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Hedge Funds Unresolved On Business Location

by Robin Pilgrim, LawandTax-News, London

03 November 2009

In the face of recent regulatory and tax uncertainty in the United Kingdom, hedge funds are reportedly wavering on where to locate their businesses, worrying over the effects of extra tax and regulatory measures in the pipeline. More often than not, they opt to maintain their existing location and open new offices in promising new locations.

According to the City A.M. busines daily, BlueGold Capital Management is the latest to open an office in Geneva, with Brevan Howard Asset Management another major hedge fund which plans to open a Geneva office, while keeping its main base in London.

A roundtable discussion on the subject organized by hedge fund publication Opalesque in October revealed that in the opinion of a number of those attending, the increase in the UK marginal income tax rate from 40% to 50% for high earners would not be the ultimate arbiter in the decision-making process, as earning high incomes gave the main players the freedom to decide where they wanted to live, and not have that decision determined by the taxman.

The latest regulatory proposals in the UK, still to be resolved, are naturally of great concern in the hedge fund industry, but the thinking is not all drawing the industry towards an exit strategy; in order to access the lucrative markets of Europe and the USA, it is likely that the funds will have to submit to regulation, wherever they are located. Moreover, there are fears that being located outside the EU could lead to inferior access to the markets.

The movement is not all one way. Bloomberg recently reported that Unigestion Holding SA, a major Geneva money manager whose clients include Nestle SA’s pension fund, working out of a Paris office, has set up funds in France in response to the negative effect that loss of bank secrecy has had on investors in Switzerland.

Patrick Fenal, CEO of Unigestion was reported as saying that the assault on banking secrecy by the US, France and Germany had made investing in Swiss offshore funds “very complicated”.

An estimated 80% of Europe's hedge funds and 60% of private equity firms are domiciled in the UK, while Switzerland reportedly controls more than a quarter of the world’s privately held offshore funds.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at and a description of the report can be seen at

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