Pillar 3 Risk Disclosure

Quartet Capital Partners LLP

Pillar 3 Risk Disclosure Statement for the Year to 31 May 2021


The 2006 Capital Requirements Directive (“the Directive”) of the European Union created a regulatory framework across Europe based on the provisions of the Basel 2 Capital Accord. This Directive affects bank and building societies and certain types of investment firms.

The Directive was implemented in the United Kingdom by the Financial Conduct Authority (“FCA”) (previously the Financial Service Authority) through its General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”).

The framework consists of three ‘pillars’

  • Pillar 1 – The minimum capital requirements to cover credit, market and operational risk;
  • Pillar 2 – The requirements for firms and regulators to assess the need to hold additional capital to cover risks not covered under Pillar 1; and
  • Pillar 3 – A set of disclosure requirements which enable market participants to assess the information of firms’ risk, capital and risk management procedures.

Quartet Capital Partners LLP (“QCP”) is required under Pillar 3 of the Directive to disclose information relating to the capital it holds and each material category of risk it faces in order to assist users of its accounts and to encourage market discipline. These disclosures aim to provide information on the risk exposures faced by QCP and the risk assessment process it has in place to monitor these. These disclosures are seen as complementary to QCP’s minimum capital requirement calculation (Pillar 1) and the internal review of its capital adequacy (Pillar 2).

This document has been prepared by QCP to fulfil its regulatory obligations under Pillar 3 and the requirements of BIPRU 11 and is verified by the Partners.



QCP is authorised by the FCA as a Limited Licence Firm with a Minimum Capital Requirement of €50,000. QCP is not a member of a group and so is not required to prepare consolidated reporting for BIPRU purposes.

QCP provides discretionary investment management services to retail high net worth clients. QCP does not hold client money or assets. QCP only acts as agent for its clients and does not deal as principal. There is no Market Risk as defined by BIPRU 7.

The Pillar 3 disclosure document has been prepared by QCP in accordance with the requirements of BIPRU 11 and is verified by the Partners. Unless otherwise stated, all figures are as at 31 May 2020.


Frequency of Disclosure

Pillar 3 disclosures will be made on an annual basis; the disclosures are not subject to audit.


Risk Management

QCP 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 Partners, who take overall responsibility for this process and the fundamental risk appetite of QCP. The Compliance Officer has responsibility for the implementation and enforcement of the QCP’s risk principles.

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


Capital Resources

QCP maintains capital resources as follows:

Date                                                   31st May 2021

Tier 1 capital*                                    £354,000

Tier 2 capital                                      Nil

Tier 3 capital                                      Nil

Total capital resources                   £354,000

*No innovative tier one capital is held

The capital resources detailed above are considered adequate to continue to finance QCP over the next year.


Credit Risk

QCP regularly monitors amounts due from its clients and has appropriate credit control procedures in place. The credit control process is operated by QCP’s accountant and outstanding balances are reported to senior management on a monthly basis via the bank reconciliation and a quarterly basis via the management accounts. Any significant issues arising intra-month would be reported immediately. QCP’s accountant prepares bank reconciliations on a monthly basis in order to ensure QCP’s records are in agreement with those of the bank. Given the nature of QCP’s exposures, no specific policy for hedging and mitigating credit risk are in place.

QCP has a limited number of credit exposures relating to its investment management clients to whom a risk weighted exposure of (1.4%) of the total balance due is applied under the simplified standardised approach detailed in BIPRU 3.5.5 of the FCA Handbook.


Market Risk

No specific strategies are adopted in order to mitigate the risk of currency fluctuations. The impact of foreign exchange movements are monitored on a regular basis and reported to senior management via the quarterly management accounts. QCP does not run a trading book. QCP at present does not have an exposure to debtors and to cash balances held in currencies other than GBP. However, were it to have such an exposure, QCP would calculate any such foreign exchange risk by reference to the rules in BIPRU 7.5.1 of the FCA Handbook.


Business Risk

QCP conducts an assessment of the business risk to which it is exposed on an annual basis, though given the size and nature of QCP no separate risk management function is considered necessary in respect of QCP’s own balance sheet. Matters arising from the review are considered and mitigating or remedial action is taken where appropriate.

QCP’s revenue is reliant on the size and performance of its funds under management. As such, the risk posed to QCP relates to underperformance resulting in a decline in revenue and ultimately the risk of loss of clients and redemptions from the funds managed by QCP. This risk is mitigated by the below average risk profile of QCP’s funds under management, its conservative investment approach, its diversified and well established client base and is further mitigated by capital maintained within the business which is kept at a sufficient level to cover the expenses of QCP for at least twelve months.


Operational Risk

QCP conducts an assessment of the operational risk to which it is exposed on an annual basis. Whilst no separate risk management function is considered necessary in respect of the operational risks which QCP faces given its size and the nature of the risks faced, risk management remains a key function of QCP’s business in respect of the portfolios it manages. Matters arising from the review are considered and mitigating or remedial action is taken where appropriate.

QCP has professional indemnity insurance in place to mitigate against the risk of costs being incurred due to trade errors occurring.

QCP is reliant on its ability to attract and retain key investment management personnel. This risk is mitigated by the fact that these individuals are also the owners and managers of QCP.

QCP has alternative arrangements in place should a disaster recovery event occur. These arrangements are tested on a regular basis in order to ensure that they would be effective should they be required to be invoked.


Liquidity Risk

Liquidity risk is the risk that QCP will not be able to meet its financial obligations as they fall due. QCP is equity funded with no debt and due to the nature of the working capital cycle and the strength of the balance sheet which holds significant net cash balances there is no specific risk arising from liquidity.


Concentration Risk

QCP holds it cash balances with banks with whom it has a strong, well-established relationships and its revenue is generated from a stable and well diversified client base.


Fixed Overhead Requirement

QCP’s Pillar 1 capital requirement is determined by its Fixed Overhead Requirement (FOR); calculated in accordance with GENPRU 2.1.53. Since this is typically the largest of the variable factors to consider, QCP 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 QCP’s accountant, and reported to senior management on a monthly basis.

QCP calculates it’s FOR after first deducting variable costs from its annual expenditure. Variable costs deducted when calculating QCP’s current FOR relate to discretionary bonuses paid to staff, non-recurring staff related, legal and tax advisory costs as well as exchange rate losses.


Satisfaction of Capital Requirements

Since QCP’s ICAAP (Pillar 2) process has not identified capital to be held over and above the Pillar 1 requirement, the capital resources detailed above are considered adequate to continue to finance QCP over the next year. No additional capital injections are considered necessary and QCP expects to continue to be profitable going forward. In managing its capital, QCP considers the variety of requirements and expectations. Sufficient capital is in place to support current and projected business activities, according to both QCP’s own internal assessment and the requirements of the UK regulator.



QCP has identified that Code Staff, as defined by the FCA Remuneration Code, are the Partners of the Firm and the Compliance Officer, all of whom exercise significant control functions. Due to the size and scale of the business no separate remuneration committee exists at Quartet; this function is instead undertaken by the Partners. The overall policy is that the remuneration of Code Staff complies with the FCA’s Remuneration Code, with an appropriate balance being struck between financial performance and risk management. The remuneration policy is agreed and approved by the Partners having due regard to risk management.


Regulatory Risk

Regulatory change and compliance with QCP’s ongoing obligations is an area of continued focus and the Directors and Compliance Officer are satisfied that QCP’s risk management and internal control framework is sufficiently robust to mitigate against the risk of non-compliance.



QCP is not a member of a group and therefore no consolidation is required for accounting purposes under IFRS.