On 28 June 2012 ESMA published a consultation paper on remuneration policy guidelines under the Alternative Investment Fund Managers Directive (AIFMD). 

AIFMD will require alternative investment fund managers (AIFMs) to establish a remuneration policy for certain categories of their staff. The guidelines set out the parameters within which this policy will operate.
 
Each AIFM will need to identify those staff whose activities have a material impact on the AIFM’s risk profile or the risk profile of the AIF that it manages. The remuneration of such staff will need to be structured in a way that promotes sound and effective risk management by, amongst other things, deferring variable remuneration (for a minimum of 3-5 years) and permitting guaranteed bonuses only in exceptional circumstances. The implementation of the remuneration policy must be reviewed at least annually and in certain cases a Remuneration Committee will need to be established. The application and oversight of remuneration policy may therefore impact significantly on the existing governance arrangements for AIFMs.
 
Given the different risk profiles and characteristics among AIFMs, the guidelines allow a proportionate implementation of the remuneration principles.  In assessing what is proportionate, the focus should be on the size of the AIFM and the AIFs it manages, its internal organisation and the nature, scope and complexity of its activities.

The consultation runs until the end of September 2012. It is expected that these Guidelines will apply from 22 July 2013, the deadline for the transposition of AIFMD into the national law of Member States.

For further information, please contact one of the key contacts listed above or your usual contact in our Asset Management and Investment Funds Team.