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France And Switzerland Are Trying To Seduce More Hedge Funds

The latest estimations of Celent and Eurekahedge indicate that 43% of European hedge funds’ headquarters are located in the UK, 9% in Switzerland and only 5% in France.

Given the fact that the hedge funds create 2-5 times more jobs than traditional funds, the stakes are really high in terms of jobs growth. It’s estimated that a third of all hedge fund managers in the UK is French. This is exactly why Paris tries to attract hedge fund managers, especially the ones who have left France for the opportunities abroad.

Everyone is mobilized to realize this objective. That includes the business lawyers, treasury, AMF (French financial authority) who play an active role in promoting this campaign. The idea is to encourage the installation of hedge funds or innovative management companies in France, according to

By one estimation, between 2003 and 2007 the growth of hedge funds was about 50% per year on average, but the French market for hedge funds collapsed and today only 1% of the funds in French market are the hedge funds. Also, the crisis really hit the funds of funds.

It also may the case that investors do not hesitate to invest directly in hedge funds in order to reduce the amount of fees instead of going through a fund of funds.

The legislation should be made carefully. The transparency requirements are not the same with what they were before the crisis, so today it is more difficult for small French hedge funds (less than 20 million euros in assets) to commence. Also, investors are more cautious with these small companies and the legislation could be more binding as proven by the draft of Alternative Investment Funds Managers on hedge managers. The proposed legislation is still pending and not yet decided, but there a risk of bringing new weights from above onto the industry.

The legendary French bureaucracy will be the biggest obstacle in attracting hedge funds or any other innovative financial vehicle. While France is trying to attract more hedge funds, French politicians often speak against hedge funds, saying hedge funds are to blame for the financial crisis. A hedge fund is called “fonds speculatif” in French. That is how it is considered in France – highly speculative – so there’s a long way to go for hedge funds in France. Plus, French financial markets authority have recently banned short selling on financial stocks, a move highly criticized by hedge funds.

France has a rival as well. Switzerland is trying to seduce its fair share of hedge fund managers to Geneva. Some hedge funds have already started moving there since the UK installed a tax rate of over 50% following the baking crisis. But according to Eurohedge, the UK may prove to be a place for synergy. It says London accounted for almost 70 percent of Europe’s $423 billion of hedge fund assets at the end of 2010, compared with 5 percent for all of Switzerland, a fact that hasn’t changed much over the past five years. Despite the French campaign to seduce more hedge fund managers and the Swiss efforts to attract more hedge funds with the beauty of the Geneva Lake, many funds still continue to be located in London. London continues to be the top financial center of Europe and the World.

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