ESMA publishes its final guidelines on AIFMs remuneration

ESMA, the European Securities and Markets Authority, has published its final guidelines on remuneration of alternative investment fund managers (AIFMs).

AIFMs will be asked to introduce sound and prudent remuneration policies and organisational structures which avoid conflicts of interest that may lead to excessive risk taking. Stronger governance of how fund managers are paid will ultimately lead to improved investor protection.

The rules will apply to managers of alternative investment funds including hedge funds, private equity funds and real estate funds.

Non-EU AIFMs who market funds using passport agreements to EU investors will also be subject in full to the guidelines after a transitional period.

The Alternative Investment Fund Managers Directive establishes a set of rules that AIFMs have to comply with when establishing and applying a remuneration policy for certain categories of their staff.

The key elements of the guidelines include AIFs’ internal governance; categories of staff covered and types of remuneration covered

The guidelines will now be translated into the official languages of EU and they will apply from 22 July 2013, subject to the transitional provisions of the AIFMD.

“These guidelines will help promote prudent risk-taking by fund managers and help align the interests of both fund managers and investors. Making sure that these provisions on pay are applied in a common and consistent way is key to increasing investor protection and ensuring a level-playing-field in the alternative fund sector across the EU,” said Steven Maijoor (pictured), chair of the authority.

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