British Hedge Fund Exodus Hasn't Happened—Yet

Oct 6 2010 | 3:51am ET

People in and around the British hedge fund industry are dismissing a report that some one-quarter of London's hedge fund employees have decamped to Switzerland. But they warn that the Financial Times estimate might only be a few years premature.

The FT reported this week that an exodus of one in four London hedge fund employees will cost the British Treasury nearly £500 million in lost tax revenue per year. The newspaper cited Kinetic Partners, but even that firm dismisses the doom and gloom.

"If you include the number of people who are in the throes of leaving, we count 600 or 700," Kinetic founder David Butler told Financial News. "If you include people who we think are likely to leave in the next two years, you reach 1,000."

At that point, the proportion of British hedgies to leave Britain would reach about 25%, given Butler's estimate of the size of London's hedge fund workforce of "4,000 to 5,000." But the Alternative Investment Management Association says 10,000 people work in the sector, meaning less than one in 10 have left.

That figure was confirmed by several other industry observers. Jon Hanifan of Ernst & Young told FN "the number that have actually moved is closer to one in 15 or one in 10, maximum." Liability Solutions' Richard Watkins said "150 to 200 people in total might have moved."

But the number is growing.

"The number of people and firms who are planning to move [to Switzerland] over the next five years is considerable," Watkins told FN.

"As this trend develops, an estimate of £500 million a year [in lost tax revenue] does not appear high."

"We believe that, within the next two years, between 20% and 25% of all U.K. hedge fund management firms will have significant non-U.K. operations," Butler said. "By significant, I mean, say, 50 out of 350 staff overseas, or 10 out of 50."


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