"Clawback" provisions to be applied to executive bonuses from 2015 at three of London's largest asset managers, Schroders (>> Schroders plc), Jupiter (>> Jupiter Fund Management PLC) and Henderson (>> Henderson Group Plc), mean they can recover rewards if evidence of misconduct is found.

The moves reflect recognition that regulators are shifting their focus from investment banks to fund firms, who collectively manage trillions of dollars in assets.

The more assets these firms collect, the more they are paid, a system the International Monetary Fund (IMF) believes is a key factor in the creation of price bubbles that jeopardise the financial system and needs to be changed.

The introduction of clawbacks, echoing those in place at Aberdeen (>> Aberdeen Asset Management plc), brings the pay policies of these fund firms more in line with banks, but some governance experts said it was too early to say whether the changes, after bumper payouts in 2013, go far enough.

Money managers across Europe are meanwhile fighting to fend off "fat cat" allegations amid a debate on whether firms overcharge clients for underwhelming returns.

"If this does reflect some sort of act of contrition ... that's to be welcomed," said Oliver Parry, senior corporate governance adviser at the Institute of Directors, a pro-business pressure group. "Let's see how they pay themselves next year."

Britain's Financial Conduct Authority is planning a probe into fund sector competition and fees to ensure value for money for savers, already struggling to grow their wealth against a backdrop of rock-bottom yields and economic uncertainty.

Annual reports published by British fund firms in recent days suggest an overhaul in pay policies is slowly underway, with remuneration boards demonstrating a tough stance on targets to better align executive pay with investor returns.

MISSED TARGETS

CEO earnings across the sector are under pressure, annual reports show, despite stellar performance at most firms in 2014.

Andrew Formica of Henderson saw his total pay fall by a quarter to 3.74 million pounds in 2014, due to a drop in his two-year long-term incentive plan (LTIP) award. Henderson missed a "stretch" target of relative total shareholder return against the FTSE 350 General Financials index.

The firm has introduced clawbacks following a recent review of remuneration policy, in line "with the changing regulatory landscape and emerging 'best' practice".

Mark Coombs, chief executive of emerging markets fund manager Ashmore, earned 562,000 pounds, a fifth of his 2013 total pay package after a nosedive in Asian asset values wiped out his bonus.

Martin Gilbert, CEO of Aberdeen, took home 4.8 million pounds for year through September 2014, 6.8 percent less than 2013, after the remuneration committee judged executives missed a number of "qualitative" targets to expand global distribution.

Other goals connected to client retention and investment performance were rated "around target", largely due to hits to its Asian and emerging markets businesses.

Michael Dobson, CEO of Schroders, was the highest-paid of independent asset management chiefs last year, but his total remuneration fell 3 percent to 8.15 million pounds.

He only earned half the available award from his LTIP this year because Schroders fell short of earnings per share targets over the four years to end-December, despite winning 45.3 billion pounds of net new business over the same period.

"A more muted 2014 has meant that asset management firms are making careful and balanced decisions around pay whilst market sentiment is uncertain," Tim Wright, head of the rewards practice at PwC, told Reuters.

Not everyone took home smaller pay packages. Maarten Slendebroek at Jupiter enjoyed a rise on the back of increased inflows, making 2.1 million pounds, just over a third more than 2013, while Man Group's (>> Man Group PLC) Manny Roman earned about $5 million, nearly 50 percent more than the previous year.

In Man's annual report, remuneration board chairman Philip Colebatch said the company would consider clawbacks in respect of director's awards over the course of 2015.

Fund firm payouts are expected to come under more scrutiny next year, as the European Union looks to extend caps on banker bonuses to fund managers.

A study by thinktank New Financial showed average compensation per employee in fund management was $263,000 in 2014, up 56 percent in a decade and set to outpace the average for investment bankers by 2016.

"Fund managers and their trade associations continue to evade any proper transparency of fees and charges," said Gina Miller, founder of the True and Fair Campaign, which seeks more transparency in the investment sector.

Miller said average fund executive pay was far higher than at equivalent-sized companies outside the sector. "There needs to be a formal investigation into this industry".

(Additional reporting by Nishant Kumar; Editing by Carmel Crimmins and David Holmes)

By Sinead Cruise