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About three-quarters of mutual fund managers’ total compensation is from bonuses and long-term incentives, meaning salary increases of 50% to 100% are thought likely to be required to negate the cap.
A European Parliament committee last month proposed to limit fund managers’ bonuses to no more than base salaries.
'We will see many firms put up fixed pay by 50% percent and maybe they will put them up by 100% because they’re worried about losing people', said Carl Sjostrom, director of executive reward for Europe at Hay Group, a Philadelphia-based management consulting firm. 'The worry is that, systemically, this will make the firms less stable because they’re less able to adjust in bad times'.
European asset-management firms are concerned the proposal, which may affect two-thirds of senior fund managers, may cause a bidding war for their best-performing employees, increasing fixed costs and making the industry more vulnerable to market downturns.
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