ESMA publishes remuneration guidelines

The guidelines regard all payments made to fund managers, including carried interest payments, and will apply to all alternative investment funds covered under the AIFMD, effective from 22 July 2013.The guidelines cover three key areas: the AIFs' internal governance, the different types of staff and the different types of payments.

The measures, which were designed in co-operation with the European Banking Authority, include an obligatory accrual period for variable payments like bonuses of at least one year. Part of the payment will take place immediately and some will be partly deferred. The deferred amount, comprised between 40-60%, will be paid after a minimum of 3-5 years. Variable remuneration has to be performance-based as detailed in the AIF's remuneration policy, with negative performance in financial or non-financial terms showing an effect on the bonus payment.

The guidelines also deem "golden parachute" rules inconsistent with the framework. The guidelines also include a five-year retention period of discretionary pension benefits for both retiring and leaving employees.

AIFs will have to adopt an internal remuneration policy that is demonstrable to the regulating authority. All staff in senior management positions or risk management and compliance functions are concerned, as are employees whose salary is comparably high. Finally, all types of remuneration and benefits are concerned, including carried interest, shares, options and bonuses, as well as non-monetary benefits.

"These guidelines will help promote prudent risk-taking by fund managers and help align the interests of both fund managers and investors," said ESMA chair Steven Maijoor.

The AIFMD regulates EU-based investment funds, as well as non-EU funds marketing in the region. These extra-European players will also have to comply with the remuneration guidelines.

The full ESMA guidelines are available here. European trade body EVCA was not yet available for comment.

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• Topics
• Regulation
• GPs
• EU Commission
• AIFM Directive
• ESMA