Joe Seet (pictured), senior partner at Sigma Partnership, comments on the proposed restrictions on hedge fund managers’ pay in the latest draft of the EU’s Directive on Alternative Investment Fund Managers.

Any inclusion in the AIFM directive to restrict hedge fund managers’ pay will be unworkable and counterproductive as most UK managers operate as Limited Liability Partnerships (LLPs).

If the mooted restrictions are included in the AIFM, they must fall into line with proposals coming out of the US. Current proposals in the US state that managers will need to disclose general incentive-based compensation arrangements - not the compensation packages of individual employees.

They will affect non-US investment advisors who have US based advisory clients but since most UK managers operate as LLPs any disclosures will be meaningless as profit sharing arrangements in LLPs are confidential.

Regulation should focus on protecting investors' interests, not getting involved in commercial operations such as remuneration.