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EU referendum: Hedge fund managers backing 'Out' campaign set to make millions from Brexit

October 27, 2015 7:10 PM
By Andrew Bow in The Independent

European flagsExclusive: Secretive Mayfair funds resent European regulation - and exit would earn them £250m a year

Billionaire hedge fund managers who are backing the campaign to take Britain out of Europe stand to bank millions more pounds a year in the event of a so-called "Brexit".

Two of the five richest hedge fund billionaires in Britain are already linked to EU exit campaigns, and The Independent understands that other fund managers are planning to throw their weight behind the Out campaign in the coming months.

Tough European rules made in the wake of the 2007 financial crisis would be under threat if hedge fund bosses helped to force the UK's exit from the EU.

Without the restrictions, hedge funds - which specialise in high-risk, short-term investments - would save about £250m a year, an analysis by this newspaper has calculated. Bonus rules which force hedge fund bosses to reduce the amount of cash they pocket and are designed to stamp out reckless trading would also be at risk if the UK left the EU.

"There are quite a few hedge fund managers who are anti-EU," said one Mayfair hedge fund boss, who did not want to speak publicly. "Many are generally opposed to it."

The emergence of an anti-EU hedge fund wing will sharpen the debate over Britain's role in Europe after the Governor of the Bank of England, Mark Carney, waded into the debate on Wednesday by supporting the UK's continued membership of the EU.

Divisions in the City are already emerging, with multinational investment banks such as Goldman Sachs and Citigroup breaking ranks with the Mayfair-based hedge funds to back the UK's EU membership.

One of the most prominent leave campaigners is Crispin Odey, the founding partner of Odey Asset Management. The Harrow-educated billionaire has thrown his support behind an organisation called Vote Leave, a formidable lobby group campaigning to "end the supremacy of EU law". Mr Odey has a substantial war chest at his disposal to fund the campaign after paying himself £47.8m last year.

"We joined an economic union, not a political union, and you should give voters a say," Mr Odey said. "This is nothing to do with hedge funds and the EU. My criticism of the EU pre-dates the regulations which have come in."

His spokesman later clarified: "This is nothing to do with self-interest except as a UK national wanting the UK to have the right commercial terms with Europe."

Sir Michael Hintze, the fourth-richest hedge fund boss in Britain, with a £1.2bn fortune, has also been linked to the campaign, due to his role as a cheerleader for Business for Britain, an affiliate to Vote Leave.

Sir Michael, who runs a hedge fund called CQS, has donated just under £1.9m to the Conservative Party in the past five years and has complained in the past about how EU regulations are stifling financial markets. He declined to comment.

The Vote Leave campaign head, Dominic Cummings, last week said: "No hedge funds have bankrolled us so far."

Mayfair's gilded hedge fund community was hit with a wave of new rules after the financial crisis, targeting everything from its secrecy to how much individuals could pay themselves. The Alternative Investment Fund Managers Directive generated ill will towards Brussels from powerful financiers used to operating outside the system.

Hedge funds' costs were expected to rise by 5 per cent a year due to the directive, according to a KPMG survey of hedge fund managers in 2011. Based on total expenses of about £5bn a year calculated by The Independent, the new rules are equivalent to a £250m hit to hedge funds a year - which is probably going to be passed on to investors.

Baroness Bowles of Berkhamsted, who steered EU policy on the hedge fund sector, said: "It's very self-interested of hedge funds because they're saying, 'To hell with the country, we want to make money and we think we'll be able to escape regulation.' Some hedge funds in the UK don't see themselves as part of Europe because their business is largely transatlantic."

The hedge fund trade body the Alternative Investment Management Association said it was not possible to estimate how much hedge funds would save through a Brexit.

"It is impossible to conclude that the individual views of hedge fund managers constitute the view of an entire industry, nor is it possible to conclude that an exit from the EU will make it any easier to bypass EU regulations, especially when accessing EU investors or trading on EU markets," said the chief executive, Jack Inglis.

On Sunday, it was reported that BlackRock, the world's biggest asset manager, said it may move operations out of London if Britain leaves the EU. According to The Mail on Sunday, Joanna Cound, BlackRock's head of government affairs and public policy in Europe, told a British Bankers' Association conference last week: "Our largest single office is in London and we have 14 offices throughout Europe. More than half of our revenues come from clients around the rest of the EU. I am not sure that the balance would remain as it is if the UK left the EU."

BlackRock later said that to draw any conclusion from Ms Cound's remarks would be misleading.

Divided: City bankers vs fund managers

The referendum vote is still a long way off but the battle lines in the City are already drawn between investment banks and fund managers


Richard Gnodde, Goldman Sachs

The South African-born co-head of Goldman's international arm has said leaving Europe would hurt Britain's financial sector and Goldman could move staff elsewhere.

Stuart Popham, Citigroup

The former legal eagle is now EU vice-chairman of Citi and has voiced concerns London's financial district would lose out if Britain left.

Bill Winters, Standard Chartered

The Young Vic board member and boss of one of Britain's biggest lenders has said a UK exit would be bad for the City.


Helena Morrissey, Newton

The fund boss warns European regulations are overwhelming the City and creeping into every area of finance.

Luke Johnson, Risk Capital

The entrepreneur and Pizza Express founder has criticised the way the EU is run and supports a vote to decide the UK's future.

Alexander Hoare, C Hoare & Co

The cricket-loving boss of one of Britain's oldest private banks heads a family worth £300m and is a prolific tweeter of Eurosceptic articles.