Relocation Considerations for Asset Management Firms

By Michael Patanella and Eric Coombs, Grant Thornton

Many asset management firms are considering shifting significant operations away from traditional centers such as New York and Chicago and moving them to markets such as Florida, the Carolinas, and Texas. In late June, in the latest case, Citadel hedge fund manager Ken Griffin announced he is moving his company’s headquarters from Chicago to Miami. While prompted by tax calculations and accelerated by the COVID-19 pandemic, the trend has been reinforced by a host of operational and cultural considerations.

The financial considerations are powerful enough — and fairly straightforward. Relevant costs include the state and local tax rates for both individuals and business as well as office space costs. Florida, for example, has no state income taxes, and state corporate tax rates of 5.5%. Texas has no state income tax or corporate tax (though it does have a gross receipts tax). North Carolina has a flat 4.99% personal income tax, and its corporate tax rate is 2.5%. By contrast, New York’s personal income tax can exceed 8%, and its corporate tax rate is 7.1%.

Similarly, the cost of office space is approximately three times higher in New York than it is in Dallas (~$82 per square foot vs. ~$29/sq ft). And the same political considerations which drove lower taxes can also create conditions more generally favorable to business and more personally attractive to some wealthy individuals.

Even on a financial level, such decisions are about more than a few top-level numbers. Especially when considering a potential move, firms must look at total corporate tax load and determine the relevance of individual tax consequences.

The decision of any business to move all or parts of its organization to another state raises distinctive operational and cultural issues. For all their Assets Under Management, the core assets of any financial firm are human. Grant Thornton Asset Management Partner Robert Holt emphasized that “Taxes may be a good reason to move. But the reason you can stay depends on whether you have the ecosystem, the social network, and ultimately the quality of life that you want.”

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Britt Tunick

Britt Tunick

Britt Erica Tunick is a Senior Consultant specializing in media relations, corporate positioning, content creation and event planning. She is an award-winning journalist with more than 20 years of experience writing about the financial services industry.