monitored. Details of the Firm’s risk management systems and controls is reported to the Governing Body.

The Firm has a risk management objective to develop systems and controls to mitigate risk to within our risk appetite, as set-out in our ICAAP. Ordinarily, a firm must disclose its risk management objectives and policies for each separate category of risk. On the basis of materiality, we have omitted those items not relevant to the Firm, however, have provided summary information upon the below listed risk items.

Operational Risk

Disruption by COVID-19 virus spread.

During 2020 and 2021 we have had to deal with the COVID-19 pandemic, and the associated measures that governments, service providers, counterparties and investors have put in place to deal with it. While we will undoubtedly suffer some adverse impact from this in the short term, we are confident that we can work through the temporary disruption and that our strategic plan is robust even in the current situation.

The extraordinary circumstances caused by the spread of the COVID-19 virus globally has required the Firm to evoke its business continuity plan and the entire workforce to work remotely from home. The Firm does not consider this to have a material impact to the Firm’s operations and this will not require any additional Pillar 2 amount.

The Firm places strong reliance on the operational procedures and controls that it has in place in order to mitigate risk and seeks to ensure that all personnel are aware of their responsibilities in this respect.

The Firm has identified a number of key operational risks. These relate to disruption of the office facilities, system failures, trade failures and failure of third party service providers. Appropriate policies are in place to mitigate against risks, including appropriate insurance and business continuity plans.

All Operational Risks assessed are within the Firm’s risk appetite.  It is therefore considered that, in normal circumstances, should any of these Operational Risks materialise, the impact and resultant expense would be managed within the business. On this basis, the Firm has not allocated any additional Pillar 2 capital to be allocated to any specific risks.

Credit Risk

The Firm’s exposure to Credit Risk is the risk that investment management and advisory fees cannot be collected and the exposure to banks where surplus funds may be deposited.  The Firm’s Credit

Risk appetite is low, so the Firm holds surplus funds in cash with banks assigned high credit ratings.  Credit Risk, for the purpose of Pillar 2, is assumed to be that calculated at Pillar 1.

Market Risk

The Firm does not have a Trading Book. The only potential exposures are Non-Trading Book Exposures (i.e. to foreign currency held on deposit and assets or liabilities held in foreign currency, such as debtors, on the Firm’s balance sheet). The Firm’s Market Risk appetite is low and, for the purposes of Pillar 2, is assumed to be that calculated at Pillar 1.

Money Laundering Risk

The Firm’s money laundering risk appetite is low.  To manage the risk to this level, the Firm has in place a number of policies and procedures.  Training is also provided annually to all staff.  Where the Fund administrator performs the ongoing money laundering programme, the Firm carries out an annual on-site due diligence visit and, on a sample basis, reviews client files. 

With regard to managed accounts, money laundering checks are performed at on-boarding and at least annually thereafter.

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Liquidity risk

With respect to its designated investment business (excluding managing AIFs and UCITS), the Firm is subject to the FCA’s Liquidity Rules, set out in BIPRU 12, on a solo basis.  The Firm is classified as a Non-ILAS Firm and, hence, is subject to the Overall Liquidity Adequacy Rule

(BIPRU 12.2.1) and considered liquidity systems and controls which include the management of Liquidity Risk via scenario and stress testing of the Firm’s cash flow forecast and the establishment of management actions and contingency funding plans.