British regulator has no problems with high pay for top fund managers

Financial watchdog 'comfortable' with high salaries despite calls for Europe-wide wage cap

PUBLISHED : Wednesday, 20 August, 2014, 9:40am
UPDATED : Thursday, 21 August, 2014, 12:33am

Fund managers are entitled to be paid millions of pounds if they are delivering high returns for investors, Britain's markets regulator said, the first sign it will not seek to impose wage caps on the industry.

"What that person gets paid, if it's 17 million, 7 million or 27 million, if investors' long-term savings needs are met by that, and that's better than they could get elsewhere from a person who's paid a million pounds a year, then for investors, that's a good thing overall," Will Amos, the head of investment-management supervision at the Financial Conduct Authority, said in London. "We'd be comfortable with that."

Regulators around the world have introduced measures to rein in bankers' pay after risky bets by traders and executives were blamed in part for causing the 2008 collapse of Lehman Brothers. While some members of the European Parliament sought to impose bank-style bonus limits on fund managers in July last year, the measure failed by a margin of seven votes out of 695 cast amid concern the step would drive up fixed costs and hurt returns.

Pay for fund managers is covered by a less restrictive set of European Union guidelines. The European Securities and Markets Authority said in February last year that bonuses for risk-taking employees should be withheld for a period of time to align managers' interests with the long-term performance of their fund.

Compensation was "something that we constantly look to keep under review, but it's different to banks because they're not taking on balance-sheet risk", Amos said. "It's not necessarily just the lowest cost is right for each and every investor, and that's what you take through the idea of how much you pay people."

Prudential, Britain's largest insurance company, paid an employee of asset-management arm M&G £17.4 million (HK$225.54 million) in salary and bonuses last year, more than any board member.

London's fund managers earn an average US$251,000 in pay and bonuses, US$111,000 more than their counterparts in Paris and US$59,000 more than at Zurich-based investment firms, according to compensation data provider Emolument. Bonuses are also highest in London - as much as three times more than in Zurich.