Jon Terry, partner, PwC

Fund managers one step closer to tougher bonus rules

The European Parliament’s economic and monetary affairs committee (ECON) has voted in favour of capping bonuses at 100% of salary. This is an important marker as to the Parliament’s position regarding asset managers’ pay and starts the process as to what the final remuneration provisions will be within the UCITS V Directive. Much negotiation lies ahead, but the starting position is now clear, says Jon Terry (pictured), partner in PwC’s reward team…


If the final rules are even close to what has been agreed today, then this will fundamentally change the way asset managers are paid. Asset managers who manage UCITS products are likely to push-back on why they are now facing the toughest pay rules across the whole of the financial services sector. 

The move to cap bonuses at one times salary follows similar proposals in the banking sector, but ECON's position is that asset managers should not be granted the same flexibility to increase the compensation mix with shareholder agreement.

UK fund management firms are set to be disproportionately hit by any bonus cap rules as bonuses tend to make up a greater proportion of pay. Many firms will have to completely review how they pay their fund managers and senior staff due to the large proportion of pay that would be affected by any such rules.

Asset managers will be concerned that ECON is suggesting a definition of those individuals who would be subject to the prescriptive rules which is far more explicit than those for banking or the alternative sector. If passed unchanged, this would significantly increase the number of people hit by the rules across senior management and the front, middle and back office.

There is a long way to go to finalise any remuneration provisions and the industry needs to make and strong a persuasive case to significantly water down these proposals or risk being stuck with onerous and restrictive rules.

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