Esma shies away from regulation of fund manager pay, for now…
The Lens expects that it will come as a relief to many investment professionals that Europe’s financial regulator, the European Securities and Markets Authority (Esma), has decided that “no immediate legislative action” on fund manager pay is needed.
As part of a wide-ranging report into short-term pressure on the financial sector, the pan-European watchdog looked into the question of whether short-term pressures are impacting the remuneration policy and practices of fund managers.
The study concluded that because of the “substantial” amount of remuneration rules that the sector has had to absorb in recent years – included in legislation for Ucits funds, alternative investment funds, as well as MiFID II – no further legislation is warranted for the moment.
However, the watchdog warned that the impact of the EU’s Sustainable Finance Disclosure Regulation, which came into force in December, would need to be monitored once it has been given time to bed down.
The decision not to push for increased regulatory oversight of fund manager pay is likely to come as a relief to asset management companies in the City – many of whom have complained of the deluge of regulation to impact the industry in the years since the global financial crisis.
But for the European Commission, fostering long-termism in financial markets is one of the key aims of its action plan on Financing Sustainable Growth.
“Sustainability and long-termism are inextricably linked, as investments in environmental and social objectives require a long-term orientation,” the report says.
“However, current market practices often prompt market participants to focus on short-term performance rather than mid- to long-term objectives.”