The Great Escape: Why are Hedge Funders and Executives Flocking to Florida?
This week’s NY Post reported that hedge-fund executives are flocking to Florida, and it’s not just for vacation. In fact, it’s their state of choice. What are the perks? It can easily be summed up in four words: Zero-Income-Tax-Jurisdiction. Even though it’s usually a balmy 77 degrees in the dead of winter, there’s simply no state income tax. But really, why not stay in NYC and reap the benefits of the big apple? It’s simple.
Firms like APEX Fund Services, and HedgeCo.net haven’t given a second thought to major moves to Florida. Even though federal tax rates are the same in Florida and in New York, the sunshine state didn’t have to pay 5 percent like New York did. Florida residents lost only 3.31 percent of their income in total taxes, according to 2009 census figures. That percentage difference is a substantial factor for those who stand to make millions of dollars a year in income. That’s something Hedge Fund Managers can definitely bank on.
Geography and ties to a new South American market maybe another factor. Smaller Hedge Funds looking for bigger opportunities may want to expand, and they simply won’t have the same opportunities if they stay in New York. Technology allows them to do their work anywhere, and shift assets easily between locations.
Apex, for example, wants to be in the center of the newest major private banking names. Most of those newer banks are located in South America. “We definitely believe it’s the right place for Apex to be,” said Thalius Hecksher in the Minyanville Paper. Hecksher, the Global Head of Business Development at Apex Fund Services, also stated that Miami is a prime hotspot. “Over the last 19-20 months, we’ve noticed that we have a couple clients there and we could better serve them more locally, “ Hecksher explained. “As a result of that we have also gotten some managers on board from Brazil and other Latin American countries.”
The incentives look good, the taxes are low, but what about job creation? In 2010 NY State and local governments took $14.71 out of every $100 earned. Looking ahead, could this be a sustainable effort to attract ambitious investment managers to the area? What about the supply of service providers who specialize in the industry in Florida in order to serve banking managers? Even though Miami seems to be a launching pad for the next emerging market, time can only tell if it will be a solid foundation for the Hedge Fund industry.
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