Underperforming Ucits fund managers would have their remuneration reduced or even clawed back under a draft law within the Ucits V directive.
Members of the European Parliament voted on July 3 on a number of aspects of Ucits V, including fund manager remuneration and performance fees.
In an interview with Funds Europe, Sven Giegold, the MEP and member of Germany’s The Greens party who has been pushing for a “fairer” system, says asset management firms have “misused” performance fees.
Giegold had proposed a system where performance-related pay towards the asset management firms is symmetric: if a fund sees strong growth in one year and a performance fee incurs as a result, there should be a reduction of this fee if the fund looses value the following year.
Giegold suggests a period of at least five years to balance losses and gains and to calculate an overall performance fee.
Adding that performance fees are unfair and not transparent, Giegold says: “Non-symmetric performance fees on top of the normal pro rata fees are simply a rip-off.”
Initially, there was no mention in his draft wording that the symmetry would go so far as to give investors a net payment from the asset manager of a long-term underperforming fund, he says.
Giegold’s draft called for a delegated act to be drawn up by the European Securities and Markets Authority. The MEP says the question of paying something back to investors could be clarified then.
The full interview will appear in the July/August edition of Funds Europe.
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