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Hedge Funds Pay Disclosure

Hedge Funds Pay Disclosure

Hedge Funds Face Regulations on Bonuses, Pay Disclosure

Hedge funds and private equity firms thought they had escaped curbs on pay from Britain's Financial Services Authority and other European regulators, but that doesn't seem to be true, according to PwC. Hedge funds and private equity firms are running into rules on how and when bonuses are paid and more pay disclosure. 

Many managers thought they would be able to avoid the pay regulation of financial institutions in Europe's Capital Requirements Directive but many of the new policies actually apply to asset management firms including private equity and hedge funds, an unwelcome surprise to many.
The AIFMD paper, published last week, targets asset managers, extending the reach of regulations made in Europe's Capital Requirements Directive, which referred only to "financial institutions" and which many managers thought they could avoid, Wright said.

"The rules will mean sweeping changes to the pay policies and practices of many asset management firms. Many thought they'd escaped the brunt of banking pay regulations, but they're coming back to bite," said Tim Wright, reward director at PwC.

Under earlier rules from the FSA, many asset managers fell into the most leniently treated group, while most private equity houses were exempt.

Most managers will now ultimately face much tougher rules, PwC said.

The new measures in the AIFMD -- a controversial piece of legislation that raised hackles when first proposed in the wake of the credit crisis -- require firms to pay at least half of bonuses in stock and defer between 40 and 60 percent of variable pay for around three to five years.  Source

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