New York Eclipses London as Financial Center in Bloomberg Poll
Oct. 30 (Bloomberg) -- New York has withstood the worst economic crisis in seven decades and remains the leading global financial center, followed by Singapore, which topped London as investors’ preferred place for doing business, according to Bloomberg Global Poll.
Twenty-nine percent of respondents in the quarterly poll of investors, traders and analysts who subscribe to the Bloomberg terminal say New York will be the best place for financial services two years from now. Singapore is chosen by 17 percent of respondents and London is the pick of 16 percent. Shanghai has 11 percent, while Tokyo, once considered a global hub, gets the nod from only 1 percent.
“Despite the carnage of 2008, I still expect the ‘new new’ thing in financial services to be developed and nurtured here, and ultimately exported to the world,” says poll respondent Peter Rup, who manages more than $300 million at Artemis Wealth Advisors LLC and Orion Capital Management LLC in New York.
On a separate question, China, Brazil and India offer investors the best opportunities for making money, those surveyed say. The U.S., Europe and Japan are seen to have less potential.
The results about the best financial-services environment contrast with the anxiety just three years ago that New York was losing its competitive edge over London as a global financial capital. U.S. Treasury Secretary Henry Paulson and New York Mayor Michael Bloomberg warned at the time that excessive U.S. regulation was driving investment firms to the U.K.
U.S. Regulation
Both U.S. and U.K. lawmakers are working to rebuild a web of financial regulations and raise taxes after a credit crisis and recession destroyed trillions of dollars in household wealth and more than 10 million jobs. Investors say they expect the U.S. administration under President Barack Obama to be more restrained in reining in risk-taking than that of U.K. Prime Minister Gordon Brown.
“Americans will fight harder against politicians than those in Europe and stand a better chance of a compromise on regulation, taxes and populism,” says poll respondent Richard Nolan, a strategist at the London brokerage firm Newedge Group. “So New York and London will suffer but I believe that London will suffer more.”
Poll respondent Bennett Gross, managing director of wealth management at Pacific Income Advisors Inc. in Santa Monica, California, says the regulatory crackdown may even be a plus. Investors, he says, may be willing to accept more constraints in exchange for stability and liquidity, particularly in the aftermath of the financial crisis.
‘Disastrous Downside’
“Most wealthy clients would accept higher regulation because it means the peaks and valleys will be a little less severe,” Gross says. “I doubt I have a single client who would not give up some of the upside to have less of the disastrous downside of 2008.”
The quarterly Bloomberg Global Poll of investors and analysts in six continents was conducted Oct. 23-27. It is based on interviews with a random sample of 1,452 Bloomberg subscribers, representing decision makers in markets, finance and economics. The poll has a margin of error of plus or minus 2.6 percentage points.
The Bloomberg Global Poll is conducted by Selzer & Co., a Des Moines, Iowa-based public-opinion research company.
The ascent of Singapore and the decline of London reflect the rise of specialized financial centers that cater to specific segments of the industry.
Hedge Funds
Many hedge funds have left the British capital because of a new top income-tax rate of 50 percent for higher earnings and regulations planned by the European Union that restrict the amount they can borrow.
One fund, Amplitude Capital LLP, recently moved its head office from London to Switzerland. Another, Brevan Howard Asset Management LLP, recently said its offshore unit was considering opening an office in Geneva.
Consulting firm Kinetic Partners LLP says it had helped 23 hedge-fund firms move to Switzerland from London in the past 18 months and is looking to relocate another 15 since the U.K. announced a higher tax rate in April.
“About 20 percent of the hedge-fund community could leave the U.K. in the next two or three years,” says London-based David Butler, a founder of Kinetic. “The feeling among the hedge-fund community is there is a better place to be.”
Singapore, Shanghai
Singapore and Shanghai are growing in popularity as firms look for ways to tap the wealth that has accumulated in China and the rest of Asia. Private wealth management in particular is growing in Singapore, which has no capital-gains tax.
“Everything in Singapore is so well organized. Everything is so efficient. Everything works,” says Gary Addison, a partner at the private-equity firm Actis Capital LLP, which has $2.9 billion under management. Addison worked in London then Tokyo before moving to Singapore two years ago.
The investment climate attracts firms seeking high returns. “I perceive Singapore to be a little more of the tawdry wild west, or I guess tawdry wild ‘east,’” says Gross, of Pacific Income.
Shanghai isn’t as well established as Singapore; 11 percent of those polled by Bloomberg see the city as the top financial center because of the huge growth potential in China. As credit remains tight in the U.S., China will try to unleash the excess savings of its citizens, says poll respondent Anthony Comorat, wealth-management director at Lydian Trust Co. in Palm Beach, Florida.
‘Optimal Environment’
China is “a country with no financial crisis and a budget surplus in a position to acquire and operate global businesses on an unprecedented scale,” Comorat says. “This creates an optimal environment for financial services that will not exist in the West in two years.”
Dubai, like China and Singapore, remains a popular regional financial center for investors who want to take advantage of the oil wealth in the Middle East. The sheikdom is the preferred locale of 5 percent of those polled.
“No one can compete with Dubai in terms of a place to live and work,” says Paul Reynolds, managing director and head of debt and equity advisory for the Middle East at NM Rothschild & Sons Ltd., in Dubai. “The Gulf generally is well-positioned in terms of its geography and liquidity, in terms of the provision of the services for business to flourish.”
The survey shows investors want to work in cities with established financial-services infrastructure, such as New York, Singapore and London. However, they see the best prospects for their investments in emerging markets such as China, India and Brazil.
Brazil, India
Sixty-eight percent of those surveyed say they are optimistic about the investment climate in Brazil; 67 percent say the same about India and 66 percent of China. The latter presents the best opportunities for investors over the next two years, according to 44 percent of those polled.
Only 41 percent are positive about the investment climate in the U.S. and 36 percent say the same about the European Union.
Investors are downbeat about Japan, with only 25 percent saying they are optimistic about its investment climate and 5 percent saying it offers the best opportunities.
“Tokyo’s tighter regulation in terms of financial rules and regulations are not providing as much flexibility as in Singapore or Shanghai,” said poll respondent Leonardy Maleke, market risk manager at PT Rabobank International in Jakarta.
“The aging population there, the large debt relative to economic output, a stock market that peaked in 1989, and stubborn bouts of deflation make it hard to characterize Tokyo as a better place for financial services,” Comorat says.
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