Alternative Investment Management Association
14 September 2010
The Alternative Investment Management Association (AIMA) – the global hedge fund industry association – is to respond to the UK’s Financial Services Authority’s consultation on remuneration.
The FSA published its Consultation Paper, “Revising the Remuneration Code”, following changes to the European Union’s Capital Requirements Directive (CRDIII). The paper proposes changes to the FSA’s existing Remuneration Code, which was introduced on January 1st 2010 and currently applies to 27 of the largest banks, building societies and broker dealer firms. Following the amendments proposed, it could cover approximately 2,500 firms, including those defined as MiFID investment firms, such as hedge funds.
The remuneration provisions of CRD III include a ‘proportionality’ clause stating that it should be applied to firms in a way which is ‘proportionate to their size, internal organisation and the nature, the scope and the complexity of their activities’, and the FSA has said it will seek to abide by this in its proposals. The consultation period closes on 8th October.
Andrew Baker, CEO of AIMA, said: “We will be meeting representatives of the FSA remuneration team this month, ahead of our submission, to discuss our detailed concerns with them directly and to suggest the need for an appropriate and proportionate regime to be implemented.
“The original justification by global leaders for action on remuneration was that a ‘bonus culture’ at large, systemically-important financial institutions had incentivised reckless and short-termist behaviour, increasing systemic risk, and creating financial instability. It was therefore agreed to tackle remuneration at a global level because it was a financial stability issue.
“Given that the FSA itself does not believe any individual hedge funds are large enough to pose a systemic risk to financial stability and given that hedge funds - unlike many large financial institutions - have not sought or received any public bail-outs, we would hope that if these provisions were to be applied to hedge fund managers it would be on a proportionate basis. Remuneration in the hedge fund sector does not encourage the reckless and short-termist behaviour the ‘bonus culture’ has created elsewhere – quite the opposite. Performance fees help to align the interests of manager and investor. And they do not reward failure, which was another criticism of the ‘bonus culture’ at large financial institutions.”
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For media enquiries, please contact Christen Thomson, AIMA’s Director of Communications. Tel: +44 (0)20 7822 8380
As the only truly representative global hedge fund association, AIMA, the Alternative Investment Management Association, has nearly 1,200 corporate members (with over 4,800 individual contacts) worldwide, based in over 40 countries.
Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst (CAIA) designation – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.