Under Rule 2.2.3R of the Financial Conduct Authority’s (“FCA”) Conduct of Business Sourcebook, CDAM (UK) Limited (“CDAM”), to the extent it is managing investments for a professional client (as defined by the FCA), is required to include 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, explain its considered choice based on its investment approach. The Code is a voluntary code and sets out a number of principles relating to engagement by investors in UK-listed companies.
CDAM’s investment strategy is opportunistic and follows a fundamental, value-oriented approach. CDAM has acquired and liquidated investments across a wide spectrum of asset types, investment strategies, market sectors, market cycles and industries. This spectrum includes, but is not limited to, UK-listed companies and therefore the Code is relevant to some aspects of CDAM’s investment activity. While CDAM generally supports the objectives that underlie the Code, CDAM has chosen not to commit to the Code. CDAM invests in a variety of asset classes and in a variety of jurisdictions globally. CDAM’s approach in relation to engagement with issuers and their management in all of the jurisdictions in which investments are made is determined on a case-by-case basis. Consequently, CDAM does not consider it appropriate to commit to any particular voluntary code of practice relating to any individual jurisdiction.
CDAM (UK) Limited is considering its position with respect to obligations under the Shareholder Rights Directive and will in due course publish in full an appropriate disclosure regarding its policy, related processes and engagement with investee companies (as per FCA rules at COBS 2.2B.5 R).
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 CDAM (UK) Limited (“CDAM” 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.
CDAM 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 to disclose information regarding its remuneration policy and practices.
The purpose of these disclosures is to give stakeholders and market participants an insight into the Firm’s culture and to assist stakeholders in making more informed decisions about their relationship with the Firm.
This document has been prepared by CDAM in accordance with the requirements of MIFIDPRU 8 and is verified by the CDAM Board. Unless otherwise stated, all figures are as at the Firm’s 31 March financial year-end.
Remuneration Policy and Practices
Overview
As an SNI MIFIDPRU Investment Firm and Small AIFM, CDAM is subject to the basic requirements of the MIFIDPRU Remuneration Code (as laid down in Chapter 19G of the Senior management arrangements, Systems and Controls sourcebook in the FCA Handbook (“SYSC”)). The purpose of the remuneration requirements is to:
The objective of CDAM’s remuneration policies and practices is to establish, implement and maintain a culture that is consistent with, and promotes, sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profile of the Firm and the services that it provides to its clients.
In addition, CDAM recognises that remuneration is a key component in how the Firm attracts, motivates, and retains quality staff and sustains consistently high levels of performance, productivity, and results. As such, the Firm’s remuneration philosophy is also grounded in the belief that its people are the most important asset and provide its greatest competitive advantage.
CDAM is committed to excellence, teamwork, ethical behaviour, and the pursuit of exceptional outcomes for its clients. From a remuneration perspective, this means that performance is determined through the assessment of various factors that relate to these values, and by making considered and informed decisions that reward effort, attitude, and results.
Characteristics of the Firm’s Remuneration Policy and Practices
Remuneration at CDAM is made up of fixed and variable components. The fixed component is set in line with market competitiveness at a level to attract and retain skilled staff. Variable remuneration is paid on a discretionary basis and takes into consideration the Firm’s financial performance as well as the financial performance of each business unit, and the financial and non-financial performance of the individual in contributing to the Firm’s success. All staff members are eligible to receive variable remuneration.
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 paying no variable remuneration component, which the Firm would do 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.
Governance and Oversight
The CDAM Board is responsible for setting and overseeing the implementation of CDAM’s remuneration policy and practices. In order to fulfil its responsibilities, the CDAM Board:
CDAM’s remuneration policy and practices are reviewed annually by the CDAM Board.
Quantitative Remuneration Disclosure
For the financial year, 1 April 2023 to 31 March 2024, the total amount of remuneration awarded to all staff was £1,950,000, of which £1,000,000 comprised the fixed component of remuneration, and £950,000 comprised the variable component. For these purposes, ‘staff’ is defined broadly, and includes, for example, employees of the Firm itself, directors, and secondees.