Pillar 3 Disclosure

The Capital Requirements Directive (“CRD”) and the Alternative Investment Fund Management Directive (“AIFMD”) of the European Union establish a revised regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment firms must maintain.

The Capital Requirements Directive (“CRD”) and the Alternative Investment Fund Management Directive (“AIFMD”) of the European Union establish 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 CRD and AIFMD have been 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 AIFMD adds further capital requirements based on the Alternative Investment Fund (“AIF”) assets under management and professional liability risks.

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 Eisler in accordance with the requirements of BIPRU 11 and is verified by senior management. Unless otherwise stated, all figures are as at 31 December 2020.

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


Eisler is permitted to omit required disclosures if it believes 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, Eisler may omit required disclosures where it believes that the information is regarded as proprietary or confidential. In its view, proprietary information is that which, if it were shared, would undermine its competitive position. Information is considered to be confidential where there are obligations binding the Firm to confidentiality with its customers, suppliers and counterparties.


The information contained in this document has not been audited by Eisler’s external auditors and does not constitute any form of financial statement and must not be relied upon in making any judgement upon either Eisler or any vehicle which it manages.

Scope and application of the requirements

Eisler is an English limited company authorised and regulated by the Financial Conduct Authority (“FCA”) as an Alternative Investment Fund Manager (“AIFM”) and as such is subject to minimum regulatory capital requirements. The Firm is categorised as a Collective Portfolio Management Investment Firm (“CPMI”) by the FCA for capital purposes.

Eisler’s primary activity is to act as AIFM in respect of certain alternative investment funds. Eisler manages the Funds’ portfolios on a discretionary basis pursuant to the investment objectives described in the Funds’ offering memoranda and any contractual restrictions set out in the investment management agreements with the Funds. The Firm does not currently manage any funds on behalf of retail clients, has no trading book exposures, and does not have regulatory permissions to hold client money or assets.

Risk management

Eisler 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 Chief Operating Officer, with the Firm’s Management Committee holding overall responsibility for the risk appetite of the Firm. The Management Committee is responsible for determining the strategic direction, senior-level hires, material issues and risk appetite of the Firm. This includes control of areas such as financial projections, business performance, strategic initiatives, recruiting, remuneration, compliance and regulation, and risk management and the control environment.

The Management Committee has established three key committees to assist it with its management and oversight responsibilities.

  • Risk Management Committee: responsible for the drafting and implementation of the Firm’s risk policies. This includes identifying, measuring, analysing and monitoring the market risks at both a portfolio and individual trader level. The chair of this committee is the Chief Risk Officer.
  • Operational Risk Committee: responsible for identifying and mitigating the risk of loss resulting from the Firm’s operations. Such risk may come from, amongst other sources, inadequate internal processes or policies, staff who fail to perform at the expected level and external events. It is chaired by the Head of Operations.
  • Valuation Committee: responsible for overseeing the drafting and implementation of the Firm’s Valuation Policy. It ensures that the Policy is applied fairly and consistently across various assets. It will also escalate valuation issues to the Firm’s and, if necessary, the clients’ boards. It is chaired by the Chief Financial Officer.

The Management Committee meets on a regular basis to discuss current projections for profitability, cash flow, regulatory capital management, business planning, and risk management. There is a framework of policy and procedures having regard to the relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required.

The senior management team has identified that business, operational, market and credit are the main areas of risk to which the Firm is exposed. Annually, the senior management team formally reviews its risks, controls and other risk mitigation arrangements and assesses their effectiveness. Day-to-day responsibility for implementing the risk management framework is delegated to the Risk Committee and the Operational Risk Committee which take primary responsibility for managing and mitigating the risks specific to their areas of responsibility. A second line of defence is provided by the governance committees, supported by the Firm’s risk and control functions.

Management accounts demonstrate continued adequacy of Eisler’s regulatory capital and are reviewed on a regular basis.

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

Specific risks

Specific risks applicable to the Firm come under the headings of business, operational, credit and market risks.

Business risk

Eisler’s revenue is reliant on the performance of the existing funds under management and the ability to attract new clients to invest in the funds. 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 and ultimately the risk of redemptions from the funds managed by Eisler. This risk is mitigated in a number of operational ways and also by ensuring sufficient capital is held to cover all expenses of the business through any periods of poor performance / market downturn.

Operational risk

Eisler places strong reliance on the operational procedures and controls that it has in place in order to mitigate risk and seeks to ensure that all members of staff are aware of their responsibilities in this respect.

The Firm has identified a number of key operational risks to manage. These relate to systems failure, failure of a third-party provider, key staff, potential for serious regulatory breaches, and market abuse. Appropriate polices are in place to mitigate against these risks, and Eisler ensure it has adequate professional indemnity insurance.

Internal Capital Adequacy Assessment Process (“ICAAP”)

The Firm’s ICAAP includes an assessment of Eisler’s business risk appetite and the design and efficacy of its internal controls. The ICAAP is formally reviewed by the Management Committee at least annually, or more frequently where there is a significant internal or external event that might affect capital adequacy.

The Pillar 2 capital requirements of the Firm are determined through a range of methods including scenario analysis of extreme events and stress testing within the ICAAP.

Credit risk

The Firm is exposed to credit risk in respect of its investment management fees billed and cash held on deposit. It holds all cash and investment management fee balances with top tier institutions with strong balances and robust reserves.

The number of credit exposures relating to Eisler’s investment management clients is limited.

Market risk

The Firm takes no market risk other than foreign exchange risk in respect of its accounts receivable and cash balances held.

Professional liability risk

The Firm has a legal responsibility for risks in relation to investors, products and business practices including, but not limited to: loss of documents evidencing title of assets of the AIF; misrepresentations and misleading statements made to the AIF or its investors; acts, errors or omissions; failure by the senior management to establish, implement and maintain appropriate procedures to prevent dishonest, fraudulent or malicious acts; improper valuation of assets and calculation of unit/share prices; and risks in relation to business disruption, system failures, process management.

Eisler is aware of, and monitors, a wide range of risks within its business operations and towards its investors. The Firm has in place appropriate internal operational risk policies and procedures to monitor and detect these risks. These procedures and risks are documented, demonstrating how the Firm aims to mitigate these risks. This is reviewed annually.

The Firm has in place professional indemnity insurance and sufficient additional Own Funds to meet the requirements of AIFMD.

Liquidity risk

Eisler is required to maintain sufficient liquidity to ensure that there is no significant risk that its liabilities cannot be met as they fall due or to ensure that it can secure additional financial resources in the event of a stress scenario.

The Firm retains an amount it considers suitable for providing sufficient liquidity to meet the working capital requirements under normal business conditions. Eisler has always had sufficient liquidity within the business to meet its obligations and there are no perceived threats to this given the cash deposits its 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. The cash position of the Firm is monitored by the Chief Financial Officer.

Regulatory capital

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

31 December 2020


Tier 1 capital* 9,679
Tier 2 capital 0
Tier 3 capital** 0
Deductions from Tiers 1 and 2 0
Total capital resources 9,679
*No hybrid tier one capital is held

The Firm is small with 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 and performance fees receivable from the funds under its management. Eisler follows the standardised approach to market risk and the simplified standard approach to credit risk.

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

  • €125,000 + 0.02% of AIF AUM > €250m; and
  • The sum of the market & credit risk requirements; or
  • The fixed overheads requirement (“FOR”) which is essentially 25% of the Firm’s operating expenses less certain variable costs.

0.02% is taken on the absolute value of all assets of all funds managed by Eisler (for which it is the appointed AIFM) in excess of €250m, 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. Eisler 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.

Capital requirement

Eisler’s Pillar 1 capital requirement has been determined by reference to the credit and market risk as referenced in IPRU(INV)11. The requirement is based on the credit and market risk since this exceeds the FOR and also exceeds its base capital requirement of €50,000.

The FOR is based on annual expenses net of variable costs deducted, which include discretionary bonuses paid to staff. 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 Chief Financial Officer and is reported to senior management.

Remuneration disclosure

Eisler is subject to FCA Rules on remuneration. The rules to which Eisler is subject are contained in the FCA’s Remuneration Code located in SYSC 19B of the FCA’s Handbook.

The Remuneration Code (“the RemCode”) covers an individual’s total remuneration, fixed and variable. The Firm incentivises staff through a combination of the two.

The Firm’s business is to provide portfolio management services to its clients as a manager of alternative investment funds.

Eisler’s policy is designed to ensure that it complies with the RemCode and its compensation arrangements:

  • Are consistent with and promote sound and effective risk management;
  • Do not encourage excessive risk taking or risk-taking which is inconsistent with the risk profiles or instruments of incorporation of the AIFs it manages;
  • Include measures to avoid conflicts of interest;
  • Are in line with the Firm’s business strategy, objectives, values and long-term interests.


The Firm has adopted a remuneration policy that complies with the requirements of the FCA’s rules, specifically those contained within SYSC 19B.

On the basis of proportionality, the Firm has concluded that it does not need to appoint a distinct remuneration committee but instead the Board oversees compliance with the remuneration policy. The Firm sets the variable remuneration of staff in a manner which takes into account performance of the individual, team and business overall. Adopting in full compliance with the FCA’s guidance the Firm has disapplied certain of the remuneration code elements.

During the 2020 reporting year, the number of Code Staff for which this disclosure is required totalled 16 and the aggregate remuneration awarded to those Code Staff was £32.0m.

Data protection

The Firm has made no omissions to this disclosure on the grounds of data protection.