Please read this statement carefully. If you do not wish to be bound by these terms and conditions then you should not access this website. Access of this website by you shall be deemed to be your acceptance of these terms and conditions. These terms and conditions apply to this website which is operated by Hayfin Capital Management LLP (collectively “Hayfin” and “we”).
Unless otherwise stated, all rights in any information which appears on this website (including the screen displays, the content, the text, graphics and look and feel of the website) belong to Hayfin or our licensors.
Unless specifically prohibited by a notice published on any page, you may download and/or print a copy of such parts of the pages of the website as you may reasonably require for your own personal non-commercial use only, provided that any copy has attached to it the relevant proprietary notices and terms and conditions.
All trade marks, service marks, company names or logos are the property of their respective holders. Any use by you of these marks, names and logos may constitute an infringement of the holders’ rights.
This website is controlled and operated by us from the United Kingdom. We make no representation that any material contained on this website is appropriate for any other jurisdiction. Should you choose to access this website from any location other than the United Kingdom, you are responsible for compliance with all applicable local laws.
By entering this website, you acknowledge and agree that the use of this website is at your own risk and to the extent permissible by applicable law, in no circumstances, including (but not limited to) negligence, shall we be liable for any direct, indirect, incidental, special, consequential, or punitive damages, losses, costs or expenses nor for any loss of profit that results from the use of, or inability to use this website or any material on any website linked to this website (including but not limited to any viruses or any other errors or defects or failures in computer transmissions or network communications) even if we have been advised of the possibility of such damage. In addition, no liability can be accepted by us in respect of any changes made to the content of this website by unauthorised third parties. All express or implied warranties or representations are excluded to the fullest extent permissible by law. We do not warrant that this website does not infringe any intellectual property rights of third parties.
Any software is downloaded at your own risk. If you are in any doubt as to the suitability of the software to be downloaded for your computer it is recommended that you obtain specialist advice before downloading it.
Nothing on this website shall be deemed to constitute legal, financial or other professional advice in any way. The information contained on this website is provided on an information basis only and should not be relied upon. If any advice or guidance is required on Hayfin’s products or services, please contact us as directed on this website.
To the extent permitted by applicable law, we do not warrant that this website will be available at any time. If the web website is unavailable, please report this by emailing to [insert email address] we will attempt to correct the fault as soon as we reasonably can.
The information contained on this website is based on up to date information and while Hayfin makes all reasonable efforts to ensure that material on this website is correct, current and complete at the date of publication. Hayfin makes no warranties (express or implied) as to accuracy, timeliness, completeness, performance or fitness for a particular purpose of any of the information. No responsibility is accepted by or on behalf of Hayfin for any errors, omissions, or inaccurate information contained on this website.
Hayfin may change the information at any time without notice. You should take appropriate steps to verify all information on this website before acting upon it.
We may update these terms and conditions from time to time and we will notify you of any changes using the email address you gave to us on registration or by an announcement on the website. The changes will apply to the use of the website after such notice. If you use the website after the date on which the changes come into effect, you will be deemed to have accepted the new terms and conditions.
If any part of these terms and conditions is, at any time, found to be invalid by a court, tribunal or other forum of competent jurisdiction, or otherwise rendered unenforceable, that decision shall not invalidate or void the remainder of these terms and conditions. These terms and conditions shall be deemed amended by modifying or severing such part as necessary to render them valid, legal and enforceable while preserving their intent, or if that is not possible, by substituting another provision that is valid, legal and enforceable that gives equivalent effect to the parties’ intent. Any such invalid or unenforceable part or parts shall be severable from these terms and conditions, or the validity of the part(s) in question in any other jurisdiction shall not be affected thereby.
You may not assign, sub-license or otherwise transfer any of your rights under these terms and conditions.
These terms and conditions are governed by and shall be construed in accordance with the laws of England. Non-contractual obligations (if any) arising out of or in connection with these terms and conditions (including their formation) shall also be governed by the laws of England
You agree submit to the exclusive jurisdiction of the courts of England and Wales as regards any claim, dispute or matter (whether contractual or non-contractual) arising out of or in connection with these terms and conditions.
The Stewardship Code
The UK Financial Reporting Council (“FRC”) issued in July 2010 the UK Stewardship Code. The Stewardship Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities.
Hayfin Capital Management LLP specialise in sourcing, structuring and managing European private debt investments while operating complementary business lines across corporate, maritime and alternative credit. Given the nature of its investment activities, Hayfin is not ordinarily in a position to apply the Stewardship Code as envisaged by the FRC and the code in general has limited applicability to Hayfin. That said, Hayfin supports the aim of the Stewardship Code. Below is a list of the principles and Hayfin’s approach to each principle.
- Investors should publicly disclose their policy on how they will discharge their stewardship responsibilities. Under the Code’s “comply or explain” policy, Hayfin has disclosed on its website its approach to these seven principles and the Code generally.
- Investors should have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed. Hayfin acknowledges that conflicts of interest may arise in the context of investments. Hayfin has implemented a policy for identifying and managing conflicts of interest with the overriding aim of taking all reasonable steps to put the interests of their client or beneficiary first. The Private Placement Memorandum for each of Hayfin’s funds discusses the potential conflicts facing the fund and Hayfin’s approach to managing those conflicts.
- Investors should monitor their investee companies. Hayfin’s Research team are responsible for monitoring all investments on a monthly basis at a formal monthly meeting with certain members of Hayfin’s investment committee. Hayfin’s analysts maintain regular dialogue with companies which enables the team to monitor the companies effectively. Where material underperformance, events or other appropriate circumstances exist, the full investment committee will meet to review the relevant investment.
- Institutional investors should establish clear guidelines on when and how they will escalate their stewardship activities. This principle focuses on the circumstances where an investor will actively intervene and regularly assess the outcomes of doing so. Given Hayfin’s focus on senior debt investing, there is limited applicability of this principle to Hayfin. However, on a case by case basis where meaningful, Hayfin would implement additional efforts and engagement with portfolio companies to escalate stewardship activities. Hayfin takes an active approach to communicating its views to portfolio companies and seeking improvements where the analysts believe there are shortcomings in performance. Dialogue is continued over an extended period of time if necessary.
- Investors should be willing to act collectively with other investors where appropriate. This principle also has limited applicability to Hayfin. That said, where appropriate, Hayfin collaborates with other, similarly situated investors to increase the investor group’s influence over a portfolio company.
- Investors should have a clear policy on voting and disclosure of voting activity. As a debt investor, voting has limited applicability to Hayfin.
- Investors should report periodically on their stewardship and voting activities. Given the limited applicability of the Code to Hayfin, it has not implemented a formal reporting policy for stewardship and voting activities.
Pillar 3 Disclosure
The Capital Requirements Directive IV (the “Directive”) of the European Union establishes 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 Directive has been implemented by the Financial Conduct Authority (the “FCA”) in its regulations through the General Prudential Sourcebook (GENPRU) and the Prudential Sourcebook for Investment Firms (IFPRU).
The FCA framework 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 the Pillar 1 requirements and further determine whether it should apply any additional capital, processes, strategies or systems to cover any other risks to which it may be exposed; and
- Pillar 3 requires disclosure of specified information about the underlying risk management controls, capital position and remuneration policy.
The rules in BIPRU 11 set out the detailed provision for Pillar 3 disclosure as supplement to the IFPRU requirements. This document is designed to meet the Pillar 3 obligations of Hayfin Capital Management LLP (the “Firm”). Unless otherwise stated, all figures are as at the 31 December financial year-end.
Pillar 3 disclosures will be issued on an annual basis after the year end and published as soon as practical, typically when the annual accounts are finalised.
The Firm is permitted to omit required disclosures if it believes that the information is immaterial such that omission would not be likely to change or influence the decision of a reader relying on that information. In addition, omission is possible where the information is regarded as proprietary or confidential. No omissions have been made in this statement.
Scope and Application of the Requirements
The Firm is authorised and regulated by the Financial Conduct Authority and, as such, is subject to minimum regulatory capital requirements. The Firm is categorised as a limited licence firm by the FCA for capital purposes. 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.
The Firm is governed by its members, who in turn have formed a Management Committee, consisting of senior members of the Firm. The Management Committee is responsible for making all decisions regarding the day-to-day management of the Firm, subject to the provisions set out in the Firm’s governing documents. As part of its day-to-day management responsibilities, the Management Committee determines the Firm’s business strategy and risk appetite and is responsible for establishing and maintaining the Firm’s governance arrangements and designing and implementing a risk management framework that recognises the risks that the business faces.
As part of the Firm’s risk management framework, the Firm has created an Audit and Risk Committee, which is responsible for reviewing all the risks relevant to the Firm’s business and reporting and making recommendations in respect of such risks to the Management Committee.
The Audit and Risk Committee, working together with the Management Committee and the Firm’s other members, to the extent appropriate, determines how the risks that the Firm faces may be mitigated and assesses on an on-going basis the arrangements to manage those risks. The Management Committee and the Audit and Risk Committee each meet on a regular basis and discuss current projections for profitability, cash flow, regulatory capital management and business planning and risk management.
The Firm manages its risk though a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules) with the aim of operating a defined and transparent risk management framework. These policies and procedures are updated as required.
The Audit and Risk Committee has identified that credit, market, operational, business and liquidity risks are the main areas of risk to which the Firm is exposed. Annually, the Audit and Risk Committee and the Management Committee both formally review the risks, controls and other risk mitigation arrangements and assess their effectiveness. For material risks, the Management Committee, in coordination with the Audit and Risk Committee, considers the financial impact of these risks as part of its business planning and capital management and concludes whether the amount of regulatory capital is adequate.
The Firm is a limited liability partnership and its capital arrangements are established in its limited liability partnership deed. The total capital resources of the Firm include members’ capital totalling £9,862,000 as at 31 December 2015, and are summarised as follows:
As at 31 Dec 2015
Tier 1 capital*
Tier 2 capital
Tier 3 capital**
Deductions from Tiers 1 and 2
Total capital resources
*No hybrid tier one capital is held
**Note: Tier 3 capital is to be removed under the CRD IV
The Firm is subject to the Fixed Overhead Requirement and is not required to calculate an operational risk capital charge though it considers this as part of its process to identify the level of risk based capital required.
As discussed above the firm is an IFPRU limited licence firm and as such its capital requirements are the higher of:
- €50,000 (base capital requirement);
- the sum of the market & credit risk requirements; or
- the fixed overhead requirement (“FOR”) which is essentially 25% of the firm’s operating expenses less certain variable costs.
As a IFPRU limited licence firm, the Firm neither holds client money or assets nor lends money. Therefore, the Firm is not exposed to credit risk in the traditional sense. The Firm’s exposure to credit risk includes:
- the risk that investment management and/or performance fees cannot be collected from its clients;
- the risk that financial institutions where the Firm’s cash and cash equivalents are deposited are unable to deliver such cash and cash equivalents to the Firm; and
- the risk that the Firm’s investments (particularly in subordinated notes issued by Hayfin Ruby II Luxembourg SCA) cannot be recovered.
In terms of market risk, the Firm does not have a trading book. The only potential exposures are non-trading book exposures (e.g., to foreign currency held on deposit and assets or liabilities held and/or denominated in foreign currencies on the Firm’s balance sheet).
The Firm’s fixed overhead requirement was higher than its base capital or credit risk plus market risk. Therefore, the Firm’s capital requirement is equal to its fixed overhead requirement. As at 31 December 2015, the Firm had a fixed overhead requirement of £1,769,000, and eligible regulatory capital of £9,862,000, Therefore, the Firm has substantial excess resources over its regulatory capital requirements. Due to a change in approach under CRD IV the capital requirement for each risk category are generally multiplied by 12.5 to create the total risk exposure amount (“TREA”). The firm then compares this TREA against the level of resources held. There are three ratios that need to be complied with. In each case the TREA is the common denominator; the difference is the numerator and the relevant target ratios as set out below:
(1) The Common Tier One Equity Capital – 4.5%;
(2) Tier 1 Capital – 6%; and
(3) Total Capital – 8%.
The Firm ensures that it maintains adequate capital for its size, nature and complexity of the business based on current total capital of £9,862,000 compared to its TREA of £59,328,000, being the higher of Pillar 1 and Pillar 2. As there is only Tier One Equity Capital held by the firm, the output from the three ratios is the same – 16.6%.