Funds Hub

Money managers under the microscope

Hedgies sit on the fence

October 1, 2009

There has been much debate about whether London’s hedge fund community, angry at plans for a 50 percent tax rate on top earners and the EU’s draft directive proposing tough controls on the sector (not to mention the usual problems of traffic, high property prices and quality in life in London that usually get raised), will head to low-tax Switzerland.

rtr273vjOur analysis today argues that, while a trickle have already left, there are far more who have upped the rhetoric but are simply waiting to see who wins the next election.

Polls point to a Conservative victory, traditionally viewed as being good for business, but so far the Tories have refused to commit to cutting the tax, which will come in next April and affect those lucky few earning over 150,000 pounds.

Tory leader David Cameron faces a tricky task — an early pledge to cut the tax could draw accusations of favouring bankers when we are still recovering from the credit crisis.

And whoever wins the election will have little room to manouevre, given a fiscal situation described by Investec chief economist Philip Shaw as “very serious”.rtr27wr0

Meanwhile, Switzerland is hoping to profit. A representative from the Canton of Zug recently spoke at a “Moving to Switzerland” briefing I attended, pointing out the benefits of a lakeside life, while relocation specialists and lawyers are hoping to drum up business.

The eventual resolution, probably next year, of the EU draft directive will also provide more clarity on whether it’s better to leave, or stay in the EU.

In the meantime, hedge fund managers are sitting on their hands and enjoying only having to pay 40 percent tax…

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