The European Council has today reached agreement on a compromise text of UCITS V, which includes details on how fund managers should be paid. This moves UCITS V one step closer to being implemented.
Jon Terry, partner in PwC’s reward team, said:
'Fund managers breathed a sigh of relief in July when plans for a bonus cap were narrowly defeated in a vote in the European Parliament. But the latest text for UCITS V will still leave the industry with plenty to do in order to meet the pay requirements.
“The current proposals bring pay rules for fund managers more in line with those for banks and investment firms under CRD IV and alternative fund managers under AIFMD.
“Even with the removal of a bonus cap, fund managers will still need to make major changes to how they pay and reward their staff. Senior fund managers and others identified as material risk takers will be particularly hit with changes to how their pay and bonuses are structured. Under the proposals, at least 40% of remuneration will need to be deferred over at least three years and half of variable remuneration will need to be in forms other than cash. There are also likely to be restrictions on guaranteed bonuses and severance, and changes to the governance around pay processes.
“Fund managers may be spared a bonus cap, but they can’t be complacent about the amount of work it will take for their pay practices to be in line with the UCITS V Directive.”
