Up to 150 UK hedge funds Swiss-bound, expert says

Within two years around a fifth of London’s hedge funds will be operating in Switzerland,  with most of them establishing offices in Geneva, a British expert familiar with the industry predicts.

David Butler, of Kinetic Partners, told Swisster his firm, which provides professional services for the asset management industry, is expanding in Geneva for that very reason.

“Personally, by the end of the week we will have 50 client firms (hedge funds) based here,” said Butler in an interview on Tuesday.

“I can go on the record as saying that over the next two years 20 percent of all hedge fund operations in London will move significant parts of their operations to Switzerland,” he said.

Butler said that translates into an extra 80 to 100 UK hedge funds transferring or adding Swiss offices, on top of the 50 his firm will be catering to.

The funds are looking to Switzerland for tax relief, he said, buttressing long-standing reports of unhappiness from asset managers and other financial companies over increases in British taxes that are set to take effect in April.

Maximum personal income tax rates are rising to 50 percent from 40 percent “and in addition, social security taxes are doubling,” Butler said.

He said a significant exodus is likely even if, as expected, the current Labour Party government is swept out of office by the Conservatives, who are widely perceived to be more business-friendly.

As a founding member of Kinetic Partners, Butler is in a good position to gauge the sentiment among London’s hedge fund managers.

He helped start the firm in March 2005, along with co-founders Julian Korek, Raymond O’Neill and the Chiltern Group.

It provides services and expertise to 350 hedge funds in London - about half of the industry players in the British capital, Butler said.

Trained as an accountant, he and his colleagues saw an opportunity to provide services tailored to the asset management industry, including hedge funds.

“After working for large accounting firms I saw there was a better way of delivering service to clients,” he said.

“Increased regulation, greater demand for services, pricing pressures and challenges facing bigger players in the (professional services) profession,” are cited by Kinetic Partners as reasons for the startup of the London-based company.

It has now grown to employ about 100 people, with offices in London, Dublin, New York and the Cayman Islands, as well as Geneva.

Butler is based in London but he spends one week a month overseeing the Geneva office, which currently has a staff of four. It will soon be growing to six.

Kinetic’s services include advice and help with regulatory and operational requirements, taxes, technical needs and auditing.

In Switzerland its office even helps clients set up IT operations, Butler said . “We will find office space, fit it out and support it - we will deal with Swisscom, and so on,” he said.

The company also offers to negotiate agreements with cantonal authorities before a company shifts its operations to Switzerland.

Butler said most of the hedge funds moving to this country are locating in Geneva because it is the acknowledged Swiss “centre for asset management”.

Of 145 hedge funds currently operating in Switzerland, around 85 of them have a Genevan base, he said.

Many of the British firms planning moves are what he called “boutique” operations - small, mobile hedge fund and venture fund managers.

The companies range in size from as few as five employees to as many as 100, he said.

Butler said UK hedge funds could be employing as many as 1,500 people in Switzerland within two years.

There will be considerable opportunities for those with “appropriate skill sets” in finance, investment and marketing, he said.

Butler did not disclose the names of any operators, but BlueCrest Capital Management, the third largest hedge fund in London, has already announced plans to move 50 people to Geneva.

And Brevan Howard Asset Management, a hedge fund reputed to manage 27 billion francs of assets, said last fall it was considering opening an office in Switzerland.

Less than two years ago, Geneva’s Finance Minister David Hiler signalled his interest in luring hedge funds to the canton and said changes in the taxation regime would be necessary.

No such changes have been made, but taxes in Geneva and elsewhere in Switzerland appear to be already more attractive for businesses than in Britain.

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