New rules from the European parliament that limit variable pay for fund managers could hit small firms hardest, it was warned.
The rules say at least half of fund managers’ variable pay must be paid in assets of the Ucits fund they manage and 40% of the variable pay must be deferred for three years.
But José Luis Jimenez, chairman of the Group of Boutique Asset Managers, says these restrictions discriminate against small and medium-sized asset managers, which cannot afford to pay large base salaries and rely on variable pay to incentivise good staff.
“The efforts of the European parliamentarians will have the opposite impact to what they seek,” he says. “It will damage competition, hasten the end of the adoption of Ucits outside Europe, and leave the end consumer worse off.”
Jimenez adds that: “Next year, more than 90% of net subscriptions could come from the 25 largest funds groups in Europe. Does anybody know in Brussels how oligopolies affect the end consumer?”
Another aspect of the rules is that Ucits funds will be required to appoint a single, independent depositary to act as a custodian. The depositary will be deemed liable for any loss of assets, even if they delegate custody.
The rules, which are designed to protect small investors from unnecessary risk-taking, were passed by a large majority on Tuesday and must now be endorsed by European member states, which have 18 months to put them into effect.
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