Sunday, May 1, 2011

London remains center of European Hedge Fund universe despite higher taxes

London is the second largest hedge fund money center in the world, behind only New York. According to an article by Reuters, this position of power will not change in the face of rising taxes. Despite its 50% tax rate on high earners, 63 hedge funds with over $1billion in assets under management are headquartered in London, compared to just 3 such hedge funds in Paris and Stockholm, the next largest European money centers.

Large firms such as Brevan Howard Asset Management and Bluecrest Capital Management retain offices in Switzerland; Brevan Howard even has senior executives Alan Howard and Nagi Kawkabani situated there. However, smaller hedge fund managers seem drawn to London – former Brevan Howard trader Frederic Denjoy, of the Geneva office, left to set up his own hedge fund Denjoy Capital Partners in London.

It seems that smaller hedge fund managers may be drawn by the lifestyle and comfort of London, and to them higher taxes are a mere inconvenience. Larger hedge funds, on the other hand, are forced to retain their London presence to compete for talent with emerging boutique and recently launched hedge funds.

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