Analysis of Executive Compensation Structures of UK Asset Management Firms: A Case Study of Premier Miton

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According to Premier Miton’s 2024 Interim Report, the company granted

on December 14, 2023, a significant increase from the 2,651,034 awards granted in the first half of 2023 [1]. Executive directors received , accounting for approximately 37.3% of the total, a substantial increase from the 811,541 awards in the first half of the year [1]. This data indicates that the company is increasing long-term incentives for its core management team.

As of March 31, 2024, the company’s Employee Benefit Trusts (EBTs) held

, accounting for 4.6% of issued ordinary shares [1]. These shares are mainly used to meet future LTIP vesting needs and executive shareholding requirements.

The design of Premier Miton’s LTIP vesting conditions reflects a multi-dimensional performance orientation [1][2]:

Performance Metric	Description	Weighting Feature
Total Shareholder Return (TSR)	Measures capital appreciation and dividend income during the shareholder holding period	Primary assessment indicator
Earnings Per Share (EPS)	Reflects the company’s profitability and ability to return value to shareholders	Core financial indicator
Fund Performance	Evaluates the asset management performance of the investment team	Directly linked to client interests
Operational Conditions	Includes operational management objectives such as risk control and compliance	Ensures business stability

All performance metrics are measured over a

[1]. This long-term assessment mechanism effectively prevents executives from sacrificing long-term value to pursue short-term performance.

The company uses the

and to estimate the fair value of LTIP awards, adjusting for lost dividends during the vesting period [1]. The estimated cost of the awards granted in December 2023 is , which will be amortized over the three-year vesting period [1]. This transparent valuation method ensures that financial statements accurately reflect the true cost of equity incentives.

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According to research by Alvarez & Marsal, the executive compensation structure of UK listed companies has undergone significant evolution over the past decade [3]:

• 2013
  : Introduction of bonus deferral mechanisms
• Subsequent Developments
  : Post-vesting holding periods for LTIPs, malus provisions, clawback provisions, post-termination shareholding requirements
• Trend
  : Decreasing proportion of fixed compensation, increasing proportion of variable compensation (especially long-term incentives)

A KPMG survey of AIM-listed companies shows [4]:

Position	LTIP Grant as a Percentage of Compensation (as % of salary)
Chief Executive Officer	49% (lower quartile), 116% (median), 214% (upper quartile)
Chief Financial Officer	52% (lower quartile), 101% (median), 158% (upper quartile)
Other Executive Directors	50% (lower quartile), 93% (median), 185% (upper quartile)

The proportion of variable compensation for UK small-cap companies has continued to rise, from 36% to 39%, while for FTSE 350 companies it has increased from 61% to 66% [4].

Consistent with the Small Cap and FTSE Small Cap indices,

and remain the most commonly used LTIP performance conditions [4]. In addition, asset management companies usually also include:

• Assets Under Management (AUM) growth
• Fund performance (relative to benchmark indices)
• Client retention rate
• Net capital inflows/outflows

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is the core objective of LTIP design [2]. Premier Miton clearly states that the incentive plan is intended to “motivate and reward exceptional performance while achieving full alignment with shareholder interests” [2]. This mechanism creates shareholder value through the following pathways:

1. Long-Term Orientation
   : The three-year performance period encourages executives to focus on the company’s long-term development rather than short-term performance
2. Risk-Adjusted Returns
   : Performance conditions usually include risk-adjustment factors to avoid high-risk speculative behavior
3. Sense of Ownership
   : After becoming shareholders, executives are more inclined to make decisions with an owner’s mindset

Research by Lazard Asset Management points out that effective compensation policies should ensure that “executive compensation is linked to company strategy and shareholder experience, including share ownership to align executive interests with those of shareholders” [5].

However, LTIP structures may also create conflicts of interest [6]:

Risk Type	Specific Manifestations	Impact on Shareholders
Short-Termism	Executives may manipulate short-term performance metrics to increase compensation	Sacrifice long-term value
Excessive Risk-Taking	Taking excessive investment risks to achieve TSR targets	Increases company vulnerability
Equity Dilution	Large-scale issuance of new shares to vest in executives	Dilutes existing shareholder equity
Market Distortion	Windfall gains (e.g., during irrational stock price increases)	Shareholders bear unreasonable costs

Studies show that companies in the REITs industry with shareholder-oriented governance structures do exhibit higher valuations and performance [6]. This finding supports the positive role of long-term incentive mechanisms such as LTIPs.

Taking Premier Miton as an example, the 4.6% of shares held by EBTs [1] represent the potential future share pool for vesting. While the current proportion is reasonable, overly aggressive LTIP grants could still lead to significant equity dilution. When evaluating executive compensation proposals, shareholders need to balance the benefits of incentives against the cost of dilution.

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The UK Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have established a comprehensive compensation regulatory framework [7][8]:

requires [8]:

• Executive compensation is linked to risk management and compliance practices
• Behavioral indicators account for a “substantial portion” of non-financial conditions
• Compensation policies must be reviewed regularly and subject to independent assessment

are a key mechanism for protecting investor interests [9]:

• Applies to misconduct or financial restatements
• Requires executives to repay vested compensation
• Ensures performance fees match actual long-term performance

For fund investors of asset management companies, the LTIP structure has dual implications:

:

• Executive interests are linked to fund performance, motivating the investment team to improve performance
• The long-term assessment mechanism encourages sustainable investment strategies
• Avoids performance volatility caused by frequent fund manager changes

:

• Performance fees may be passed on to fund costs
• Executives may prioritize the company’s stock price over fund net asset value
• Complex compensation structures may increase operational risk

The FCA requires investment firms to publicly disclose key features of their compensation policies, “for the purpose of providing sufficient detail to enable external stakeholders to understand the firm’s risk profile or the profile of the assets it manages, and to understand the incentives created by the compensation policy” [10]. Premier Miton discloses LTIP valuation methods, vesting conditions, and performance metrics in detail in its annual report [1], complying with regulatory transparency requirements.

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The PS21/25 reforms effective in October 2025 [7] simplify compensation rules for dual-regulated firms:

• The FCA cross-references PRA compensation rules via SYSC 19D
• Reduces regulatory duplication and lowers compliance costs
• Ensures consistency of rules

Asset management companies must also comply with [7][10]:

Code	Scope of Application
AIFM Remuneration Code (SYSC 19B)	Alternative Investment Fund Managers
UCITS Remuneration Code (SYSC 19E)	Undertakings for Collective Investment in Transferable Securities
MiFIDPRU Remuneration Code (SYSC 19G)	Investment Firms

These codes impose stricter compensation restrictions on “Material Risk Takers (MRTs)”, including deferral ratios, risk adjustment, and shareholding requirements.

Based on research literature and regulatory guidance, asset management companies should consider the following when optimizing LTIP structures [5][6]:

1. Balance Short-Term and Long-Term Incentives
   : Combine annual bonuses (short-term) and LTIPs (long-term)
2. Diversify Performance Metrics
   : Combine TSR, EPS, fund performance, and operational indicators
3. Introduce Holding Period Requirements
   : Continue holding shares after vesting to strengthen long-term alignment
4. Establish Clawback Mechanisms
   : Cover scenarios of misconduct and performance restatements
5. Set Shareholding Targets
   : Require executives to accumulate and maintain a certain proportion of the company’s shares

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The LTIP structure design of UK asset management firms represented by Premier Miton generally aligns with industry best practices and regulatory requirements. Its features include:

• Three-year performance assessment
  ensures long-term orientation
• Diversified indicator system
  balances shareholder returns, profitability, and fund performance
• Monte Carlo valuation
  provides transparent accounting treatment
• Employee Benefit Trust shareholdings
  support future vesting needs

When evaluating investments in asset management companies, investors should focus on:

Evaluation Dimension	Key Questions
Compensation Reasonableness	Does the LTIP grant size match performance? Is there over-incentivization?
Performance Conditions	Are assessment indicators related to shareholder value creation? Are thresholds too low?
Long-Term Alignment	Do executives have significant exposure to stock price performance? What are the post-termination shareholding requirements?
Governance Quality	Is the compensation committee independent? Is the shareholder voting mechanism effective?

UK executive compensation regulation continues to evolve [3][4]:

• Compensation policies focus more on
  behavior and risk
• Environmental, Social, and Governance (ESG)
  indicators may be included in assessments
• The scope of application for
  clawback provisions
  will expand
• Regulation of
  performance fees
  for hedge funds and private equity will become stricter

Investors should continue to monitor changes in compensation structures and assess their potential impact on long-term shareholder value and fund investor interests.

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[1] Premier Miton Investors Interim Report 2024 (https://www.premiermiton.com/wp-content/uploads/2024/06/Premier-Miton-Investors-Interim-Report-2024.pdf)

[2] Premier Miton Group Full Year Results - Research Tree (https://www.research-tree.com/newsfeed/article/premier-miton-group-full-year-results-1610412)

[3] Alvarez & Marsal - EXECUTIVE PAY IN THE UK (https://www.alvarezandmarsal.com/sites/default/files/2023-06/A%26M_Big_Tent_Brochure_V4_Digital.pdf)

[4] KPMG - Executive remuneration in AIM listed companies (https://assets.kpmg.com/content/dam/kpmgsites/uk/pdf/2023/12/executive-remuneration-aim-listed-companies.pdf)

[5] Lazard Asset Management - Global Governance Principles (https://www.lazardassetmanagement.com/content/dam/lazard-asset-management/lmap-documents/101881/273566.pdf)

[6] Emerald - Corporate governance and executive compensation: do they impact performance (https://www.emerald.com/jpif/article-split/41/6/601/237736/Corporate-governance-and-executive-compensation-do)

[7] Bank of England - PS21/25 Remuneration Reform (https://www.bankofengland.co.uk/prudential-regulation/publication/2025/october/ps2125-remuneration-reform)

[8] FCA Handbook - SYSC 19D Dual-regulated firms Remuneration Code (https://handbook.fca.org.uk/handbook/sysc19d)

[9] Databento - What is a clawback provision? (https://databento.com/compliance/clawback-provision)

[10] The IA - Investment Firms Prudential Regime (IFPR) Remuneration Guide (https://www.theia.org/sites/default/files/2021-12/IFPR_Remuneration Guide_IA_Linklaters_December 2021.pdf)

[11] Premier Miton - Remuneration Committee Policy (https://www.premiermiton.com/wp-content/uploads/2023/06/23.02-Website-Remuneration-policy-002.pdf)