Hedge-fund billionaires bet on London again

London

THE city's fund industry is bouncing back, and US billionaires Steven Cohen and Ken Griffin are grabbing a piece of the action.

Griffin's Citadel and Millennium Management, a hedge fund run by Israel Englander, have bulked up in London, where asset growth is outpacing the US. Point72 Asset Management, the family office that oversees Mr Cohen's wealth, is plotting a return to Europe's financial hub by year-end, said a person with knowledge of the matter.

London lost ground with hedge fund investors earlier this decade as taxes rose on the highest earners and Europe's debt crisis roiled markets. Now managers say trading opportunities are multiplying and dealmaking is picking up. Europe attracted US$12.5 billion in the first half of the year, while funds focused on the US had net outflows, according to a report from eVestment, a firm that tracks hedge funds.

"This is the first time London has looked really exciting for hedge funds since the European debt crisis in 2011," said Ray Nolte, chief investment officer of SkyBridge Capital. The New York-based firm plans to boost investments in European hedge funds that seek to profit from events such as corporate restructurings, mergers and share sales.

The rebound is driving up demand for office space in Mayfair and other districts where hedge funds congregate. The industry's growth contrasts with the bloodletting at Europe's biggest banks, which are slashing thousands of jobs and closing trading desks in the face of tougher capital requirements.

London 'Pilgrimage' Citadel, with its London offices just streets away from the Bank of England in the centuries-old financial district, increased staff by 25 per cent to about 170 over the past year, said spokeswoman Katie Spring. The Chicago-based firm oversees US$26 billion.

Mr Cohen is returning to London after shutting the UK offices of SAC Capital Advisors in 2013 amid a US probe into insider trading. SAC's London office was the least profitable of the hedge fund's global hubs, two people with knowledge of the matter said. Point72, which manages US$11 billion, has begun interviewing money managers and analysts for London roles, said the person, who asked not to be identified because the information is private.

"We've noticed a pilgrimage back to London," said Rob Christian, head of research at Franklin Templeton Investment's K2 Advisors, which has US$10.5 billion invested in hedge funds.

Millennium, run by Brooklyn native Mr Englander, increased the teams working from its Mayfair offices by 10 in the past year to 30, said a person familiar with the matter. The firm hired former JPMorgan Chase & Co executive John Anderson for a new role as commodities chief based in London, the person said. Spokesmen for Point72 and New York-based Millennium, which oversees US$30.4 billion, declined to comment.

Dmitry Balyasny, who manages a US$9.6 billion Chicago-based fund, opened an office in the St James's district last year in a second foray into London. The firm plans to increase its current staffing of about 40 people, which includes 14 money managers, said spokesman Colin Lancaster, without elaborating.

It's not only US firms that are expanding. London-based Marshall Wace, which managed US$12.4 billion two years ago, now oversees US$20.3 billion. The firm agreed to the largest new lease by an alternative investment firm in London in the first half, for offices in Knightsbridge, according to broker Cushman & Wakefield Inc. Marshall Wace declined to comment.

Growth is also coming from high-profile startups. Former Ziff Brothers Investments money manager David Fear opened a fund earlier this year with US$1.5 billion, the biggest initial fund-raise in Europe since the financial crisis. Chris Rokos, a former top trader at Brevan Howard Asset Management, plans to open a firm this year.

Brevan Howard and BlueCrest Capital Management moved some staff from London to Geneva following the global financial crisis, when Britain raised income taxes for the highest earners to 50 per cent from 40 per cent. The UK government has since lowered the top tax rate to 45 per cent.

A shortage of skilled fund managers might restrain growth in London, said Jason Kennedy, the head of recruitment firm Kennedy Group. "The hedge fund talent is thin, so those expanding have a smaller pool to choose from." Hedge funds employed about 10,000 people in the UK last year, said industry trade group Aima. London's larger hedge funds manage in total about a third as much as those in New York, which oversee about US$1.1 trillion, according to HedgeFund Intelligence, an industry publication.

Questions remain over performance, which has been "mixed" at some of the largest UK funds, said Roberto Botero, the London-based director at Sciens Capital, which invests about US$1 billion in hedge funds. "We are looking to the sector to start performing again after a muted few years." BLOOMBERG