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Hedge Funds in Europe

I was in Europe recently for the GAIM conference in Monaco where I served as opening day chairman and a speaker on capital raising.  During my travels, I was able to learn more about the hedge fund industry in Europe and about the current environment for European hedge fund managers.  In the following video, I share my insights on the European hedge fund industry.

Video Transcript/SummaryThe strategies and tips provided within this video module include:

  1. European hedge funds have pretty much recovered the assets lost during the financial crisis.
  2. However, managers are becoming increasingly sensitive to taxes and regulation.
  3. The Alternative Investment Manager Directive has caused many European hedge fund managers to consider moving away from the EU.
  4. New York is still the hedge fund capital of the world with London following at second place.
  5. About 19% of all global assets are with London-based hedge funds.  

Transcript for Hedge Funds in Europe

Hello, it’s Richard Wilson. I just want to give you a quick 3-minute update on the hedge fund industry in Europe. Overall since the past financial recession Europe has pretty much recovered the assets that were lost. They were up to about $440 billion in Europe 3-4 years ago dropped down to the 200s and now it’s back up to about $430 billion in assets, of known assets in hedge funds in Europe. So they really kind of recovered from where it was in the past but managers are becoming more and more sensitive to over regulation and over taxation of their businesses.

I’ve heard that some hedge fund managers based in London can end up paying up 60% taxes. Meanwhile, the EU just past a new regulation called the “Alternative Investments Fund Manager Directive.” It was just passed this year and you know it won’t fully go into effect until 2017, but managers can feel the pain coming of that and the extra cost and compliance burden and that combined with high taxes is just making a lot of fund managers look at basing their fund out of places such Switzerland or Monaco, or I’m here today shooting this video, or other places such as Singapore or other tax-friendly havens.

And it’s really not a matter of cheating on your taxes or trying to not to pay your fair due of taxes, really it’s that these governments don’t understand it by making their environment regulatory heavy and raising taxes on alternative investments and hedge funds and private equity funds, what they’re doing is just driving these funds and masses to other locations like here. So I think that trend is going to continue. I think that people are going to keep on raising taxes in many different countries but then smart countries such as Switzerland which is not part of the EU and Monaco which is not part of the EU, so they won’t be affected directly from that new directive which came out. I think that people are going to greatly benefit and they’re going to see their economies grow and they’re actually the ones who are going to be collecting more taxes at the end of the day rather than these countries who just want to collect a higher percentage of taxes. That’s not very smart business wise.

Just a few more quick tips on European hedge funds, New York is still the hedge fund capital of the world and still has a slightly more hedge funds than London, about 20% of US allocation goes to European hedge funds so lots of US investors are allocating to European hedge fund managers. And about 19% of all global assets are based in London, based hedge funds. So I thought those would be a couple of interesting facts to share with you just about how the environment is here and the hedge fund industry is definitely growing, it’s robust, there’s lots of people invested in the hedge funds, that’s also very dynamic. I just got done speaking at the Game 2011 Hedge Fund Conference.

There was about 800 professionals there including 300 investors and 500 hedge fund managers. And their attitude was positive, people are raising capital and doing pretty well in the industry but it’s also dynamic, people are switching strategies, raising capital from Asia, changing whether they’re based in Switzerland, et cetera, et cetera.

So, hope you enjoy this quick recap of the European hedge fund industry. It’s Richard Wilson and we’ll see you again soon.

The tax and regulatory environment has made many hedge fund managers consider leaving the European Union countries to avoid these measures.  Overall, however, hedge funds in Europe have recovered rapidly.

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