London Now Europe's Hedge Fund Capital, Data Suggests

by Carla Johnson, Investors Offshore.com

22 March 2006

Hedge fund assets managed out of London grew 18% in 2005 to $225 billion, making London one of the fastest growing hedge fund centres, recently published data has revealed.

Although New York remains the leading hedge fund centre, London's share of global assets doubled to 20% between 2002 and 2005 as growth in Europe outpaced growth in the US, according to the 2006 edition of International Financial Services London's (IFSL) Hedge Funds report.

The IFSL says that this growth was driven largely by an increase in investment from European institutional investors such as pension funds and insurance companies during this period.

However, growth in assets in 2005 was lower than in previous years, mirroring a global trend which has seen hedge fund inflows slow as returns have slackened.

Nonetheless, London has grown to become by far the largest centre for European hedge fund managers. The 700 hedge funds located in London accounted for three-quarters of European based hedge fund assets at end-2005. If figures for fund of funds and US hedge funds with a trading desk in Europe are taken into account, London's share was more than 90%.

Other locations for hedge fund managers in Europe include France, Spain, Sweden and Switzerland.

However, local expertise, the proximity of clients and markets, a strong asset management industry and a favourable regulatory environment have underpinned London's pre-eminence as Europe's hedge fund centre.

London is also a leading centre for hedge fund services, notably prime brokerage services offered by the leading London based investment banks; more than 90% of European prime brokerage activity is conducted through London.

IFSL (International Financial Services, London) is a private sector organisation which aims to promote the international activities of UK-based financial institutions and professional and business services, including maritime services.

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