These measures, which if strictly enforced would overhaul the sector’s prevailing pay practices, are included in the Alternative Investment Fund Managers' Directive (AIFMD), to be enforced by July 2013.
Some investment firms were technically covered by similar remuneration rules when they were introduced for banks last year. However UK guidelines spared almost all investment firms from the most prescriptive curbs.
Hedge funds expected the Financial Services Authority, the UK watchdog, to apply the same principles to AIFMD – sparing them from deferring at least 40 per cent of variable pay for three to five years or inserting clawback provisions for “subdued” performance. But draft guidance from the European Securities and Markets Authority (ESMA) last month included no explicit means for national authorities to exempt categories of funds from the toughest curbs. While the requirements are tailored to firms according to size and risk, the lack of a broad exemption would mean more managers were hit.
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