Risk Taking

Between 40 percent and 60 percent of an employee’s variable pay should be subject to deferral, with the exact amount depending on the size of the pay award and how involved the person is in risk taking, according to the agency’s guidance.

In addition to hedge fund managers and private-equity firms, the rules also apply to other so-called alternative investment vehicles, such as real estate funds.

The measures should apply to senior management and other staff that have a “material impact” on risk taking, according to the agency.

Exemptions to the three-to-five-year deferral rule may be made for managers of funds with a short life cycle, ESMA said.

Spokesmen for the Alternative Investment Management Association, a group representing hedge funds, and the European Private Equity and Venture Capital Association, didn’t have an immediate comment.

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