as at 31 December 2017

The Capital Requirements Directive (‘CRD’) and Alternative Investment Fund Management Directive (‘AIFMD’) of the European Union establish a revised regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment Firms must maintain.
In the United Kingdom, the CRD and AIFMD have been implemented by the Financial Conduct Authority (‘FCA’) in its regulations through the General Prudential Sourcebook (‘GENPRU’), the Prudential Sourcebook for Banks, Building Societies and Investment Firms (‘BIPRU’), The Interim Prudential Sourcebook for Investment Business (“IPRU (INV)”).

The CRD consists of three ‘Pillars’:

  • Pillar 1 sets out the minimum capital amount that meets the Firm’s credit, market and operational risk capital requirement;
  • Pillar 2 requires the Firm to assess whether its capital reserves, processes, strategies and systems are adequate to meet Pillar 1 requirements and further determine whether it should apply additional capital, processes, strategies or systems to cover any other risks that it may be exposed to; and
  • Pillar 3 requires disclosure of specified information about the underlying risk management controls and capital position to encourage market discipline.

The AIFMD adds further capital requirements based on the Alternative Investment Fund (‘AIF’) assets under management and professional liability risks.

The rules in BIPRU 11 set out the provision for Pillar 3 disclosure. This document is designed to meet our Pillar 3 obligations.

The Pillar 3 disclosure document has been prepared by Circuitus Capital LLP (‘The Firm’) in accordance with the requirements of BIPRU 11 and is verified by the Executive Board. Unless otherwise stated, all figures are as at the 31 December 2017 financial year-end.

Pillar 3 disclosures will be published on an annual basis as soon as practical following the finalisation of the audited annual accounts.

We are permitted to omit required disclosures if we believe that the information is immaterial, such that omission would be unlikely to change or influence the decision of a reader relying on that information for the purpose of making economic decisions about the Firm.

In addition, we may omit required disclosures where we believe that the information is regarded as proprietary or confidential. In our view, proprietary information is that which, if it were shared, would undermine our competitive position. Information is considered to be confidential where there are obligations binding us to confidentiality with our customers, suppliers and counterparties.

We have omitted certain data on the grounds of materiality. Further, where we have chosen to omit information because it is proprietary or confidential, we have explained the omission and provided our reason.

Scope and application of the requirements

The Firm is an independent Alternative Investment Fund Manager (“AIFM”) that specialises in private equity with a focus on investing in real assets and infrastructure. It is authorised and regulated by the FCA and is therefore subject to minimum regulatory capital requirements. The Firm is categorised as a full scope Collective Portfolio Management Investment Firm (“CPMI”) Firm by the FCA for capital purposes.

CC was formed in 2014 as a joint venture between the Italian construction company Fininc SpA, the Spanish construction company Sacyr SA, and two private individuals with significant infrastructure financing experience.

The Firm has implemented a predominantly European focused investment strategy and seeks to deliver attractive risk-adjusted returns focused on the transportation, utilities and energy sectors. The Firm is headquartered in London.

It is an investment management Firm and as such has no trading book exposures.

The Firm is not a member of a group and so is not required to prepare consolidated reporting for prudential purposes.

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 Chief Operating Officer, with the Executive Board taking overall responsibility for this process and the fundamental risk appetite of the Firm. The Compliance officer has responsibility for the implementation and enforcement of the Firm’s risk principles.

The Executive Board meet on a regular basis and discuss current projections for profitability, cash flow, regulatory capital management, business planning and risk management. They engage in the Firm’s risks though a framework of policy and procedures having regard to the relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required.

The Executive Board has identified that business, operational, market and credit are the main areas of risk to which the Firm is exposed. Each year they formally review the risks, controls and other risk mitigation arrangements and assess their effectiveness.

A formal update on operational matters is provided to the Executive Board on a quarterly basis. Management accounts, which demonstrate the continued adequacy of the Firm’s regulatory capital, are reviewed on a regular basis.

Appropriate action is taken where risks are identified which fall outside of the Firm’s tolerance levels or where the need for remedial action is required in respect of identified weaknesses in the Firm’s mitigating controls.

 Key Risks

The most significant risks applicable to the Firm come under the headings of business, operational, credit and market risks:

Business risk

The Firm’s revenue is reliant on the performance of the funds under management and its ability to launch new funds and obtain new mandates. As such, the risk posed to the Firm relates to underperformance resulting in a decline in revenue and adverse market conditions hindering the launch of new funds and ultimately the risk of redemptions from the funds managed by the Firm. This risk is mitigated by:

  • the use of lock up periods imposed by the funds;
  • the continued support of the Firm by its Partners and investors; and
  • sufficient capital held by the Firm which will continue to cover all expenses

 Operational risk

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 operational risks to manage, including key man risk, failure of a third party provider, potential for regulatory breaches, market abuse and investment delays. Appropriate polices are in place to mitigate against these risks, which includes taking out adequate professional indemnity insurance.

 Credit risk

The Firm is exposed to credit risk in respect of its debtors, investment management fees billed, and cash held on deposit.

The number of credit exposures relating to the Firm’s investment management clients is limited. Management fees are drawn monthly from the funds managed and performance fees are drawn annually where applicable. The Firm considers that there is little risk of default by its clients. All bank accounts are held with large international credit institutions.

Given the nature of the Firm’s exposures, no specific policy for mitigating credit risk is in place. The Firm uses the simplified standardised approach detailed in BIPRU 3.5.5 of the FCA Handbook when calculating risk weighted exposures of 1.6%  (Cash in Bank) and 8% in respect of its other assets.

Credit risk summary

Credit risk exposure Risk weighting Risk weighted exposure
Cash at bank 1.6% £5,196
Trade Debtor 8% £0
Prepayments and Accruals 8% £1,916
Other debtors (<1 year) 8% £17,942
Other assets 8% £65,072

Market risk

The Firm takes no market risk other than foreign exchange risk in respect of its accounts receivable and cash balances held in currencies other than GBP. Further the Firm takes no trading book positions on its balance sheet.

No specific strategies are adopted in order to mitigate the risk of currency fluctuations.  Losses arising on foreign exchange movements are monitored on a regular basis and reported to senior management via the quarterly management accounts.

The Firm calculates its foreign exchange risk by reference to the rules in BIPRU 7.5.1 of the FCA Handbook and applies an 8% risk factor to its foreign exchange exposure.

Market risk summary

Market risk exposure Risk weighting Risk weighted exposure
Foreign currency assets and liabilities 8% £40,633

Professional liability risk

The Firm has a legal responsibility for risks in relation to investors, products & business practices including, but not limited to; loss of documents evidencing title of assets of the AIF; misrepresentations and misleading statements made to the AIF or its investors;acts, errors or omissions; failure by the senior management to establish, implement and maintain appropriate procedures to prevent dishonest, fraudulent or malicious acts; improper valuation of assets and calculation of unit/ share prices; and risks in relation to business disruption, system failures, process management.  The Firm is aware of, and monitors, a wide range of risks within its business operations and towards its investors. The Firm has in place appropriate internal operational risk policies and procedures to monitor and detect these risks. These procedures and risks are documented, demonstrating how the Firm aims to mitigate the risks, and reviewed annually.

The Firm has appropriate professional indemnity insurance cover in place, where single claims are covered for up to £1m with an excess of £20k on every claim.

 Liquidity risk

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, or to ensure that it can secure additional financial resources in the event of a stress scenario.

The Firm retains an amount it considers suitable for providing sufficient liquidity to meet the working capital requirements under normal business conditions. The Firm has always had sufficient liquidity within the business to meet its obligations and there are no perceived threats to this given the cash deposits it holds and support it receives from the Partners. Additionally, it has historically been the case that management fee debtors are settled promptly, thus ensuring further liquidity resources are available to the Firm on a timely basis. The cash position of the Firm is monitored by the Chief Operating Officer on a daily basis, and the Firm would be able to call on the Partners for further capital as required.

Capital requirement

A Firm’s Pillar 1 capital requirement is ordinarily determined by reference to the Firm’s Fixed Overheads Requirement (‘FOR’) and calculated in accordance with Article 95 and the EBA Final draft technical standards as referenced in IPRU(INV) 11.3.3A. The requirement is based on the FOR since this exceeds the total of the credit and market risk capital requirements it faces and also exceeds its base capital requirement.

The Firm is subject to the Fixed Overhead Requirement and is not required to calculate an operational risk capital charge although it considers this as part of its process to identify the level of risk-based capital required.

As the Firm is a Full Scope CPMI Firm, its capital requirements are the higher of:

  • €125,000 + 0.02% of AIF AuM above €250m; and
  • The sum of the market & credit risk requirements; or
  • The fixed overheads requirement (‘FOR’) which is essentially 25% of the Firm’s operating expenses less certain variable costs.

The FOR is calculated, in accordance with FCA rules, based on the Firm’s previous year audited expenditure. Our Firm is small with a simple operational infrastructure. Its market risk is limited to foreign exchange risk on its accounts receivable in foreign currency, and credit risk from management and performance fees receivable from the funds under its management. The Firm follows the standardised approach to market risk and the simplified standard approach to credit risk. The Firm is not subject to an operational risk requirement.

The FOR is based on annual expenses net of variable costs deducted, which include discretionary bonuses paid to staff, allowable commission and fees as well as one-off legal set-up costs. The Firm monitors its expenditure on a monthly basis and takes into account any material fluctuations in order to determine whether the FOR remains appropriate to the size and nature of the business or whether any adjustment needs to be made intra-year.

This is monitored by the Chief Operating Officer and reported to senior management on a monthly basis.

While the Pillar 1 FOR calculation is intended to represent a proxy for the winding-down costs of a Firm, through the ongoing monitoring of both the Firm’s internal capital adequacy assessment process, and the relevant aspects of FOR calculations, the Firm concluded its cost of an orderly wind-down slightly exceeded its FOR calculations within 2017. Although it is the Firm’s experience that the FOR establishes its capital requirements, it has followed the regulators expectation that Firms should maintain the higher figure between the two.

To this extent, the Firm has taken a bottom-up Pillar 2 approach to the regulatory capital is maintains. As such, to represent the Firm’s Pillar 1 capital requirement, the Firm maintains sufficient funds required to wind down regulated activities in an orderly manner (rather than using the FOR calculation).

The Firm will continue to monitor both the sufficient winding-down costs and FOR calculations, to ensure the amount of regulatory capital maintained by the Firm remains appropriate.

Regulatory capital

The Firm is a Limited Liability Partnership and its capital arrangements are established in its Members’ Agreement (Partnership deed).  Its capital is summarised as follows:

The main features of the Firm’s capital resources for regulatory purposes are as follows:

31 December
Tier 1 capital* 598
Tier 2 capital 0
Tier 3 capital 0
Deductions from Tiers 1 and 2 0
Total capital resources 598
*No hybrid tier one capital is held

UK Financial Reporting Council’s Stewardship Code

Under Rule 2.2.3R of the FCA’s Conduct of Business Sourcebook, the Firm is required to include on this website a disclosure about the nature of its commitment to the UK Financial Reporting Council’s Stewardship Code (the ‘Code’) or, where it does not commit to the Code, its alternative investment strategy.

The Firm pursues a global macro investment strategy and, as a result, does not currently invest in single equities. Consequently, while the Firm supports the objectives that underlie the Code, the provisions of the Code are not relevant to the type of business currently undertaken by the Firm.

If the Firm investment strategy changes in such a manner that the provisions of the Code become relevant, the Firm will amend this disclosure accordingly.

 Remuneration disclosure

The Firm’s business is as a manager of alternative investment funds.  It is authorised and regulated by the Financial Conduct Authority as a Collective Portfolio Management Investment (‘CPMI’) Firm and is therefore subject to FCA Rules on remuneration. These are contained in the FCA’s Remuneration Codes located in the SYSC Sourcebook of the FCA’s Handbook. As a CPMI Firm, this remuneration disclosure is made in respect of the whole business (i.e. AIFMD and MiFID).  The specific requirements of the AIFMD remuneration disclosure will be set out in the Annual Report of the AIF.

The Remuneration Code (‘the RemCode’) cover(s) an individual’s total remuneration – fixed and variable. The Firm incentivises staff through a combination of the two.

Our Compensation policy is designed to ensure that we comply with the RemCode and our compensation arrangements:

  1. are consistent with and promote sound and effective risk management;
  2. do not encourage excessive risk taking which is inconsistent with the risk profile set out in the Funds’ respective prospectuses;
  3. are in line with the Firm’s business strategy, objectives, values and long-term interests;
  4. include measures to avoid conflicts of interest:
    1. The AIFM’s COO, who is not a member of the Investment Committee, oversees and ensures the implementation of the Compensation Policy;
    2. The Executive Board ensures that key role holders in Risk and Compliance functions are compensated according to the achievement of the objectives linked to their functions, independent of the performance of the business. For these employees, the Executive Board administers the compensation process, such that those key role holders do not administer their own compensation.


Enshrined in the European remuneration provisions is the principle of proportionality. The FCA has sought to apply proportionality in the first instance by instituting two tests. Firstly, a Firm that is significant in terms of its size must disclose quantitative information referred to in BIPRU 11.5.18R at the level of senior personnel. Secondly, that a Firm must make disclosure that is appropriate to the size, internal organisation and the nature, scope and complexity of their activities.

The Firm is not ‘significant’ (that is to say has relevant total assets <£50bn) and so makes this disclosure in accordance with the second test (BIPRU 11.5.20R(2)). The Executive Board have determined that the following detailed FCA rules are not proportionate to the Firm and have not implemented them:

  • SYSC 19B.1.17 – Retained shares and other instruments;
  • SYSC 19B.1.18 – Deferral; and
  • SYSC 19B.1.19 – Performance adjustment, etc.

 Application of the requirements

We are required to disclose certain information on at least an annual basis regarding our Remuneration policy and practices for those staff whose professional activities have a material impact on the risk profile of the Firm. Our disclosure is made in accordance with our size, internal organisation and the nature, scope and complexity of our activities.

  1. Summary of information concerning the Firm’s decision-making process used for determining its remuneration policies:
  • The Firm is a limited liability partnership and its decision-making processes are governed by the provisions of the Partnership Agreement between the members of the Firm. Under the Partnership Agreement, overall responsibility for the management and control of the business and affairs of the Firm is conferred on the Firm’s Executive Board;
  • Due to the size, nature and complexity of the Firm, we are not required to appoint an independent remuneration committee and, accordingly, the Firm’s Executive Board is the governing body responsible for reviewing the general principles of the Firm’s remuneration policies and their implementation;
  • The day-to-day implementation of the Firm’s remuneration policies has been delegated to the Firm’s Chief Operating Officer who acts in consultation with the Firm’s partners;
  • The Firm’s policy is reviewed as part of an annual process or following a significant change to the business requiring an update to its internal capital adequacy assessment;
  • The Firm’s business model is based on the typical management fee/ performance fee structure adopted by fund managers. This fee structure underpins the Firm’s remuneration policies and practices.
  1. Summary of how the Firm links pay and performance, the design characteristics of the remuneration system and the features of the variable components of remuneration:
  • The remuneration of the Firm’s employees (excluding partners of the Firm) is made up of an annual salary, discretionary variable compensation based on personal performance and in some cases a share of net carry based on the Firm’s full-year results. Salary levels are market-driven and not strongly affected by individual performance. However, individual performance is critical in determining that individual’s discretionary award for the year;
  • Individuals are rewarded based on their contribution to the overall strategy of the business:
    1. New business development;
    2. Investment returns; and
    3. Operations
  • Other more personal factors such as teamwork, reliability, productivity, leadership, collaborative culture, ESG, compliance, effectiveness of controls, communication and general good corporate citizenship are considered when assessing employee performance.
  1. Aggregate quantitative information on remuneration for all employees by business area:

The Firm had no paid employees during 2017. It hired a consultant in August 2017 who subsequently became an employee in June 2018. The consultant’s fees in 2017 are included below.

Business Area Aggregate remuneration for year-ended 31 December 2017
Investment Management Nil
Other £33,330
  1. Aggregate quantitative information on remuneration for senior management employees and those whose actions have a material impact on the risk profile of the Firm (“Code Staff”):
Code Staff Aggregate remuneration for year-ended 31 December 2017
Senior Management: Nil
Others: Nil

We may omit required disclosures where we believe that the information could be regarded as prejudicial to the UK or other national transposition of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data.

We have made no omissions on the grounds of data protection.