Hedge Funds and Banks in Switzerland

Investment Banks May Follow Hedge Funds to Switzerland

Hedge funds in the UK are facing stiff regulation by the European Union and a top income tax of 50%. Many of these UK firms are responding to the regulation by moving to more welcoming countries, especially Switzerland which has made a name for itself offering low taxes and limited disclosure requirements. As hedge funds migrate to Switzerland, investment banks are expected to follow.

Switzerland not only has a 14% tax rate but, as a non-EU country, it is not likely to adopt the EU regulations on hedge funds borrowing and which banks hedge funds will have to go through. London has been in stiff competition with New York City for the number one destination for hedge funds, but it is possible that Switzerland may take a large share of hedge funds from the UK.

Hedge funds are a cluster industry: They like to be where all their competitors are. More significantly, while the hedge funds used to go where the investment bankers were, that will go into reverse in the next five years.

If many of the hedge funds relocate to Switzerland, investment bankers will follow them. Switzerland will be the winner, and London’s loss may be permanent.
Right now, it is only a handful of funds that are making the switch from London to Switzerland. Amplitude Capital LLP recently moved its head office from London to Switzerland. Brevan Howard Asset Management LLP recently said its offshore unit was considering opening an office in Geneva.

Consulting firm Kinetic Partners LLP says it has helped 23 hedge-fund firms make the move from London to Switzerland in the past 18 months. Source

Read more about the UK tax proposal

Read about the EU Directive on Alternative Fund Managers

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