IFPR regulatory disclosure

Canada Life Asset Management Limited (CLAM) operates as a MiFID Investment Firm within the Canada Life UK group of companies.

As an FCA authorised and regulated firm, it is required to meet the FCA’s capital resource requirements set out in MIFIDPRU, including at all times to hold own funds and liquid assets which are adequate, both as to their amount and their quality. This is to ensure it can remain financially viable throughout the economic cycle, with the ability to address any material potential harm that may result from its ongoing activities. Also, to ensure that the business can be wound down in an orderly manner, minimising harm to consumers or to other market participants.

Business Background

CLAM is a subsidiary of The Canada Life Group (UK) Limited and is part of Great-West Lifeco (GWL). The CLAM Board has six members, including three non-executive directors. Whilst there is a day-to-day management team, CLAM operates as part of the Canada Life UK Division and shares several functions with other group companies.

CLAM began trading as an investment management firm in December 2004 when it took over the investment management of the Canada Life Unit Trust following its transfer to Link Asset Services (LAS). LAS is authorised and regulated by the FCA as an Authorised Fund Manager and Alternative Investment Fund Manager and is part of the worldwide Link Group. LAS is responsible for the operation of the funds, including dealing with unitholders, valuation and pricing, settlement, and regulatory reporting. CLAM solely provides discretionary investment management services, which are governed by an Investment Management Agreement. Funds are sold through internal and group sales teams, retail platforms, directly through LAS and include fund links from group insurance companies.

CLAM is supported by shared group functions for several non-investment services such as human resources, tax, finance, and marketing. CLAM also manages several, primarily, GWL group company portfolios, all governed by Investment Management Agreements, and a number of unit-linked, bond and equity segregated fund mandates for other clients.

Governance, Diversity & Conflicts of Interest

CLAM is governed by its Board, comprised of directors who have the necessary skill and experience, and can commit sufficient time[1], to leading and controlling CLAM. There is a Board Risk Committee and a Board Audit Committee, the risk management responsibilities of each committee are formalised within their respective terms of reference.

The Senior Leadership Team (SLT) meets regularly to review all aspects of CLAM’s business including business strategy, planning, financial results and risk and compliance matters. Several other committees and governance forums assist in the management of risk with direct reporting lines to the Board and Board Risk Committee.

The responsibilities of the Chief Risk Officer and the Chief Compliance Officer are set out in their respective mandates. The responsibilities of the Risk and Compliance functions are described within their policies, standards, and operating procedures.

In addition, several UK Group Division Committees such as the Investment Committee, Customer Operational and Risk Committee, and Finance Committee provide oversight of CLAM in line with their respective remits.

Through its Diversity Policy, the Board recognises and promotes the value of appointing individual directors who bring a variety of opinions, experience, skills and backgrounds to its discussions and decision-making processes, which enables more dynamic oversight and strengthens governance.

CLAM maintains a Conflicts of Interest Policy and register, which serves to identify any potential conflicts of interest generated by its business activities and/or the conduct of colleagues, together with the appropriate management controls. Conflicts of Interest may arise for CLAM in areas such as trading and investment management including proxy voting, fund pricing and asset valuation, remuneration, personal account dealing and gifts and hospitality. Controls include segregation of duties in respect of the trading and management of investments along with remuneration setting and fund/asset pricing. The Conflicts of Interest Policy has a range of associated policies and standards, which together form a control framework, overseen by the Investment Governance team and an independent Risk and Compliance function.

¹ Of the current CLAM Board, two non-executive Directors hold additional non-executive directorships with companies outside of CLAM’s wider group. One on a single company Board, and another on four company Boards.

Risk management Objectives and Policies

CLAM operates under the CLUK Enterprise Risk Management (ERM) framework, which is a process effected by the company’s Board of Directors, management, and other personnel, applied in conducting business, making business decisions, strategy setting, across all areas of the company. The process is designed to identify potential events or emerging issues that may cause harm to CLAM, its customers and/or the broader financial markets. The effective implementation and operation of the ERM framework allows CLAM to manage risks to be within its risk appetite and provide reasonable assurance regarding the risk consequences of achievement of CLAM’s objectives.

ERM encompasses aligning risk appetite and strategy, enhancing risk informed decisions, reducing operational surprises and losses, identifying, and managing multiple risks, seizing appropriate business opportunities, and improving deployment of capital.

The ERM framework is the framework through which the Board and management establish CLAM’s risk strategy, articulate, and monitor adherence to the risk appetite and risk limits, and identify, measure, manage, monitor, and report on risks. The effective operation of CLAM’s ERM framework supports and facilitates successful delivery of its strategic business objectives, protects customers from harm and helps maintain the integrity and resilience of financial markets.

A key component of an effective ERM framework is the Three Lines of Defence model. This introduces a clear delineation of responsibilities for risk management between the business areas, the Risk function, and Internal Audit. Such delineation allows appropriate ownership, oversight, and assurance. The three separate lines of defence provide the Board with greater comfort that the risk framework is comprehensive, suitable, and operates effectively.

Central to risk management within CLAM is the Risk Function. The Risk function, headed by the Chief Risk Officer, has oversight responsibility for all aspects of the ERM framework.

Risk Appetite

CLAM willingly accepts and manages risk when doing so is necessary to achieve its business objectives. Qualitative Risk Appetite Statements are set, reflecting the Board’s view of key operational aspects, enabling the business to assign risk-related parameters to their strategic vision and goals, these are set out below:

Maintaining a Strong Capital Position - CLAM ensures the delivery of obligations to customers by maintaining a strong balance sheet and not taking risks that would jeopardise the solvency of the company. CLAM will manage its business such that it will hold sufficient assets to cover its liabilities and regulatory capital requirement, even after stressed conditions. CLAM has established controls and Key Risk Indicators to monitor its Solvency Ratio on an ongoing basis and escalate any risks to the appropriate senior management and where required, the Board.

Maintaining a Strong Liquidity Position – CLAM has sufficient asset liquidity in order to meet the demands of customers and financing obligations under normal and stressed conditions. CLAM maintains, monitors, and manages its liquidity in order that it can continue to meet its obligations under stressed conditions and has sufficient quality liquid assets to cover its Liquid Assets Threshold Requirement. CLAM has established controls and Key Risk Indicators to monitor its Liquidity Ratio on an ongoing basis and escalate any risks to the appropriate senior management and where required, the Board.

Maintaining the Company’s Reputation - CLAM has no appetite for business practices which may damage the Company’s reputation. The potential impact on the reputation of the Company is considered in all business activities. The assessment referred to in the Risk Appetite Statement above shall include the use of Key Risk Indicators (KRIs) and Risk Indicators (RIs) to summarise and aggregate metrics across relevant risk categories, such as Conduct Risk and Operational Risks, which either directly or indirectly impact upon CLAM’s reputation.

Fair Treatment of Customers - CLAM is committed to achieving good outcomes, delivering fair value and avoid causing foreseeable harm to its customers. CLAM deals with customers honestly and fairly, putting them at the heart of its business is core to our strategy. CLAM continuously monitors its products and related processes to ensuring its products are fit for purpose, meet the needs and objectives of the consumers to whom they are targeted and are distributed accordingly.

Sustainability - CLAM is committed to delivering long-term positive outcomes for all its stakeholders and recognises that ethical, social, cultural, environmental, governance and economic elements are inexorably linked to this. CLAM does not engage in business activities that do not align with its sustainability beliefs.

The above statements are considered in all aspects of CLAM’s business including in the design and ongoing governance of product and services.

Key Harms and Risks

CLAM has identified the key harms that could materialise because of the risks to which it is exposed. These risks and associated harms are described in the following section.

Strategic & Business Risk - CLAM is exposed to strategic and business risk through its business planning and execution of its strategy. Changes to the business environment and the introduction of new regulations will give rise to the need for further planning. The crystallisation of these risks could result in harm to CLAM and to its customers.

Credit Risk - CLAM’s credit risk exposure is limited to cash deposits, money market funds and non-receipt of fee income. For cash deposits and money market funds, CLAM prioritises diversification of risk. Exposure to non-payment fee income is managed through robust contractual arrangements, where the level and frequency of fee income is specified and subsequently monitored. CLAM’s exposure to Credit Risk is low.

Concentration Risk - As CLAM does not operate a trading book, concentration risk is limited to sources of earnings and the concentration of investments held as regulatory capital. The SLT monitors and oversees both key sources of income from clients and concentration of invested assets held as capital, the latter being subject to internal Investment Policy restrictions.

Operational Risk - CLAM has put in place a Risk and Control Self-Assessment (RCSA) process to assure itself that all key operational risks to which it is exposed are effectively identified, assessed, and controlled to the appropriate level. CLAM’s Operational Risk Universe includes fraud, infrastructure, legal & regulatory, outsourcing, and critical suppliers, people and process. The crystallisation of these risks could result in harm to CLAM and to its customers. In a limited number of circumstances, and to a lesser extent, the crystallisation of legal and regulatory risk may cause harm to the reputation of the wider investment management industry.

Conduct Risk - CLAM has developed a range of collective investment funds that it actively markets to product distributors such as IFAs and institutional investors. CLAM is therefore exposed to a number of conduct risks in its role as co-manufacturer with LAS, and these are; funds are misrepresented in the sales process; target markets are not clearly defined; products do not offer good value; products designed do not cater for the needs of customers; funds are not managed in the best interest of customers; business decision are made without consideration of the impact on the customer; and inability to meet unitholder redemptions due to lack of fund liquidity. The crystallisation of these risks could result in harm to CLAM and to its customers. There is an extensive product design and approval process carried out within CLAM before any fund is launched. Funds are subsequently monitored through the product lifecycle framework. In addition, LAS has its own extensive review, authorisation and monitoring processes as do the funds’ depositaries.

Market Risk - CLAM does not hold any investments in its own name other than its own funds. CLAM’s exposure to Market Risk is low. The limited impact of this risk crystallising would cause harm only to CLAM.

Liquidity - CLAM has a Liquidity Operating Policy which sets out how it consistently maintains sufficient liquid resources to meet its obligations from financial liabilities. CLAM’s exposure to Liquidity Risk is low. The limited impact of this risk crystallising would cause harm only to CLAM.

Own Funds

CLAM has completed an assessment of the potential material harms and risks that apply to it and calculated the appropriate Own Funds that it needs to hold to comply with the requirements of the Overall Financial Adequacy Rule.

CLAM’s Own Funds requirement has been calculated based on a reasonable estimate of the own funds it needs to hold to address (1) any potential material harms that the firm has identified and in relation to which it has not taken any measures to reduce the impact of such harms; and (2) any residual potential material harms that remain after the firm has taken measures to reduce the impact of such harms.

As part of its ICARA process, CLAM has assessed its business model and identified all material harms that could result from (1) the ongoing operation of the firm’s business and, (2) the winding-down of the firm’s business.

The methodology and breakdown on how CLAM calculated the individual components required to assess the amount of Own Funds required was as follows:

Identify and measure risk of harm
Determine the capital requirement from on-going operations (Assessment A) by assessing the appropriate amount of residual risk from any material harms that could result from the ongoing operation of the firm and where additional owns funds are necessary over and above the K-factor requirement.
Determine the capital requirement for wind-down (Assessment B) by starting with the fixed overhead requirement (FOR) and determining if the FOR is sufficient and if any additional owns funds are necessary
Own Funds requirement is the higher of Assessment A and Assessment B
Undertake Stress and Reverse Stress Testing to determine if any additional capital is required

Composition of regulatory own funds
Item		Amount (GBP 000's)	Reference to the audited financial statements
	OWN FUNDS	13,703
2	TIER 1 CAPITAL	13,703
3	COMMON EQUITY TIER 1 CAPITAL	13,703
4	Fully paid-up capital instruments	2,250	Page 15, 16 & 21
6	Retained earnings	11,453	Page 15 & 16
19	CET1: Other capital elements, deductions and adjustments	0

20	ADDITIONAL TIER 1 CAPITAL	0
25	TIER 2 CAPITAL	0

Own funds: reconciliation of regulatory own funds to balance sheet in the audited financial statements
		a	b	c
		Balance sheet (per audited financial statements)	Under regulatory scope of consolidation	Cross reference to OF1
		As at 31.12.22	As at 31.12.22
Assets
1	Financial investments	50
2	Debtors	2,914
3	Cash at bank	14,156
	Total Assets	17,120
Liabilities
1	Creditors falling due within one year	3,417
	Total Liabilities	3,417
Shareholder's Equity
1	Called up share capital	2,250		4
2	Retained earnings	11,453		6
	Total Shareholder's Equity	13,703

Own funds: main features of own instruments issued by the firm

Own funds of Canada Life Asset Management is limited to £2.25m of called up share capital plus accumulated earnings (Retained Earnings) form previous years, not paid out as a dividend.

Own Funds Requirement

Own Funds Requirement (£000)

K-Factor Requirement
K-AUM (Assets under Management)	2,563
K-COH (Client Orders Held)	167
Total	2,730

Fixed Overhead Requirement	3,399

Remuneration disclosure year ending 31 Dec 2022 - View PDF