|Lim Yin Foong: Financial sector’s centre of gravity moves East|
|Written by Lim Yin Foong|
|Tuesday, 26 January 2010 07:09|
AS A NEW decade dawns upon the City of London, its continued viability as a leading financial centre has never seemed less certain. News that the UK’s third-largest hedge fund Bluecrest Capital Management is moving 50 of its top-earning managers to its newly set up office in Geneva is fuelling already rife speculation of a possible exodus of hedge funds from the UK.
With £10 billion ($22.7 billion) under management, Bluecrest is reportedly the first sizeable business to move part of its operations to Switzerland. However, at least 23 hedgefund firms have already relocated to the alpine nation in the past two years, and consulting firm Kinetic Partners LLP, which assisted these hedge funds in their relocation, expects up to 150 hedge funds to leave London.
An increasingly harsh and arbitrary tax regime in the UK and the prospect of greater regulation have driven hedgefund traders to seek more appealing shores. High earners have already been contemplating moves to more tax-friendly regimes to avoid the proposed increase of the top income-tax rate from 40% to 50%, which will come into effect on April 6, while non-UK domiciled residents (known as “nondoms”) look to escape the £30,000 annual charge slapped on worldwide earnings not taxed in the UK.
A Bloomberg Global Poll on the city most likely to be the best financial hub in two years’ time found that Singapore has overtaken London (New York ranked No 1 in the poll), while another survey by law firm Eversheds LLP found that China’s growth has propelled Shanghai into second place, ahead of London as a leading global financial centre in the next decade.
The attraction of Asia has much to do with bankers and fund managers following the money to fast-growing emerging new centres, as well as the fact that the Asian economies have fared much better than their Western counterparts in the current global meltdown. However, HSBC Bank’s decision to relocate its CEO Michael Geoghegan to Hong Kong next month as the bank focuses its expansion on Asia is seen as a clear sign of an eastwards shift in the world’s economic centre of gravity.
Joining Geoghegan in Hong Kong this year is one of London’s star fund managers Anthony Bolton, who is apparently postponing his retirement to manage a new China fund for Fidelity from the special administrative region.
Hedge funds are also looking to replace the London “hedgies heartland” of Mayfair and Belgravia with Hong Kong’s Central or Singapore’s Chinatown. Bloomberg reports that more than a dozen multibillion-dollar international hedge funds are planning to set up or re-establish a presence in Hong Kong and Singapore as the US and Europe increase industry regulation, and names that have been bandied about include Soros Fund Management LLC and GLG Partners Inc.
For the longest time, the City of London — and the UK — has enjoyed years of unsurpassed growth from the financial-services industry, leading to an overdependence on the sector. Perhaps it is time the government takes serious heed of increasing calls for the nation to refocus and rebalance its economy away from the City.