Economy

As The E.U. Cracks Down, Hedge Fund Managers Discover Familiar Haven: Switzerland

The EU is tightening regulations on hedge fund managers, who have begun looking for friendlier places to do business. More and more are turning to a new refuge in the old financial-friendly confines of Switzerland.

Bernhard Fischer


ZURICH - For Europe's hedge fund managers, the party may well be over. Now that the EU has signed legislation aimed at regulating these high-return financial managers, they can no longer do as they please. We've seen attempts at regulation before. This time, however, things are a bit different. Previous regulations only affected legal personnel and hedge fund firms. Now it's the managers themselves who are to be more strictly controlled, both in terms of their business practices and their compensation.

In Switzerland, this may mean the coming of a new golden age. Whereas hedge fund managers pay 50% taxes in London, they pay only 40% in Geneva. On top of this, regulatory rules are currently being tightened even further in the UK. "Capital is mobile, so are managers," says Austrian Investor and stock market guru Mike Lielacher. "Many hedge fund managers are spontaneously moving to Switzerland in order to escape the higher British taxes and stricter rules."

Man Investments spokesman Marc Duckeck adds: "Switzerland is an attractive location for hedge funds, especially because many investors still have their headquarters here. Between Zurich and Geneva, the country offers asset management firms one of the densest networks of investors and private banks worldwide. Add to that the relatively low tax rate, and it becomes a very interesting place for people to live and work."

"Scandalous' salaries

Switzerland can no longer avoid international scrutiny about its role as a financial refuge. The country is caught in a crossfire of international criticism for its alleged facilitation of tax evasion, and will therefore not take any risks. FINMA, Switzerland's financial market authority (Finma), is formulating new rules for hedge funds that are intended to keep them on a tight leash. These provisions are intended to make sure that "Switzerland does not attract suppliers simply because they may no longer work in other countries." The rules will also allow Swiss suppliers to continue to offer their services within the EU area.

According to Hato Schmeiser, professor and risk expert at the University of St. Gallen, the regulations in both the EU and in Switzerland are long overdue for an overhaul. Hedge funds are spinning out of control, he says. "Some managers have earned so much that they've acquired a gut feeling that they can't let go. They can't be the last in the food chain. To anyone with common sense, this is scandalous."

According to Hedge Fund Research, the head of Appaloosa Management David Tepper cleared the highest hedge-fund salary ever in 2009: a sum of $4 billion. Investor George Soros came in second place with an income of 3.3 billion dollars. Schmeiser claims that politics are to blame for these developments, which have allowed for tax havens and a lack of rules guiding hedge funds. Despite new Finma regulations in Switzerland, which will also apply to bonuses for hedge fund managers, Schmeiser hopes for continued self-regulation. Existing rules still allow for too many workarounds between countries.

"The strongest migration of hedge fund managers is currently to Singapore and Hong Kong," says stock market guru Lielacher, a trend confirmed by the SFA.

In absolute terms, however, most hedge fund capital is still centered in the United States. Around 78% of hedge fund firms reside in New York and Chicago. Roughly 12% are in London. The rest are in Switzerland, Singapore and Hong Kong. In total, global hedge fund assets amount to $2 trillion, of which 1.58 trillion are in the United States, 240 billion in the UK and a little less than 180 billion in Switzerland. So while Switzerland may be a paradise for hedge-fund managers, it won't be taking over the top spot any time soon.

Read the original story in German

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Society

Chinese Students Now Required To Learn To Think Like Xi Jinping

'Xi Jinping Thought' ideas on socialism have been spreading across the country since 2017. But now, Beijing is going one step further by making them part of the curriculum, from the elementary level all the way up to university.

Children from Congtai Elementary School, Handan City, Hebei Province

Maximilian Kalkhof

BEIJING — It's important to strengthen the "determination to listen to and follow the party." Also, teaching materials should "cultivate patriotic feelings." So say the new guidelines issued by the Chinese Ministry of Education.

The goal is to help Chinese students develop more "Marxist beliefs," and for that, the government wants its national curriculum to include "Xi Jinping Thought," the ideas, namely, of China's current leader.


Xi Jinping has been the head of the Chinese Communist Party (CCP) for almost 10 years. In 2017, at a party convention, he presented a doctrine in the most riveting of party prose: "Xi Jinping's ideas of socialism with Chinese characteristics in the new age."

Behind this word jam is a plan to consolidate the power of the nation, the party and Xi himself. In other words, to make China great again!

Communist curriculum replaces global subjects

This doctrine has sent shockwaves through China since 2017. It's been echoed in newspapers, on TV, and screamed from posters and banners hung in many cities. But now, the People's Republic is going one step further: It's bringing "Xi Jinping Thought" into the schools.

Starting in September, the country's 300 million students have had to study the doctrine, from elementary school into university. And in some cities, even that doesn't seem to be enough. Shanghai announced that its students from third to fifth grade would only take final exams in mathematics and Chinese, de facto deleting English as an examination subject. Beijing, in the meantime, announced that it would ban the use of unauthorized foreign textbooks in elementary and middle schools.

But how does a country that enchants its youth with socialist ideology and personality cults rise to become a world power? Isn't giving up English as a global language the quickest way into isolation?

The educational reform comes at a time when Beijing is brutally disciplining many areas of public life, from tech giants to the entertainment industry. It has made it difficult for Chinese technology companies to go public abroad, and some media have reported that a blanket ban on IPOs in the United States is on the cards in the next few years.

photo of books on a book shelf

Books about Xi-Jinping at the 2021 Hong Kong Book Fair

Alex Chan Tsz Yuk/SOPA Images/ZUMA

— Photo:

Targeting pop culture

The regime is also taking massive action against the entertainment industry. Popstar Kris Wu was arrested on charges of rape. Movies and TV series starring actor Zhao Wei have started to disappear from Chinese streaming platforms. The reason is unclear.

What the developments do show is that China is attempting to decouple from the West with increasing insistence. Beijing wants to protect its youth from Western excesses, from celebrity worship, super wealth and moral decline.

A nationalist blogger recently called for a "profound change in the economy, finance, culture and politics," a "revolution" and a "return from the capitalists to the masses." Party media shared the text on their websites. It appears the analysis caused more than a few nods in the party headquarters.

Dictatorships are always afraid of pluralism.

Caspar Welbergen, managing director of the Education Network China, an initiative that aims to intensify school exchanges between Germany and China, says that against this background, the curriculum reform is not surprising.

"The emphasis on 'Xi Jinping Thought' is being used in all areas of society," he says. "It is almost logical that China is now also using it in the education system."

Needless to say, the doctrine doesn't make student exchanges with China any easier.

Dictatorships are always afraid of color, pluralism and independent thinking citizens. And yet, Kristin Kupfer, a Sinology professor at the University of Trier, suggests that ideologically charged school lessons should not be interpreted necessarily as a sign of weakness of the CCP.

From the point of view of a totalitarian regime, she explains, this can also be interpreted as a signal of strength. "It remains to be seen whether the Chinese leadership can implement this so thoroughly," Kupfer adds. "Initial reactions from teachers and parents on social media show that such a widespread attempt to control opinion has raised fears and discontent in the population."

Die Welt
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