19/11/2009 Author: Tony Griffiths

Industry reacts to AIFM pay restriction proposals

The manager pay restrictions added to EU Council president Sweden’s redrafting of the Alternative Investment Fund Managers (AIFM) Directive have been greeted with alarm by hedge fund managers.

“Yet again there’s been no consultation,” says David Stewart, CEO of Odey Asset Management. “We’ve spent six months consulting on the last bit, where they have actually come up with more sensible stuff – why throw in an annex without any warning?”

According to a member of Sweden’s council AIFM team, however, most of the council’s member states wanted the annex included. “The thought here is that [hedge funds] can be very systemically important funds and we want to see that they manage their risks,” they told HFMWeek.

The remuneration annex has been lifted almost word-for-word from the Capital Requirements Directive (CRD) – the banking regulations. “It’s going to be subject to discussion,” the Swedish source admits.

Most concerning for Stewart, though, is the amendment’s lack of clarity. “Is this applying to the whole fund management industry?” he asks. “What happens to most of us, where we have 60% long-only and 40% alternatives?”

Melissa Hill, principle of London-based hedge fund Sabre Fund Management, agrees: “This latest amendment shows what little understanding the EU has of our industry,” she says.

The Alternative Investment Management Association (Aima), the global hedge fund body, has also been quick to register its reservations. “It appears to be based on the formula for banking remuneration and our concern is that there are elements which are inappropriate for the asset management industry,” says Florence Lombard, Aima chief executive