Welcome to Miami: More Hedge Funds Grow Footprint in Florida

PBHFA’s founder quoted in Financial Time’s Fund Fire publication,  Read the original here

The pandemic – in addition to lifestyle and tax reasons – pushed people who were already considering moves to Florida over the border, said David Goodboy, founder of the Palm Beach Hedge Fund Association, which has tripled its membership since the pandemic began and seen an increase in event attendance.

“I’m expecting a permanent shift, but, of course, not the entire office,” he said. “I’m convinced that the shift that has happened will remain, but they will also have people in New York and Connecticut. I don’t believe the entire hedge fund industry is moving to South Florida, but I believe the entire hedge fund industry will have a footprint in South Florida.”

The hedge fund industry’s footprint is growing in Florida, as major firms such as Millennium Management, Point 72 Asset Management and D1 Capital Partners have opened – or soon will – new office locations. Warm weather and no personal income tax have long drawn people to the Sunshine State, but the global pandemic accelerated the trend, with industry watchers now expecting many of the new offices to become permanent staples of the alts world.

Millennium, which already has a small presence in Florida, is set to open two more offices next year in Miami and West Palm Beach. The $52 billion firm will create about 500 seats between the two locations for employees at both Millennium and World Quant, a spinout that manages capital for the hedge fund, a spokesperson confirmed.

Steve Cohen’s Point72 opened a permanent location in West Palm Beach last month, with room for 20 employees, and a Miami location will open early next year with room for up to 60 people, according to a spokesperson for the firm. The offices will focus on the firm’s long/short equity and macro businesses. Point72 is currently hiring for an equity financial analyst with long/short investing experience to work in Florida, according to a job listing on its website.

Chicago-headquartered Balyasny Asset Management recently opened a Miami office on Bayshore Drive, which is listed on the firm’s website. A spokesperson declined to comment. D1 Capital Partners also opened a Miami office earlier this year. The firm declined to comment.

Other managers have made similar moves since the onset of the pandemic, including Paul Singer’s Elliott Management, which moved its headquarters to Florida, and ExodusPoint Capital Management, which opened a small North Palm Beach office. Neither firm responded to a request for comment. BlockTower Capital, a cryptocurrency hedge fund, announced a headquarters move from New York to Miami last month.

In addition, Ken Griffin’s Citadel still has plans to open an office in Florida, a spokesperson confirmed. Its Citadel Securities affiliate, however, earlier this year shuttered a temporary trading floor that it opened in Palm Beach in March 2020.

The number of active hedge fund managers headquartered in Florida grew from 193 at the end of 2019 to 290 this year, with those managers accounting for $94.2 billion in assets under management, according to data from Preqin.

Southern Migration The number of hedge fund managers in Florida has increased since the onset of the pandemic. Source: Preqin Date Number of Active Hedge Funds Total Assets Under Management Dec-19 193 $66.3 billion Dec-20 304 $40.3 billion Aug-21 290 $94.2 billion

“It has been a non-stop deluge of people moving [to Florida] and considering moving, renting and working from home for six months. You have various degrees of commitment,” said James Koutoulas, founder and CEO of Typhon Capital Management, a multi-strategy fund based in Miami Beach, who has fielded calls from industry colleagues and made introductions to housing brokers since the pandemic began.

As the hedge fund community grows in Florida, investors will have to come to conduct due diligence, Koutoulas said, adding that January will be a busy month, with several large hedge fund conferences planned in the state.

Josh Koren, founder and CIO of Musketeer Capital Partners, a long/short equity hedge fund founded in 2020, lived in New York for 11 years. The Pennsylvania native chose Miami Beach for his firm’s location and his team members are in the process of moving to the state.

“I decided to set up shop in Florida because I thought the quality of life is better,” he said, adding his belief that fresh air and space help manager performance. “It’s very good for the mind, soul and body, and I found my mental capability has become sharper.”

The state’s supportive business environment and “the lower tax situation certainly helps on both an individual and company level,” Koren said.

Financial services firms have long been recruited for the market, said James Kohnstamm, executive vice president for economic development at the Miami-Dade Beacon Council, who noted that federal tax changes in 2017 that limited deductions for state and local income and property taxes allowed Miami to position itself better to attract more firms.

“Once Covid hit and New York locked down, there was a big shift in talent, followed by company migration. What was a trend went gangbusters,” he said. “We are still receiving inquiries almost daily from financial services… companies.”

While programs at the state and city level do offer incentives for firms to move, Kohnstamm said for many financial services firms those do not ultimately drive decisions. Conversations are instead focused on quality of life, tax savings, hiring of talent and relocating families, he added.

Hedge funds having a location in Florida has become a “selling point” in recruiting, said Michael Goodman, managing partner at New York-based recruiting firm Long Ridge Partners. Working from a satellite location is an option that people may never have had before, he added.

“It is a destination now and it’s on people’s radar,” he said. “It used to be New York, Chicago, San Francisco and Austin were the big hot spots. You can now look anywhere from Palm Beach to Miami being in there as well.”

While searches with the option to work from Florida have increased since the pandemic began, “it’s not your only option to be down there,” said Adam Kahn, managing partner at Odyssey Search Partners. Florida is still far from becoming the Wall Street of the south, he said.

“[New York] City’s resurgence has helped [as have] the warm months,” he said.

Florida may face other challenges, including its current pandemic surge. While the entire U.S. has seen Covid cases rise, Florida has been among the states with the highest case numbers and hospitalizations, according to the Centers for Disease Control.

Office reopenings may again be in flux as the Delta Covid variant continues to spread. But the Beacon Council’s Kohnstamm said he is continuing to field conversations, and is anticipating the possibility that the winter months could bring more relocations to Florida.

“I foresee a lot of continued disruption overall over the next year or two, and I think that will create opportunities that Florida is well positioned to benefit from,” he said. “But we’ll have to see.”