London Briefing:Mayfair's swanky restaurants are likely to serve up even more champagne than usual this week, as new figures show London's hedge fund players are rapidly closing the gap on New York.
The lucrative and fast-expanding global hedge fund industry is estimated to have as much as $1.5 trillion (€1.1 trillion) under management - and London's share of that has more than doubled over the past five years, from 10 per cent to 21 per cent.
New York, on the other hand, has seen its share fall from 45 per cent to 36 per cent over the same period and, with traders complaining of stifling regulation in the US market, that trend looks likely to continue. The figures, from International Financial Services London, show London accounting for 80 per cent of hedge fund assets under management in Europe. The capital is now home to some 900 hedge funds.
Rather than the City of London or Canary Wharf, the bulk of these are based instead in Mayfair, a location which suits not only their super-rich clientele (don't bother calling unless you have more than £1 million to invest) but also their increasingly wealthy traders.
So many hedge fund operators are packed into this exclusive part of London, it has become known as "hedge fund alley."
The impact on the area in recent years has been marked - office rents have been pushed above £100 per square foot, making Mayfair the world's most expensive business location. Non-hedge fund traders are vacating the area for lower rents elsewhere.
There has been a knock-on effect on the already-toppy residential market, with millionaire traders buying up properties in surrounding St James, Kensington and Chelsea areas, and sending prices soaring further still.
Not that this will worry the denizens of hedge fund alley. Another survey last week, by Trader Monthly magazine, revealed the huge returns enjoyed by the world's leading traders and, of the 100 wealthiest, 93 were hedge fund managers. Of those, 27 were based in London.
Heading the list of London-based players were Noam Gottesman and Pierre Lagrange of GLG Partners, who are estimated to have earned as much as £250 million each last year.
One other notable name on the list is Michael Farmer of RK Capital. Widely held to be the best metals trader in the world, the 62-year-old is a devout Catholic who once considered becoming a priest. Last year, he took home an estimated £75 - £100 million.
Debenhams debacle
Dire results from Britain's second-largest department store group, Debenhams, knocked not only the department stores sector yesterday but also further tarnished the reputation of the private-equity industry.
Just five weeks after saying it was happy with analysts' forecasts, the retailer issued a dire profits warning yesterday - its third since floating last year. The shares crashed almost 20 per cent at one stage, tumbling to around 140p and leaving them well adrift of their 195p flotation price.
The group warned that current year profits will fall short of expectations and analysts responded by slashing their already reduced forecasts from £170 million to £150 million.
They were scathing in their assessment of Debenhams' performance. One analyst was moved to say that the group's return to the market last May, after two and a half lucrative years in the hands of private equity owners, was "one of the greatest stuffings since the Christmas turkey".
The City still bought the shares, though, despite fears at the time that the private-equity players had stripped the business of its property assets and over-burdened it with debt.
As the newly-floated business struggled to woo shoppers, it staged a flurry of promotional days and special discount offers, inflicting serious damage and possibly lasting damage to its image as a prestige stores chain.
Now the group, which owns the Roche Stores business in Ireland, appears to be giving up market share to the likes of Marks & Spencer, House of Fraser and John Lewis. Chief executive Rob Templeman, previously thought of as a retail magician, is rapidly losing credibility in the City.
He accompanied yesterday's news of a near 7 per cent decline in sales in the opening six weeks of the second half with a raft of excuses: the weather was too warm, older fashions failed to sell well, interest rate rises are starting to bite . . . the list goes on.
Whatever the Debenhams chief says, most in the City have finally been convinced that the real problem is the time spent under private-equity ownership. In short, Debenhams is rapidly becoming one of the worst advertisements for the besieged private-equity industry as it attempts to answer accusations that the quick buck is all it cares about.
As those who bought at 195p watched the shares tumble yesterday there was, however, one small crumb of comfort: the pre-float private-equity owners - CVC Capital Partners, Texas Pacific and Merrill Lynch Global Private Equity - still own 43 per cent of the shares.
Fiona Walsh writes for the Guardian newspaper in London
