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Remuneration rules under AIFMD — final guidelines from ESMA

The European Securities and Markets Authority (ESMA) recently published final guidelines on remuneration under the Alternative Investment Fund Managers Directive (AIFMD).

Remuneration policies of managers (AIFMs) of alternative investment funds (AIFs) must broadly promote sound and effective risk management and not encourage risk taking which is inconsistent with the risk profiles and rules of the AIFs they manage.

ESMA’s guidelines confirm that for many, the prescriptive arrangements for aligning pay with risk will require changes to an AIFM’s policies and practices on pay. They also provide some helpful clarity, for instance:

  • Proportionality: in some cases (in the context of an AIFM’s size, nature and scope of its activities) an AIFM can disapply some of the remuneration requirements altogether.
  • Transitional provisions: existing AIFMs have a year’s grace to comply with the remuneration requirements, i.e. until 22 July 2014.
  • Disclosure: there is no mandatory requirement for remuneration information to be made public.

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