Some of London’s biggest hedge fund managers are shifting their operations to Malta in response to both the rising costs of business and the growing regulatory burden in the UK.
The Mediterranean island is emerging alongside traditional rivals to London, such as Swiss towns Geneva and Zug, as another European location for hedge fund managers keen to maintain flexible operating arrangements – and avoid heavy tax bills.
David Butler, founder of the consultancy Kinetic Partners, which advises hedge funds on their domicile and tax arrangements, said: “It’s dozens, rather than hundreds, that are moving there at the moment, but opening an office there gives managers flexibility. [They] are sitting in London, saying: ‘I have too much country risk here – the tax rate is through the roof, the regulations are too intrusive’.”
Clive Capital, the world’s largest commodity hedge fund manager, has established an office on the island and now has about a quarter of its hundred or so employees based there, a person familiar with the firm’s operations told the Financial Times.
The growth of its Maltese office has been exclusively “at the expense of London”, the person said. London-based Clive manages an estimated $5bn. Clive declined to comment.
Vector Commodity Management, a hedge fund launched last year by ex-Goldman Sachs senior oil trader Gilbert Saiz, has opened an office on the island, according to people familiar with the firm.
Other managers including the $2.3bn Duet Asset Management, $1bn Finisterre Capital and Belay Partners have all recently opened offices in Malta.
BlueGold Capital, one of the world’s biggest energy hedge funds, domiciled its parent company on Malta in 2008, but is now considering new staff there.
Malta enjoys an advantage in being within the European Union – giving managers based there greater flexibility under the terms of recently-enacted rules to regulate the European hedge fund industry. Running an office from the island is also significantly cheaper than in London or Geneva – as is the cost of living for employees.
The Maltese financial regulator, the MFSA, has meanwhile been keen to ape the kind of “light touch” regulation of the hedge fund industry once propounded by the UK’s FSA – one of the foundations of London’s success as Europe’s main hedge fund centre.
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