The burgeoning hedge fund industry in London has meant a net gain to jobs in London’s financial services sector, according to an independent report launched today, for the Corporation of London and written by Radley & Associates.
Entitled “The Hedge Fund Industry and the City,” the report says a relatively small number (less than 1% of financial service employees) of very highly qualified individuals have set up in West End offices but their movement from elsewhere in London has been more than compensated for by growth in trading in the City arising from hedge fund activity, as well as by the growth in the numbers of hedge funds in the City.
Globally, assets under hedge fund management are expected to grow by more than 400% in the next decade. With London likely to keep the lion’s share of EU hedge fund business, (currently over 70%), the report says this will fuel growth in larger, mainly City- based institutions as well as in smaller boutique funds traditionally clustered in the West End.
About one third of hedge funds are currently based in the City, with 61% of funds based in the West End primarily due to lifestyle reasons and the availability of small units of top quality office space.
Peter Bennett, the Corporation of London’s Deputy City Surveyor, said the Corporation’s City Property Advisory Team, which helps the Square Mile’s office provision adapt to meet new trends, had commissioned the report to highlight the impact of the hedge fund industry on the City and to generate informed debate.
“The hedge fund industry is employing more people both directly and in ancillary services, and an increasing number of firms are locating in the Square Mile as the market matures,” says Bennett. “Now is the moment for City property developers to offer more high quality, small and discreet offices that the hedge funds require.”
The report concludes that the biggest threat to the burgeoning industry is the return of bull markets. There is a limited risk that hedge funds could relocate to tax advantaged locations such as Dublin but this is unlikely to happen as long as tax and regulation remain at an appropriate level.