With the European Commission’s crackdown on the “alternative asset management” industry looming, London’s hedge funds managers have been increasingly threatening to take their offices elsewhere.
Now, BlueCrest Capital has put its money where its mouth is, so to speak. As the FT reports on Thursday (emphasis ours):
BlueCrest Capital, one of the UK’s largest hedge funds, is moving a significant portion of its operations to Geneva amid growing concerns about London’s status as a centre for alternative asset managers.
Founded in 2000 by former JPMorgan traders Bill Reeves and Mike Platt, the $15.5bn firm is the third-largest hedge fund manager in Europe. It is looking to relocate 50 staff. The new office will be BlueCrest’s largest after its headquarters in London, where it currently employs 300 people.
People close to the fund said increased taxes for high earners and controversial new European financial regulations made it prudent to look beyond the UK.
Many industry experts are doubtful that London’s large hedge funds will change their corporate domicile completely, but BlueCrest’s move may herald a trend for part-relocations.
We’re not sure if “part-relocations” will solve the regulatory problems for hedge funds – although it will undoubtedly facilitate some creative accounting – and will definitely provide some tax relief for all those high-income earners.
But it’s all part of a worrying trend for London, which is already slipping from its position as the world’s number two location (after New York) for hedge funds, as noted in a recent, separate FT report.
Ironically, however, the EU may unintentionally provide London with a boost in terms of another part of its looming new regulation of the alternative asset management industry.
As FTfm reported earlier this month, another aspect of the European Commission’s proposed proposed alternative investment fund managers directive is aimed at non-EU firms, to bar the marketing of non-EU funds to EU-based investors.
While some multi-billion dollar US managers such as SAC Capital and Avenue Capital maintain outposts in London, the smaller managers may find it difficult to bear the additional regulatory, administrative, personnel and compliance costs involved.
But this is not all bad news for London’s future as a global financial centre. As FTfm points out:
A non-EU manager with even one EU investor will have to establish a physical presence in the region to keep the capital. London, which so far has been the most favoured European locale for hedge funds, could draw interest.
Related links:
Hedge funds are our friends, say hedge fund experts – FTfm Blog
UK lobbies Brussels on hedge funds – FT
London begins to lose appeal for hedge funds – FT