London hedge funds are moving away from their Mayfair heartland – including the “hedge fund alley” of Curzon Street and Berkeley Square – as they come under pressure to cut costs after a dire year for the sector.
Managers are ditching their traditional home in favour of Victoria, Soho and areas north of Oxford Street, according to research.
Only 51 per cent of hedge funds and private equity firms in London’s wider West End area were based in Mayfair and St James’s in the last quarter of 2011, down from 69 per cent five years ago, according to data from property consultancy Cushman & Wakefield (C&W).
“Because they have had a number of years of poor performance investors are putting them under greater scrutiny than in the easy days of 2007 and 2008,” said Henry Peto, a C&W partner working with financial services clients.
“That extends to not taking on extravagant offices and spending a lot on the fit-out. That is pertinent to start-ups – you have more leeway if you are established.”
One industry insider told City A.M.: “The economics are extremely important to small managers and larger managers are struggling. A lot have suspended performance fees and some have even suspended management fees.”
Funds are paying around £65 per square foot in Victoria and the area north of Oxford Street, compared to £100 in Mayfair and St James’s.
Several funds are based in the Soho area, such as Och-Ziff in Argyll Street, GLC in Broadwick Street and Zebedee Capital Partners in Great Pulteney Street, said Peto, although there is no suggestion any of these performed badly in 2011.