A political drive to extend the EU bonus cap beyond the banking sector was stopped in its tracks as the bloc’s main legislative body narrowly voted against strict curbs on retail fund managers’ pay. In a landmark European parliament vote that will come as a great relief to the City of London, a controversial proposal to limit managers’ variable pay as a proportion of salary was voted down by a majority of seven.
The surprise outcome checks the political effort among some MEPs to replicate in other pending financial sector legislation the principle of the bonus cap for bankers, agreed by the EU this year against the protestations of the UK.
The result removes the mandate to seek a bonus cap in pending negociations with EU member states over reforms to Ucits funds (UCITS V).
While hedge funds were not directly covered by the Ucits rules, some hedge fund managers have started to use Ucits products more regularly. The outcome of the Ucits reforms would also probably set the standard for any future revisions to regulation for alternative fund managers.
Some remuneration restrictions remain in pending Ucits negotiations, including requirements to defer bonuses and clawback, which were introduced for bankers soon after the 2008 financial crisis.
Daniel Godfrey, the Investment Management Association chief executive, said: “The European parliament has voted for proposals that drive true alignment between asset managers’ pay and the interests of our clients.”
Alex Beidas, an incentives lawyer at Linklaters, said: “This is good news for Ucits fund managers, but will also give other sectors comfort as there has been a concern that [the Alternative Investment Fund Manager’s directive] would be amended to apply the cap to hedge funds and private equity firms, and that the shareholder rights directive could apply a cap to listed EU companies.”
Source: Financial Times. Read full article here – Drive to curb fund managers’ bonuses blocked by MEPs