Vanguard and Standard Life Investments are among a number of fund groups to escape a European push to extend a bonus cap on bankers to asset managers, putting them at a “huge” advantage to some of their biggest rivals.

Under existing rules, European banks must limit bonuses for key staff at twice their fixed salary. They must also defer at least 40 per cent of bonuses for a minimum of three years.

The new proposals from the European banking watchdog, announced last week, mean that any fund company that falls under the latest version of the Capital Requirements Directive (CRD IV) would have to apply the same rules.

This would force several large fund houses, including BlackRock, Aberdeen and Schroders, to overhaul how they pay their senior staff.

In 2013, Schroders chief executive Michael Dobson received variable pay of £7.84m, nearly 14 times his fixed salary (£573,000). In 2014, Aberdeen chief executive Martin Gilbert received a bonus of £4.25m, more than eight times his fixed salary (£505,000).

Many of their biggest rivals, however, would not be affected, including passive fund giant Vanguard, Man Group, T Rowe Price, Standard Life Investments and Threadneedle.

Tim Wright, head of the rewards practice at PwC, the consultancy, said the competitive disadvantage for the affected groups would be “huge” with some fund companies more able to attract and retain staff.

“Their hands will be tied in terms of how they structure remuneration. This will create a big divide within the industry. [These proposals] have come out of the blue and there’s been a bit of backlash,” he said.

Fidelity Worldwide Investments, Henderson and Jupiter also confirmed to FTfm that they fall under the scope of CRD IV. The directive applies to any asset manager that has permission to hold client money or carry out proprietary trading.

Many fund companies are likely to review whether they want to retain these permissions if the rules remain unchanged, according to Mr Wright. A spokesperson for Henderson said: “We will consider our position once any new rules are finalised.”

Schroders said: “Once the consultation is complete and the final guidance is published, we will know what the implications are for the firm.”

The proposals, which are open to consultation over the next three months, would also cause problems for the asset management subsidiaries of large financial institutions which had gained exemption from CRD IV. This includes BNY Mellon subsidiary Newton and South African asset manager Investec.

The UK’s Investment Association, which represents the domestic asset management industry, said it would push for “a more proportionate approach” from the European Banking Authority, estimating that “dozens” of its 207 members would be affected.

The fund body added: “A bonus cap will not reduce the risk of systemic events or enhance their existing remuneration practices which are already designed to avoid short-termism and imprudent behaviour.”

A spokesperson for Fidelity said: “We believe that the ability to vary pay in line with results is an important principle. We will review the CRD IV draft carefully and respond as appropriate in line with these principles.”

Get alerts on Bank bonuses when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article