ZURICH (Reuters) - At least ten new hedge funds are set to launch in Switzerland this year, after none in 2012, in a boost to the country’s $24 billion industry, sources familiar with the plans said.
Fund managers had feared tighter legislation passed this year would damage the hedge fund sector in Switzerland, but the new rules have in fact attracted institutions previously unable to invest in such funds by giving them more protection.
While Swiss single hedge funds make up only a small part of Europe’s $415 billion total, industry insiders see it growing, with the new regulations helping attract EU demand.
Industry sources advising new funds referred to at least ten fund launches this year which they said could ultimately boost Swiss hedge fund assets by $8 billion, eclipsing a 10 percent global growth forecast in a Credit Suisse survey.
Ex-JP Morgan (JPM.N) star trader Deepak Gulati, who named his Argentiere Capital after a picturesque ski resort in the French Alps, and former Man Group/GLG Partners (EMG.L) manager James Berger who has set up B1 Capital will both launch funds shortly, people close to them said. Their funds are expected to be among the larger global hedge fund launches this year.
“People like the tax regime, the location, being surrounded by others in the same industry,” said Derek Simross, whose Premier Alpha Capital advises an equities-focused hedge fund.
From this year, Switzerland has brought its own regulations into line with new European rules designed to ensure more regulatory oversight of investments like hedge funds.
“It’s smart regulation, I‘m sure it will help tap into institutional money,” said Philippe Gougenheim, who launched his $50 million Glasnost fund in October after previously running Swiss bank Unigestion’s $3 billion fund of hedge funds unit.
Though assets at Swiss “funds of hedge funds”, the largest Swiss hedge fund investors, have fallen from $275 billion to $175 billion since the financial crisis, pension investors like$50 billion manager Swisscanto and insurer Suva said they are raising their allocations to single hedge funds, without giving details.
Pension fund managers say the tighter regulatory oversight will ease the way for fund trustees, generally wary of unregulated funds, to approve investments in Swiss hedge funds.
A global crackdown on tax evasion may also help top performing hedge funds to attract assets by weeding out weaker ones who can no longer offer the ability to shield assets from the tax man as part of their sales pitch.
“Before, it was all about asset gathering and tax evasion,” said Zurich University hedge funds specialist Peter Meier. “Now, Swiss asset management is much more performance-driven, which is helping attract assets from a broader client base.”
Wealthy fund managers may also be influenced by new European Union rules to curb the upfront pay of hedge fund managers, set to be introduced this summer, Simross said, and could be attracted by the more stable tax environment for top earners.
“Ultimately, whether the marginal tax rate of 40 or 50 percent is not the key, the key is stability and predictability. This is an enormous advantage Switzerland can offer,” said Markus Fuchs of the Swiss Funds Association.
Editing by Elaine Hardcastle