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Hedge fund excitement in France’s quant valley

Last week, Paris played host to Europe’s biggest hedge fund – the EuroHedge Summit, which attracts more than 750 financial markets professionals, investors, and hedge fund service providers for an annual reunion. It was the 10th successive year that Paris has hosted the event, but surely the organizers made an error when they selected the host city?

Charming and talented, Paris is inconsequential when it comes to hedge funds

According to studies, Paris has only two to three percent of the European market for hedge fund assets under management. It has ten times fewer hedge funds and ten times fewer assets under management than London. Even Switzerland, with a 5% share of Europe’s hedge fund market, ranks ahead of France.

“Paris is a very pleasant place – especially at this time of year – for networking and organizing dinners after a day of meetings and conferences,” said Neil Wilson, editor of Hedge Fund Intelligence, the group behind the Parisian summit. “We already run the EuroHedge Awards in London and I believe that London hedge fund professionals are pleased to have a change of scene and to meet each year in Paris,” he added.

Paris’s charms aren’t just a fabrication of the organisers. “Around a quarter of the people who come to the EuroHedge event are French,” said Wilson. “This is because there is a significant number of traders, quants and fund managers in London who are French,” he concluded.

In 2010, Paul-Henri de la Porte du Theil, president of the French fund management society AFG estimated that a third of the hedge fund managers in London were French. That same year, a new project, QuantValley Paris – 2020”, was started, bringing together nine different French fund management societies. The aim? To attract French expatriates with quantitative skills back to their home country.

Who’s following Guillaume Rambourg?

So far, Quant Valley seems to have had limited success. Guillaume Rambourg – the star trader of Gartmore – left London to start his fund Verrazzano Capital in Paris last year. But he hasn’t inspired many others to do the same.

Behind the scenes, however, things may be stirring. Emergence, a French initiative for seeding hedge funds, claims to be be ready to launch a second incubation fund and says it’s seeing a growing number of young French quants who’ve left banks and want to start their own funds. It says these kinds of small quantitative funds will in future represent most of the 30-40 new investment companies which are launched each year in Paris.

Bertrand Gibeau, of Reinhold Partners, a company which helps launch nascent French funds, said there’s been an increase in the number that are being launched in the past 18 months. “Around ten new hedge funds have been launched or are in the process of being launched in Paris,” he told us.

For Gibeau, a new generation of 30-something hedge fund entrepreneurs is emerging in Paris. Lionel Melkam co-founder of Bernheim, Dreyfus & Co, an alternative investment company which was formed in Switzerland in 2007 and repatriated to Paris one year later said he was resolutely optimistic about the future for Paris. “There are a lot of projects in the pipeline at the moment,” he said.

Lionel Melka, partner at French fund Bernheim, Dreyfus & Co, noted that direct employment at French hedge funds is limited, with no more than 500 people working in the sector in Paris. However, this understates the real size of the French hedge fund industry, said Melka: “There might only be 10 people working in a hedge fund, but there are also the lawyers, the accountants and the prime brokers,” he pointed out. It only would take a few new funds and hedge fund employment in France could flourish.

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