Hedge Funds' Swiss Shift Costs U.K. £500M

Oct 4 2010 | 1:45pm ET

Hedge fund managers leaving the U.K. will cost the country's Treasury some £500 million in lost tax revenue, even though the feared "exodus" has yet to materialize.

About one in four hedge fund employees have moved from London to Switzerland, according to Kinetic Partners. The Financial Times conservatively estimates that those roughly 1,000 people pay nearly £500 million in taxes every year—assuming that they were paying the 28% corporate tax rate on their average earnings of between £1.5 million and £2 million per year.

The exit of just two people alone is responsible for £200 million of the loss: Brevan Howard Asset Management's Alan Howard and BlueCrest Capital Management's Michael Platt. Leaders of Europe's largest and third-largest hedge fund firms, respectively, the two decamped to Geneva this year, taking with them several group of top traders, whose tax-generating potential is not included in the lost £200 million.

Britain's decision to raise taxes on its highest earners to 50% from 40%, along with growing fears of strict new European Union regulation, are behind most of the decisions to leave London, the world's second-largest hedge fund center, for the regulation- and tax-friendly Alpine climes of Switzerland.


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