EU LEGISLATION ON BONUSES LITTLE IMPACT ON HIRING
EU LEGISLATION ON BONUSES LITTLE IMPACT ON HIRING EXCEPT FOR HEDGE FUNDS
While there may have been a sharp intake of breath at the news that the EU has passed legislation capping bankers bonuses, Chief Executive of Twenty Recruitment group Paul Marsden says it will have little impact on the investment banking hiring environment but could be disastrous for the alternative investment market.
It was always going to happen, says Marsden whose firm has a specialist financial services division recruiting in London, Europe, Asia and New York. It was pretty obvious that the legislation was going to tie bonuses to risk - so banks will now have to defer between 40 and 60% of bonuses for between three and five years and only 50% of immediate bonus can be paid in cash the rest will be paid in shares linked to the institutions performance. Many of the banks have already changed their pay structures in anticipation of the legislation and are structuring remuneration around increases in base salaries to enable them to attract the best talent Whats interesting though is that this isnt just a gentlemans agreement between European countries its an actual law and its a more aggressive stance than other G20 participants.
Marsden warns that in the case of the alternative investment markets things could be trickier. It is still not clear if the law will be applied strictly to hedge funds and other alternative investment funds but if it is then it could be disastrous. London is the European hub for the hedge fund and private equity sectors but its also very mobile so could easily relocate to offshore locations such as Singapore or Switzerland. My gut feel is that the FSA will be mindful of the fact that the Alternative Investment Fund Directive is in the offing and so will apply the rules in line with that directive.