Hedge funds look to avoid EU’s bonus cap

Tim Wallace
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HEDGE fund industry specialists yesterday called on the government to save the City by ensuring traditional partnerships are not hit by the EU’s proposed cap on pay, as the mobile funds could easily move overseas.

Politicians across Europe want to cap bank bonuses at the same level as salaries unless a supermajority of shareholders agree to double that level. But the rules are set to apply to all firms covered by the City watchdog’s remuneration code, including hedge funds.

“This creates a huge problem for hedge funds – we’re all wondering how to construct a remuneration structure that allows us to incentivise these guys without them leaving for Hong Kong or New York,” said Joe Seet from consultancy the Sigma Partnership.

He called for George Osborne to ensure that traditional City partnerships are not hit by the rules, paying profits rather than bonuses to the fund managers who jointly own the institutions.

The Investment Management Association said it is pushing to ensure the rules do not apply to the industry, arguing pay is already well aligned with client interests.