Staff Incentivisation

Explanation

An incentivised and motivated team is vital to the success of the GP. By adopting appropriate policies to maintain a stable and motivated team, the GP is likely to improve its performance and returns to LPs.

The AIFMD and/or other regulatory provisions applicable to the GP may have an impact on the structure of remuneration within the GP and the GP should ensure that it fully complies with any such rules. For example, the AIFMD requires managers to ensure that their remuneration policies and practices are consistent with and promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the funds they manage.

The LP community is also increasingly benchmarking remuneration practices against the requirements and principles set out in the AIFMD, similar regulations or standards.

Recommendation

The GP should ensure suitable remuneration for its staff. An important factor in the development and structuring of a remuneration scheme will be to ensure that it creates an alignment of interests between the employee, the GP and the LPs in the fund, including appropriate attitudes to risk and risk management.

The GP should ensure that its remuneration policy and practices are consistent with its responsible investment objectives. The GP should ensure that carried interest and similar arrangements are structured in a balanced manner to motivate, retain and incentivise the team and its key members throughout the life of the fund. The GP should also ensure that there are provisions that set out the extent to which individuals are permitted to participate in carried interest arrangements upon leaving the employment of the GP.