On 11 February 2013 the European Securities and Markets Authority (“ESMA”) published its final guidelines on remuneration of hedge fund managers. The rules will not only apply to hedge fund managers but also to managers of other alternative investment funds such as private equity funds and real estate funds. Non-EU fund managers who market their funds to EU investors will also be subject to the guidelines although this will be after an initial transitional period. ESMA Chair, Steven Maijoor, said “These guidelines will help promote prudent risk-taking by fund managers and help align the interests of both fund managers and investors.”

The guidelines also clarify the Alternative Investment Fund Managers Directive’s (“AIFMD”) rules relating to the requirement for fund managers to establish and apply a remuneration policy for certain categories of their staff with one of the aims, rightly or wrongly, being to align the guidance on remuneration policies across financial sectors, such as the banking industry. “Remuneration” will encompass all forms of payments or benefits including monetary payments or benefits such as cash, sharers, options, remuneration by funds, for example, through carried interest models and non-monetary benefits such as discounts or special car allowances. As to what will happen next, within two months of ESMA publishing the translations of the guidelines on its website, the competent authorities of each Member State should confirm to ESMA whether they comply or intend to comply with the guidelines by incorporating them into their supervisory practices. The guidelines will, subject to the transitional provisions of the AIFMD, apply from 22 July 2013.

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