The Capital Requirements Directive (‘CRD’) 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. The CRD forms part of the “retained EU law” under the European Union (Withdrawal) Act 2018 and was therefore transposed into UK law before the end of the Brexit transition period.

In the United Kingdom, the CRD is 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 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 Ancala Partners LLP (‘Ancala’ or the ‘Firm’) in accordance with the requirements of BIPRU 11 and is verified by the senior management.  Unless otherwise stated, all figures are as at the 31 March 2021 financial year end.

Pillar 3 disclosures will be issued on an annual basis after the year end and published as soon as practicable when the audited annual accounts are finalised.

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 made no omissions on the grounds that it is immaterial, proprietary or confidential.

Scope and application of the requirements

Ancala Partners LLP is an independent investment firm focused on investing in mid-market infrastructure businesses in UK, the EU countries, Switzerland, Norway, Iceland, the Isle of Man and the Channel Islands.  The Firm’s principal activity is the management of alternative investment funds. 

The Firm is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. The Firm is categorised as a Collective Portfolio Management Investment Firm (‘CPMI’) Firm by the FCA for capital purposes, noted specifically below.

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 to ensure that it has effective systems and controls in place to identify, monitor and manage risks arising in the business.  Whilst the ultimate accountability for risk leadership and management rests with the Management Committee supported by its sub-committee, the Risk Management Committee (‘RMC’),  the Firm’s Chief Operating Officer (‘COO’) has responsibility to ensure effective implementation of the Firm’s risk management policy and procedures, with the involvement of all Ancala team members in their respective business areas. 

Specific 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 existing funds under management and its ability to launch new funds/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. To mitigate this, the Firm:

  • maintains a significant level of capital;
  • undertakes careful revenue forecast, budgeting and sensitivity analysis;
  • closely monitors its financial position on an ongoing basis; and
  • continues to build a strong and competent investment and asset management team with a focus on generating enhanced returns for its investors.   

Operational risk  

Operational risk is the risk of potential loss arising from fraud, human error, inadequate controls or failures in internal processes and systems, or from external events, including legal risk.

The Firm places strong reliance on the systems and controls, procedures and disaster recovery arrangements to manage and mitigate against these risks. 

Appropriate insurance policies including professional indemnity, D&O and crime insurance have also been put in place.

Credit risk

The Firm is exposed to limited credit risk in respect of its investment management fees billed and cash held on deposit.  Management fees are drawn quarterly in advance from the funds managed. The Firm considers that there is little risk of default by its clients, which are primarily institutional investors whose financial soundness formed part of the client due diligence before their admission to the funds. All bank accounts are held with large international credit institutions.

Given the nature of the Firm’s exposures, no specific policy for hedging and 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 exposureRisk weightingRisk weighted exposure £’000
Cash in the bank1.6% subject to institution and FCA rules112
Prepayments and Accrued Income8%20
Other assets8%3

Market risk  

Since the Firm takes no trading book positions on its balance sheet, the Firm has no market risk other than foreign exchange risk in respect of its accounts receivable and cash balances held in currencies other than its reporting currency GBP (predominantly in Euro). 

No specific strategies are adopted in order to mitigate the risk of fluctuations in Euro to date.   However, hedging strategies may be used in the future to mitigate against potential foreign exchange losses as the proportion of Euro denominated revenue increases.  This exposure is monitored by the COO and the Managing Partner on a regular basis.

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 exposureRisk weightingRisk weighted exposure   £’000
Foreign currency assets and liabilities 8%394

Liquidity risk  

The Firm is required to maintain sufficient liquidity to ensure that its liabilities can be met as they fall due or additional financial resources are available in exceptional circumstances. 

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. Additionally, it has historically been the case that all management fee debtors are settled promptly, thus ensuring further liquidity resources are available to the Firm on a timely basis.  Budgets and cash position of the Firm are monitored by the Managing Partner together with the COO on a regular basis. 

Regulatory capital

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

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

 31/03/2021 £’000
Tier 1 capital*700
Tier 2 capital
Tier 3 capital
Deductions from Tiers 1 and 2
Total capital resources700
*No hybrid tier one capital is held

In keeping with the size and investment strategy of the Firm, Ancala has 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 fees receivable from the funds under its management.

As discussed above the firm is a CPMI Firm and as such its capital requirements are the higher of:

  • €125,000 plus 0.02% of the Firm’s AIF Funds Under Management that is over €250 million; or
  • The Fixed Overhead Requirement (‘FOR’) – which is essentially 25% of the Firm’s annual operating Expenses; plus
  • Either the Professional Negligence Capital Requirement or the Professional Indemnity Insurance (‘PII’) capital requirement, whichever is applicable; or
  • The sum of market and credit risk requirements.

0.02% is taken on the absolute value of all assets of all funds managed by the Firm (for which it is the appointed AIFM in excess of €250 million, including assets acquired through the use of leverage, whereby derivative instruments shall be valued at their market value, including funds where the firm has delegated the management function but excluding funds that it is managing as a delegate. The FOR is calculated, in accordance with FCA rules, based on the Firm’s previous years audited expenditure. The Firm has adopted the simplified standardised approach to credit and market risk and the above figures have been produced on that basis.  The Firm is not subject to an operational risk requirement.

It is the Firm’s experience that the capital requirements for Market Risk and Credit Risk exceed the Fixed Overhead Requirement as at the year end.  Market Risk arises primarily on receivables and payables denominated in Euros and Credit Risk arises primarily on any management fees billed and cash held on deposits.

Capital requirement

The Firm’s Pillar 1 capital requirement has been determined by reference to the Firm’s sum of credit and market risk and calculated in accordance with BIPRU 3.5.5 and BIPRU 7.5.1 of the FCA handbook respectively. The requirement is based on the sum of credit and market risk as this exceeds both the FOR plus PII and its base capital requirement of €125,000 plus the FUM capital requirement.

The FOR is based on annual expenses net of variable 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 COO and reported to the Management Committee if intra-year adjustment is required.

UK Financial Reporting Council’s Stewardship Code

FCA COBS Rule 2.2.3R requires FCA authorised firms to disclose whether they conform to the requirements of the UK Financial Reporting Council’s Stewardship Code (the ‘Code’). Adherence to the Code is voluntary. The Firm pursues a private equity strategy focused on investing in mid-market infrastructure investments. Therefore, while the Firm supports the principles of the Code, it does not consider it appropriate to conform to the Code currently. 

Remuneration disclosure

Ancala Partners LLP (“Ancala”) is a limited liability partnership, authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom as a full-scope UK authorised alternative investment fund manager (AIFM).  Ancala has adopted a remuneration policy which implements the requirements of the FCA’s AIFM Remuneration Code.  The principles behind this Remuneration Policy are designed to ensure compliance with the requirements set out in Article 14 of the Alternative Investment Fund Managers Directive (AIFMD) and chapter 19B of the FCA’s Senior Management Arrangements, Systems and Controls sourcebook to satisfy requirements relating to the disclosure of remuneration information.


Enshrined in the 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)).

Ancala has applied the AIFM Remuneration Code in a proportionate manner, considering the firm’s size, internal organisation and the nature, scope and complexity of its activities. The Management Committee set the framework and provide guidelines for the overall compensation strategy, including the overall financial budget for the base and variable compensation components for the year.


The Management Committee is responsible for approving and reviewing the remuneration policy and its implementation which is overseen by the Managing Partner. In the event of any questions or disagreement regarding remuneration, the Managing Partner has a casting vote.

Purpose of the Policy

Ancala’s remuneration policy is designed to:

• be consistent with and promote sound and effective risk management
• not encourage excessive risk taking which is inconsistent with the risk profile of the firm and its clients
• set out position on conflicts of interest
• be in line with the firms’ business strategy and objectives
• offer competitive remuneration packages that are realistic within the industry
• be reviewed regularly to ensure that the firm keeps pace with the continually changing market
• ensure that all stakeholders understand the remuneration policy

Remuneration structure

The remuneration structure is agreed by the Management Committee.  Remuneration is comprised of fixed pay or drawings for its members and performance related pay (e.g. cash bonus and performance fee programme), which are based on the overall performance of the firm and the performance of the investment portfolio under the firm’s management.

The integrated remuneration structure is made up of three components:

·         Fixed Component

Incorporating a fixed basic remuneration, medical cover, leave and various other allowances (where applicable)

·         Bonuses

Dependent on firm and individual performances for the financial year and accounted for on a cash paid basis at the end of each financial year

·         Performance fees

Involving the performance fee program (otherwise known as incentive fees). Performance fees are typically subject to payment over a period of time and act as a long-term incentive to ensure aligned interests on investment performance through both annual incentive fees and mid-term incentive fees (based on net IRR and cash yield calculations) to ensure retention of key staff.

Bonuses for partners and employees, where applicable, are discretionary and are paid out at a varying percentage of fixed remuneration, dependent on firm, investment portfolio and individual performance. All the bonuses are reviewed thoroughly prior to recommendation and authorisation by the Managing Partner.  Bonuses awarded at the discretion of the Management Committee could be subject to conditions, deferral or retention (in whole or in part), vesting, cancellation or claw back, in accordance with applicable regulatory requirements and industry practice.  Variable remunerations are paid from realised profits or incentive fees received, taking account of any necessary adjustment for future risks and only to the extent that such payment does not impact Ancala’s capital base. 


Ancala considers that its remuneration policy and practices reflect appropriate quantitative and qualitative criteria. Alignment with client interests avoids the potential for conflicts to arise between the interests of Ancala and its individual staff members and those of its clients or between the interests of different clients. Ancala’s remuneration policy is aligned with the general duty to ensure effective conflicts of interest management. Total aggregate remuneration for Code Staff as of 31 March 2021 is £6,149,000.