GLOBAL - The Alternative Investment Management Association (AIMA) is set to meet with the UK Financial Services Authority (FSA) to tackle the issue of hedge fund remuneration.

Andrew Baker, chief executive at the global hedge fund association, said AIMA would bring "detailed concerns" to the table and stress the need for an "appropriate and proportionate" regime.

"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," he said.

"Given 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 bailouts, we would hope, if these provisions were to be applied to hedge fund managers, it would be on a proportionate basis."

Baker argued that remuneration in the hedge fund sector did not encourage the reckless or "short-termist" behaviour that had been created elsewhere by the bonus culture.

He added: "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."

AIMA has pointed out that the remuneration provisions of the EU's Capital Requirements Directive (CRDIII) include a clause stating that it should be applied to companies in a way that is "proportionate to their size, internal organisation and the nature, the scope and the complexity of their activities".

The FSA published its consultation paper, Revising the Remuneration Code, after changes were made to the CRDIII.

The paper proposed changes to the watchdog's existing code that, according to AIMA, could cover approximately 2,500 firms, including those defined as MiFID investment firms, such as hedge funds.

 

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