London sees rise in hedge funds

Date: Tuesday, April 17, 2007
Author: Ben Smith, Financial Times

London has doubled its share of global hedge fund assets over the past four years, according to the findings of a survey by International Financial Services London.

The industry association report says that between 2002 and 2006 the UK capital's share of hedge industry business rose from 10 per cent to 21 per cent, with London hedge fund managers holding approximately $360bn of assets last year, an increase of 40 per cent on 2005.

IFSL, whose stated purpose is to raise awareness of the UK's role in international financial markets and to highlight the contribution of financial services to the UK economy, said London had a number of key advantages that accounted for its rapid growth. These included its local expertise, the proximity of clients and markets, a strong fund management industry and a favourable regulatory environment. London was also an obvious location for prime brokerage services, given that about 50 per cent of European investment banking activity is conducted through it. Indeed, London represents 90 per cent of the European prime brokerage market.

Simon Hopkins, chief executive of London-based hedge fund Fortune Group, agreed that the tax regime in the UK was very attractive for hedge funds, while the general business climate was also favourable. He pointed to a rapid growth in multi- and single-strategy funds, with players coming from nowhere a few years ago to becoming serious players today. Fortune Asset Management will be undertaking the initial public offering of the Market Wizards Fund on May 1, the first listed fund of hedge fund strategies investing exclusively via managed accounts.

New York, by contrast, has seen its position slip, although it is still the leading global centre for hedge fund assets. The IFSL report estimated that about 36 per cent of global hedge fund assets were managed in New York last year, compared with 45 per cent in 2002.

London outpaces any other European city as a centre for hedge fund managers, with the 900 hedge funds based there accounting for 80 per cent of the $460bn of European-located hedge fund assets last year. The ISFL added that this figure would likely rise to more than 90 per cent if funds of funds and US funds with a trading desk were also counted. France, Spain, Sweden and Switzerland are other major locations for hedge fund managers in Europe.