Disclosures

Mesarete Capital LLP
MIFIDPRU 8 Disclosure

December 2023

Introduction

The Financial Conduct Authority (“FCA” or “regulator”) in the Prudential sourcebook for MiFID Investment Firms in the FCA Handbook (“MIFIDPRU”) sets out the detailed prudential requirements that apply to Mesarete Capital LLP, (“Mesarete” or the “Firm”). Chapter 8 of MIFIDPRU (“MIFIDPRU 8”) sets out public disclosure rules and guidance with which the Firm must comply, further to those prudential requirements.

Mesarete is classified under MIFIDPRU as a small and non-interconnected MIFIDPRU investment firm (“SNI MIFIDPRU Investment Firm”). As such, the Firm is required by MIFIDPRU 8, more specifically under 8.6, to disclose certain information regarding its remuneration policy and practices and this document is designed to satisfy those requirements.

The purpose of MIFIDPRU 8.6 disclosure is to provide the reader with an understanding of the risk profile of the firm and/or the assets it manages through summary information on (1) our approach to remuneration, (2) the objectives of financial incentives and (3) the decision-making procedures and governance surrounding the development of the remuneration policies/practices.

This document has been prepared by Mesarete in accordance with the requirements of MIFIDPRU 8 and we have provided information that we consider to be appropriate to our size and internal organisation, and to the nature, scope and complexity of our activities. Unless otherwise stated, all figures are as at the Firm’s 31 March financial year-end.

Mesarete Capital LLP

Mesarete is registered with the FCA as a full scope UK AIFM and registered with the SEC as an Investment Advisor. Mesarete provides investment management services to private funds (alternative investment funds) and acts as a sub-advisor for certain clients. Please see our main website pages and the Financial Services Register for further information on Mesarete.

Qualitative Remuneration Disclosures

Approach and Objective of Remuneration

As an SNI MIFIDPRU Investment Firm, Mesarete is subject to the basic requirements of the MIFIDPRU Remuneration Code (as laid out in Chapter 19G of the Senior management arrangements, Systems and Controls sourcebook in the FCA Handbook (“SYSC”)). Mesarete, as an alternative investment fund manager, is also classified as a collective portfolio management investment firm, and as such, is also subject to the AIFM Remuneration Code (SYSC 19B).

Mesarete’s approach to remuneration is to have a remuneration policy and process which enables us to meet the remuneration requirements and promote sound and effective risk management and not encourage risk taking which is inconsistent with the risk profile of Mesarete’s clients. We also recognise that remuneration is a key component in how we attract, motivate, and retain quality staff and in how those staff sustain consistently high levels of performance, productivity, personal growth and results which meet our firm’s strategic objectives. As such, the remuneration process must also have regard to broader market components, role specific or industry wide, as well as individual and firm performance.

Collectively, our remuneration policy and the financial incentives stemming from it have the objectives of:

  • Promoting effective risk management in the long-term interests of the Firm and its clients;
  • Ensuring alignment between risk and individual reward;
  • Supporting personal growth, positive behaviours and healthy firm culture, on a consistent basis,
  • Discouraging behaviours that can lead to misconduct and poor customer outcomes; and
  • Meeting regulatory requirements.

In line with the Firm’s core values with regard to equality, diversity and inclusion, we do not discriminate against gender or other such personal or cultural characteristics when assessing and awarding (or not awarding) remuneration.

Governance and Oversight

Following an assessment of the size, internal organisation, and nature, scope and complexity of our business, we have not appointed a Remuneration Committee. The Mesarete Partnership Committee – which is the highest level of governance for the firm – is responsible for implementing Mesarete’s remuneration policy and practices and awarding compensation. The Partnership Committee:

  • Is appropriately staffed to enable it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk, capital, and liquidity across the entire business. The Partnership Committee is comprised of the CIO, Deputy CIO, and the COO, who additionally performs the function of Compliance Oversight Officer/Chief Compliance Officer. As a Partner and Senior Manager within the Firm, the COO/CCO can ensure that any relevant compliance considerations are considered when setting individual remuneration awards.
  • Prepares decisions regarding remuneration, including decisions that have implications for the risk and risk management of the Firm.
  • Ensures that the Firm’s remuneration policy and practices consider the long-term interests of stakeholders in the Firm.
  • Ensures that the overall remuneration policy is consistent with the business strategy, objectives, values, and interests of the Firm and of its clients.

Mesarete’s remuneration policy and practices are reviewed at least annually by the Partnership Committee.

Mesarete Remuneration Structure

Components of Remuneration

Remuneration is a total compensation number composed of base salary (fixed compensation) and discretionary bonus (variable compensation). Given the size and nature of the firm, we believe the best approach to meeting the objectives of our remuneration policy is to assess performance throughout the year and then conduct a formal annual review of compensation for all staff. We believe this provides strong incentive for staff to focus on their contribution to the firm within an appropriate timeframe to prove consistent delivery and motivate personal and professional development in line with our firm objectives.

Fixed compensation is set competitively, commensurate with market rates bearing in mind this is a primary reflection of professional experience and organisational responsibility set at a level to attract and retain skilled staff. Fixed compensation is contractual i.e., permanent, pre-determined, non-discretionary, non-revocable and not dependent on performance. The Partnership Committee has sought to set the fixed element of employee total compensation at a sufficient level to provide staff with comfortable living standards, which avoids reliance on the variable element of remuneration, whilst ensuring the Firm’s capital and liquidity position remains strong.

Variable remuneration is paid on a discretionary basis and takes into consideration the Firm’s financial performance and long-term performance of the individual in contributing to the Firm’s success. All staff members are eligible to receive variable remuneration where performance allows and payment of such an award does not weaken the financial stability of Mesarete.

Summary of Financial and Non-Financial Performance Criteria

The financial and non-financial performance criteria used across the Firm in assessing variable compensation include:

Firm level criteria

  • Assets under management and investment performance
  • Outlook and risks for the Firm in the future
  • Outlook for the market/competition for staff

Business unit criteria

  • As a small firm, we focus on role specific criteria for individuals which gives us better granularity on performance than setting business unit criteria

Individual staff member level criteria

  • Performance of the individual personally – their productivity and contribution to the business and team in line with their role and defined objectives and/or target metrics
  • The value of the staff member to the Firm as determined by the Partnership Committee, and the staff member’s contribution to its strategy and overall objectives
  • Adherence by the staff member to the Firm’s policies and procedures including compliance policies and risk limits

Overall, we consider that the fixed and variable components of remuneration are appropriately balanced: the fixed component represents a sufficiently high proportion of the total remuneration to enable the operation of a fully flexible policy on variable remuneration. This allows for the possibility of the Firm not paying a variable remuneration component in certain situations, such as where the Firm’s profitability performance is constrained, or where there is a risk that the Firm may not be able to meet its capital or liquidity regulatory requirements.

Quantitative Remuneration Disclosure

For the financial year 1 April 2022 to 31 March 2023, the total amount of remuneration awarded to all staff, including pension, was £12,443,136, of which £2,960,666 comprised the fixed component of remuneration, and £9,482,470 comprised the variable component. For these purposes, ‘staff’ is defined broadly, and includes employees of the Firm and the Partners, but where relevant employees of other entities in the group.