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Remuneration policy for UCITS funds

UCITS V Remuneration Disclosure

Introduction

Pictet Asset Management (“Pictet AM”) (Europe) SA is a Management Company created under Chapter 15 of the law of 17 December 2010 on Undertakings for Collective Investment, as amended.

Pictet AM (Europe) SA applies the Remuneration principles and policies of Pictet AM. Pictet AM is the Asset Management business of the overall Pictet Group.

The key principles that underpin Pictet AM (Europe) SA’s overall remuneration approach are:

  1. Remuneration decisions are based on a sound risk management approach that protects Investors, the Group, and staff;
  2. Incentives are designed to encourage behaviour focused on long-term strategic performance and ensure compliance with regulatory and legal frameworks;
  3. Fairness and equity in remuneration decisions that are based on a rigorous performance assessment;
  4. Individuals are valued and rewarded competitively against external market peers; and
  5. Managing conflicts of interests to encourage responsible business conduct.

Remuneration policy overview

Pictet AM (Europe) SA remuneration policy, procedures, and practices are designed to be consistent and promote sound and effective risk management. It is designed to be consistent with Pictet AM (Europe) SA’s business strategy, values and integrity, and long-term interests of its investors, as well as those of the wider Pictet Group.

The policy aims to avoid conflict of interests and is subject to independent review by Internal Audit. In order to achieve this, staff remuneration is reviewed annually, taking into account individual performance, contribution to the business and market practice for the role being undertaken.

Remuneration review process & governance framework

Pictet AM (Europe) SA remuneration strategy is based on a “Total Compensation” approach.

Individual compensation packages are adapted over time, both upwards and, potentially, downwards, reflecting the development of external markets, results, and the role, profile and performance of the staff member. We aim to manage employees’ total compensation appropriately by applying the right mix of the different remuneration types. We pay competitively based on market-based remuneration according to employees’ skills, experience, performance and responsibilities.

1. Decision-making process

Pictet Partners form the Supervisory body overseeing all Group remuneration policies as well as providing the final approval of remuneration proposals for Pictet AM globally including Pictet AM (Europe) SA employees. Two of the Pictet Partners have executive management roles for the Pictet Asset Management business globally and they also sit on the Pictet AM Executive Board and the Pictet AM Remuneration Committee.

The Pictet AM Executive Board, which includes the Chief Risk Officer, is responsible for ensuring the implementation of the Remuneration Policy (the “Policy”). The Pictet AM Executive Board may enlist the services of external advisors to ensure the Policy is implemented appropriately. The Pictet AM Executive Board delegates responsibility for a number of matters relating to remuneration to the Pictet AM Remuneration Committee.

The Pictet AM Remuneration Committee is in charge of approving the Policy, making sure it is compliant with regulatory requirements, and continues to be in line with all applicable directives, laws and regulations.

The Board of Directors of Pictet AM (Europe) SA adopts the general principles of the Policy, annually approves the Policy and has oversight of the implementation of the Policy.

Pictet AM Human Resources is responsible for the operational oversight and administration of Pictet AM (Europe) SA remuneration policies. Human Resources considers input from Pictet AM Risk & Control Functions and Internal Audit when reviewing the Policy.

2. Link between individual performance & pay

Employees’ performance objectives are set at the beginning of the performance year, taking into consideration the nature of the business, team and individual’s performance.

Variable pay elements are assessed both on an individual bottom-up basis, based on balanced scorecards or objectives, and on a top-down basis by taking into account current and potential risks together with an assessment on the current and future financial stability of the business.

Performance bonuses are an important instrument to motivate and reward individual and team performance and to align individual compensation with divisional financial and non-financial performance objectives and results, as well as those of the Group as a whole.

For Investment and Sales professionals, Pictet AM operates a bonus target system based on a Balanced Scorecard (BSC) methodology. Each BSC consists of both quantitative and qualitative objectives based on the individual’s role. At the end of the performance year, each individual’s BSC objective is scored, generating an overall score which translates into variable payment. This direct link between quantitative results and bonus payment creates clear alignment between business performance and individual payout, whilst allowing other non-financial elements to be reflected in the qualitative part.

For Control Functions, employees are either on a target bonus which is articulated at the start of the performance year, or are eligible for a discretionary variable remuneration. Variable payout is linked to the results of year-end appraisals reflecting employees’ performance of their role, as well as, overall achievement of objectives set.

All performance bonus awards are ultimately discretionary, subject to adjustment and the payment of bonus is neither guaranteed in principle, nor from a financial point of view.

Performance bonus awards above a certain level are subject to deferral. Specific deferral arrangements apply to groups of staff identified under applicable regulation.

3. Performance measurement and risk adjustment

The PAM Compliance function operates an annual quantitative system to determine whether any individual annual remuneration outcomes require adjustment. This involves the monitoring and recording of a number of different categories of breaches. 

Before deferred and long-term remuneration is paid, a reassessment of the performance is made by the CRO in conjunction with HR and, if necessary, a risk adjustment is made in order to align variable remuneration to risks and errors in the performance and risk assessment that might have arisen since the variable remuneration was initially granted.

To the extent it is permitted by the applicable rules and regulations, Pictet AM (Europe) SA and other Pictet AM entities shall reserve the right to withhold a deferred or long-term remuneration in the following circumstances:

  • Evidence of misbehaviour or serious error by the staff member (e.g. breach of law, regulation or code of practice, if any, and Code of Ethics/ internal rules, especially concerning risks);
  • There is a materially adverse restatement of Pictet AM’s accounts or there is a significant downturn in financial performance;
  • There is a significant failure of risk management; 
  • Any matter which materially affects the reputation of Pictet AM and/or Pictet AM (Europe) SA; or
  • Any other matter that the Pictet AM RemCo, in its absolute discretion, determines is sufficiently serious to warrant an adjustment.  

4. Firm performance criteria for variable remuneration

The Pictet AM CFO and the Finance function ensure the overall financial ability to pay for the compensation proposals at year-end by reviewing business and Group financial results. If the final calculations indicate that the results of a business sector are not sufficient to cover the variable elements to be paid, the amount set aside for the employees concerned may be reduced. If the Group’s results are too poor, all business sectors may have their bonuses reduced or even withdrawn. 

5. Main parameters and rationale for each remuneration element

Individuals’ total compensation may comprise of some or all of the following remuneration type:

A. Base Salary – for performing the day-to-day responsibilities reflecting their role, responsibilities, individual competencies, and geographic locations.

B. Pictet PART profit sharing scheme – this provides participation in the profitability of the whole Pictet Group. This allows staff to participate directly in the Pictet Group’s results, thereby aligning employees’ interests with those of the Group and its owners.

C. Performance Bonus – these may be based on Balanced Scorecards as described above and / or be discretionary to reflect individual, team and company performance.

D. Other Remuneration such as the Long Term Incentive Plan (“LTIP”). The purpose of the LTIP is to align the remuneration of certain senior executives with the long term results of the asset management business. Pictet AM LTIP is subject to 4 years deferral and any payment is subject to achieving the Plan’s performance conditions.

E. Pension and other benefits – the purpose of pension and life insurance is to provide a level of security for staff members and their dependents with regards to retirement, disability and death. The level of pension and healthcare benefits is country-specific and is influenced by local legislations and market practice.