While the European Union had visions of becoming the United States of Europe, serious obstacles remain to fully incorporating the different languages, cultures and laws into one cohesive economic force. As the PIIGS have struggled, the national personalities re-emerged with border and monetary restrictions re-established. As a result of European government restrictions on hedge funds, more UK hedge fund managers are relocating to New York or Boston, United States.
Just like the Beatles invasion decades ago, some of the top London hedge funds are finding great opportunities across the pond. Winton Capital manages more than USD$25 billion in assets and opened a New York office with six employees and is planning to add up to 100 over the year. The United States accounts for 40% of its assets. Winton Founder David Winton Harding stated ” … I think people are frightened, intimidated, and maybe even jealous of us.”
“What Does the United States Have to Offer?”
High frequency trading (HFT) has gained press coverage due to the fact that well-heeled hedge funds and banks can actually gain a trading advantage due to proximity to the New York Stock Exchange. Pension schemes are increasing their allocations to hedge funds. The United States is the center of action as the Federal Reserve makes capital cheap and the pool of European assets stagnates. Cheyne Capital manages USD$6.5 billion in assets and relocated to New York in January 2014. This multi-strategy house hopes to expand in a nation that is not controlled by the restrictive Alternative Investment Fund Managers directive.
“Blaming the Bankers”
While the concept of developing nations and high returns on sovereign debt should make Europe ideal for hedge funds, there is a growing sentiment blaming bankers for the continent’s woes. Skybridge senior portfolio manager Troy Gayeski said “Europe is going out of its way to make it difficult for investors to invest in hedge funds. The US is still the largest market with the deepest pools of capital and [UK hedge funds] would be crazy to not at least try to expand[,] ….” Agecroft Partners managing partner Don Steinbrugge said “US pension funds shifting money from fixed income into hedge funds is fuelling growth, and most large European hedge funds would like some exposure to that.”
Call it what you will – Invasion of the US or Exodus from the UK – when you add the Cube Capital, CQS and Polygon hedge funds planning to add more New York employees, it is probably good business for all.