Hedge Funds To Quit UK Over EU Capital Gearing Provisions

by Ulrika Lomas, Tax-News.com, Brussels

08 June 2009

European Commission proposals on limiting hedge funds’ gearing ratios will force hedge funds located within Europe, particularly those currently operating in London, to relocate to jurisdictions unaffected by the EC’s directive, major hedge funds have warned.

London’s largest hedge funds have warned that if the EC directive is introduced, they will carry out plans to seek exile in jurisdictions such as Switzerland and the Cayman Islands to maintain competitiveness. Many European hedge funds have already stated that they are already in the process of investigating moving offshore as a precaution.

In a statement when the directive was first announced, AIMA, who represents 1,100 hedge funds, commented:

“We are concerned that the process of drafting the directive has been subjected to undue political pressure. There has been much rhetoric from various political organisations on the directive, most of which appears designed to satisfy domestic audiences ahead of the forthcoming European elections rather than to secure an effective and sensible solution to identified problems.”

AIMA further warned that the directive would fuel a hedge fund exodus:

“All of this is important because a flawed directive could have major negative consequences for several key European financial industries and directly affect tens of thousands of jobs in Europe.”

Recommended