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Copyright Pictet

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

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.

Individuals’ total compensation can be adapted both upwards and, potentially, downwards, reflecting the development of results, functional responsibilities, contribution towards the success of the business, 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 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.

The Pictet AM Executive Board which includes the Chief Risk Officer is in charge of making sure the remuneration policy is compliant with regulatory requirements, and for ensuring the implementation of the Remuneration Policy. The Pictet AM Executive Board may enlist the services of external advisors to ensure our policy continues to be in line with all applicable directives, laws and regulations.

The Board of Directors of Pictet AM (Europe) SA approves remuneration policy changes and ensures remuneration proposals of Pictet AM (Europe) SA’s identified staff and employees are within the remuneration framework.

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 remuneration policies.

2. Link between 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.

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 variable payment ensures clear alignment between business performance and individual payout.

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.

Performance variable remuneration may be in cash or a mixture of cash and deferred. Deferred variable remuneration is used for functions or roles that may have a significant impact on the risk profile of Pictet AM.

3. Performance measurement and risk adjustment

The ex-ante risk adjustment applied to variable remuneration is incorporated in the calculation of individuals’ Balanced Scorecards (BSC). This is in the form of Target Tracking Error limit for each product. If individuals exceed the tracking error limit, this reduces their overall BSC score which results in lower variable payment.

In addition, BSC scores may be reduced if employees fail to adhere with Pictet AM’s Code of Ethics and Compliance Rules including the following;

A. Active breaches of the Personal Account (“PA”) dealing rules as contained in the Pictet AM Code of Ethics.

B. Active breach of a fund or client’s investment restrictions

C. A persistent failure to follow procedures, address outstanding actions, or respond to Compliance requests, and persistent passive breaches of client’s investment restrictions.

D. Failure to complete in a timely manner compliance disclosures and compliance training

In accordance to applicable rules and regulations, Pictet AM (Europe) SA may apply ex-post risk adjustments by reserving the right to withhold and/or demand full or partial repayment from individuals who have been awarded variable remuneration under the following circumstances;

  • Fraudulent conduct of staff member;
  • Misleading information or evidence of serious error by the staff member (e.g. breach of code of conduct, and other internal rules especially concerning risks)
  • Business unit subsequently suffers a significant downturn in its financial performance, and/or a significant failure of risk management.

4. Performance criteria for variable remuneration

All variable remuneration is subject to a discretionary decision of Pictet Partners. If results of a specific business line are insufficient to cover variable payouts, the Partners may at its discretion reduce variable remuneration funding for that business line. Similarly if Group results are sufficiently poor, across-the-board reduction may be applied.

5. Main parameters and rationale for each remuneration scheme and benefits

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.

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.