Thursday, 23 October 2014
Last updated 29 min ago
Aug 13 2012 | 1:22pm ET
Less than a year before strict new pay rules for European hedge funds come into force, the industry is still unsure of how exactly they will be affected—and are fearing the worst.
The European Securities and Markets Authority in June told national financial regulators that it expects bonus restrictions already imposed on banks to be extended to hedge funds. ESMA's guidance suggests that hedge funds would have to defer between 40% and 60% of bonuses over several years, and that at least half of bonuses would have to be paid in equity-linked instruments related to the fund.
"The prospect of clawback is really alien to this industry," PricewaterhouseCoopers' Jon Terry told the Financial Times. "And some of the deferral rules would be virtually impossible for many hedge funds."
Worse still, the deferral rules could create "a very real tax problem" for British hedge funds, Sigma Partnership's Joe Seet told the FT. The U.K. taxes bonuses at the time they are awarded, making it "entirely possible that the tax due exceed the initial cash portion paid."
"Pay is one of the things this industry has got right," one hedge fund manager complained to the newspaper. "We only make money if our clients are making even more money."
Sep 22 2014 | 4:15pm ET
"I tell people that everybody likes good news and so if you have good performance that’s wonderful,” explains Mike McKitish of Peddie School's endowment, “but it’s the people that want to talk about the bad news or where they drifted and how they came back and how they stayed to their discipline…” that he wants to hear from. Read more…
Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...