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Comment: Will hedge funds quit London?


The writing is on the wall (or at least in the press).

The writing is on the wall (or at least in the press). With the looming G20 meeting possibly about to enshrine new level of global regulation for the hedge fund industry, managers are now saying that they will not hesitate to quit London and move offshore if rules and taxation become over-burdensome.

The managers who are threatening to vote with their feet are reported to include Stuart Roden of Lansdowne Partners, Michael Hintze of CQS and Stanley Fink, once of Man Group and now of International Standard Asset Management. Crispin Odey of Odey Asset Management told the Sunday Telegraph: ‘We don’t have to be in London.’

With hedge fund reform on the G20 agenda, it appears only a matter of time before governments increase regulation of hedge funds and their managers, possibly compel them to disclose their strategies and holdings, and even tax them at higher rates. But hedge fund managers are highly mobile. They employ relatively few people and thanks to online trading systems can operate anywhere that has decent telecommunications connections.

The G20 appears to have traditional offshore fund jurisdictions such as Cayman and the British Virgin Islands, Bermuda and the Channel Islands in its sights, but there are plenty of other jurisdictions that offer enticing fiscal arrangements.

Ireland has secured massive foreign investment by lowering its corporate income tax rate to 12.5 per cent, and many hedge fund managers might find it an attractive home if the country lowered its hefty 41 per cent top rate of personal income tax. Alternatively, they could join existing members of the UK’s business elite in Monaco, which does not have personal taxation.

But cynics might wonder whether the noises about an exodus from London is just sabre-rattling aimed at stiffening the government’s resistance to proposals for tougher regulation from its EU partners.

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