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Jan 28, 2022
Paris Wants to Become the Mayfair of Europe for Hedge Funds
(Bloomberg) -- Back in 2016, trying to get an ambitious young financier to choose France over Britain was an often hopeless task.
“When I was going to London to tell people to relocate to Paris, the answer of my contacts was, ‘Paris, never!’” says Arnaud de Bresson, whose job is to promote his city as an attractive location for international finance firms.
Six years later de Bresson’s mission has become a whole lot easier.
Brexit has left many U.S. investment banks and hedge funds hunting for a new base in the European Union, now that the City of London is outside the bloc, and Paris is emerging as a No.1 destination. At the same time, President Emmanuel Macron has cut taxes for the wealthy, removing one of the biggest deterrents for high earners thinking about working in France.
The effect of both these things has been striking. Wall Street banks have been expanding their French trading teams rapidly. Now hedge funds are following, enticed by the abundant supply of clever mathematicians and engineers from France’s elite universities. Millennium Management, Ken Griffin’s Citadel and ExodusPoint Capital are all hiring or opening offices in Paris.
This sudden burst of activity begs the question of whether the City of Light will become the EU’s main hub for hedge fund traders, as well as for their investment bank counterparts. As Anne-Sophie d’Andlau, cofounder of Paris-based CIAM Investment, asks: “Can Paris become the Mayfair of Europe?”
London’s affluent Mayfair and St James’s district, host to Britain’s thriving hedge fund industry, needn’t worry too much yet. Most of the new Paris hires are either local recruits or French expats transferring home. The U.K. capital’s finance industry, which employs about 418,000 people, dwarfs its French rival.
Nonetheless, the hedge funds’ Paris commitments look serious.
New York-based Millennium has leased some space in the RTL radio station’s old headquarters on Rue Bayard -- just around the corner from the gleaming luxury stores of Avenue Montaigne -- which could house as many as 100 staff. Citadel made several star hires last year, with more portfolio managers joining in 2022, a person familiar with the plan said.
ExodusPoint, which set up a Paris research desk in 2019, wants to recruit more locals once it gets regulatory approvals, people familiar say. Other firms, including Point72, Qube Research & Technologies and Squarepoint Capital are advertising jobs in the city. Spokespeople for Millennium, Citadel and ExodusPoint declined to comment for this story.
President des Riches
Macron’s tax cuts are a huge draw for hedge funds. “The game changer was the fiscal reforms that put France and Paris at the average level in Europe, at a level playing field,” says de Bresson, managing director of Paris Europlace, a finance industry lobby group.
Since taking power in 2017, the president has enacted a string of tax changes aimed at letting France seize post-Brexit opportunities to win new business. In addition to cutting corporate tax from 33.33% to 25%, he replaced the tax on individual wealth with a real-estate levy. He also introduced a flat tax on income from interest, dividends and share sales.
These policies carry a political cost as Macron approaches a springtime reelection campaign. He’s regularly accused of being “president of the rich,” with some studies showing that his reforms have favored wealthier parts of society.
But his economic record is solid overall, with jobless claims falling to decade lows recently and gross domestic product rising more than expected at the end of 2021. He’s leading in the polls: Bookmakers put his chances at 72%.
And his reforms have worked for the finance industry. “We think Paris is the most attractive option among other European cities,” says d’Andlau, who also credits the country’s “impatriation” regime, which offers eight years of generous tax exemptions for people moving there.
France, already the EU’s biggest supplier of asset management services, also offers “a pool of talent like no other country in continental Europe,” says Christophe Leclercq, an executive search consultant at Shadowhound Ltd.
With its deep bench of traders and financial engineers who graduated from the renowned Ecole Polytechnique or Ecole Centrale -- and who contributed to the creation of highly complex structured products at French banks Societe Generale SA and BNP Paribas SA -- France has long been a hunting ground for recruiters at the world’s biggest funds.
“There has always been talent in Paris, especially in the quant space,” says Zack White, a partner at London headhunting company Attica Executives who hires staff for multi-strategy hedge funds. “There are also many native French working at the big funds globally, and opening in Paris makes relocation straightforward.”
Another reason for returning home now is that the big expansion of Paris trading operations by JPMorgan Chase & Co., Goldman Sachs Group Inc. and their Wall Street peers means there’s plenty of alternative employment if things don’t work out at a hedge fund.
“Only a few years ago, people were reluctant to come back to France because they thought they’d find limited career perspectives,” Leclercq says. “That’s clearly not what we see now. Many banks have decided to set their talent hubs in France.”
The rise of “multi-strategy” hedge funds also makes it more viable for traders to work in outposts like Paris. By joining these international firms, people can run investment strategies using small amounts of capital that wouldn’t be profitable if they had all the costs of setting up their own funds. That creates “far lower barriers to entry,” says White. “This, mixed with consistent inflows of capital, makes new offices in new locations a straightforward decision.”
FOMO (or fear of missing out) contributes, too. Firms won’t want their rivals to grab all the best Parisian traders. Similar hedge fund herd behavior has been seen before in tax-friendly Florida, Singapore and Hong Kong.
Local businesses in Paris’s 8th arrondissement are certainly looking forward to a new crowd of well-paid customers from the renovated RTL building. “This is very, very good news after 17 months of Covid,” says Fabrice, manager of Chez Savy, a typical brasserie right across the street from Millennium’s new digs. “We won’t be able to get everyone in for lunch.”
©2022 Bloomberg L.P.
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