More hedge fund traders join rush to Geneva

Date: Monday, January 18, 2010
Author: Kate Walsh, Times Online

THE UK’s third-largest hedge fund, Bluecrest, will move 50 of its highest-earning traders and fund managers to its new office in Geneva before the 50% income tax on high-earners kicks in on April 6.

The hedge fund, currently housed in an office overlooking London’s Buckingham Palace Gardens, is the first sizeable business — with $16.7 billion (£10 billion) under management — to move part of its operations to the Swiss canton.

The departure marks the beginning of an exodus of this highly mobile industry from Britain — a reaction to higher taxes and the threat of a new regulatory regime governing hedge funds from the European Union. A number of smaller hedge funds, including Amplitude Capital, have already relocated to low-tax jurisdictions. In Switzerland the income tax rate is closer to 25%.

David Butler of Kinetic, a firm that helps hedge funds to relocate, is currently working on eight mandates from British-based firms to find them office space in Switzerland. “They want to be out of the UK by April,” he said. “Geneva is the most popular choice. These people are a club: they go where the others are.” Butler predicts that up to 150 hedge funds will leave London.

Brevan Howard, the UK’s largest hedge fund, is also considering whether to open an office in Switzerland. Alan Howard, the founder, is said to be sounding out staff over whether there is sufficient demand among its 100 traders and fund managers to merit the move.

James Vernon, Brevan Howard’s chief operating officer, said that the proposed EU directive on hedge-fund regulation would make it “impossible” for it to do business in Britain.

One London-based hedge fund manager said: “They have no choice but to do this. We tried to hire a trader last week but he said he would not join unless he could be based in Geneva. People don’t want their fortunes subject to the ever-changing whim of the British government.”