Geneva is a city that has always punched above its weight but as international financial centres scramble to protect market share and grow. It is now looking to attract hedge fund and other alternative investment funds.

The city has interesting specialities. The nascent Swiss trust business is mostly based in Geneva and the city has a recognised expertise in alternative investments with banks such as UBP, Bank Syz and Hyposwiss only three of the institutions with a focus on this area. There has also been an increase in the number of commodity brokers establishing locally.

Whilst there is significant expertise in alternative investments in Switzerland, the European hedge fund managers and their teams are nearly all based in London. That is something that David Hiler, the Geneva cantonal finance minister, would like to change. The cantons are in discussion with Bern, the Swiss capital, to negotiate a tax treaty that would provide for an attractive environment for hedge fund management within Switzerland.

According to Mr Roland Godel, a spokesperson for the Department of Finance, the idea proposed by Geneva is that the canton and state would tax only the (not inconsiderable) income of the hedge fund managers, but not the funds themselves.

Mr Godel also believes the local financial expertise would also interest hedge fund managers. This plan also fits in with the development of Switzerland as a financial centre. Quoted in various interviews locally, Mr Hiler said it may also be interesting for these managers to be based outside the European Union given the way legislation is progressing.

Geneva has a track record, however, for attracting people without planning for the consequences. In 1999 Proctor & Gamble and Kodak both set up European headquarters in Geneva, but no-one thought about housing supply or international school places. WealthBriefing raised these issues with the Department of Finance. Mr Godel noted that the free cross border circulation introduced in recent years allows anyone with an EU passport to work (and pay tax) in Geneva and live in neighbouring France – where significant construction is underway.

The department is not responsible for education, however. The Geneva International School Foundation recently reported over 1,000 on the waiting list for a system with 4,000 students. The schools are trying to expand but demand is not decreasing. Cadbury Schweppes and Yahoo are in the process of moving their European HQs to the area.

Success in attracting the hedge fund industry to Switzerland will take more than a friendly tax regime. It remains to be seen whether Geneva can provide the infrastructure to meet the needs of those it wants to draw to the lakeside.