The New City Initiative, a think-tank for independent asset management companies, has said it welcomes the Financial Conduct Authority’s consultation on the Alternative Investment Fund Manager Remuneration Code which was published earlier this month.

The [tag|new city initiative|]New City Initiative[/tag], a think-tank for independent asset management companies, has said it welcomes the Financial Conduct Authority’s consultation on the Alternative Investment Fund Manager Remuneration Code which was published earlier this month.

The current AIFM Remuneration Code sets out high-level principles on remuneration and also that alignment of staff incentives should be set to achieve effective risk management and control risk. 

The move came at a time when when policymakers in Europe and elsewhere have sought to control how managers of such funds get paid to prevent a repeat of the high risk-taking they claimed was a key factor behind the 2008 financial crash.

The consultation includes amendments to the rules making them less onerous for AIFMs. 

“We welcome the proposals contained in the[tag|fca|] FCA[/tag]’s guidance. For a number of years, the NCI has emphasised the importance of aligning the interests of fund managers and their investors as an effective way of providing investor protection, improving investment performance and rebuilding trust in the financial services industry," said Magnus Spence, board member of the NCI and chief executive of Dalton Strategic Partnership.

An AIFM may be exempt from the rulings if:

Senior management forms the majority ownership of the AIFM;

The AIFM is classed as a low risk firm by measures such as the FCA's internal conduct and prudential supervision rankings;

The AIFM has robust risk management and monitoring systems in place;

Fee structures are in place which align the AIFM Code Staff interests with investors and discourages inappropriate risk-taking by being paid out towards the end of the fund life-cycle.

The consultation ends on 6 November 2013 and the FCA intends to issue final remuneration guidance in early 2014.

The Alternative Investors Fund Management Directive was introduced in July to provide a new regulatory framework for alternative investment funds such as hedge funds and investment trusts.

It aims to tighten regulation so that investors have greater protection while ensuring regulators receive detailed information about alternative investment funds and managers to identify significant trends or events that could impact market stability.

“We note the strong emphasis placed on alignment by the FCA in relation to its proposed regulations on remuneration, particularly in relation to owner-managed firms and limited liability partnerships. We also commend the introduction of a proportionality regime to enable smaller, independently owned fund managers to disapply some of the requirements of the AIFM remuneration policies, particularly where they can demonstrate that their fee structures and ownership structures are designed to align interests with their clients,” said Spence.