Big Tech is flocking to Austin. Big Finance is expanding in Dallas. Houston, the epicenter of the U.S. energy industry, is diversifying away from Big Oil.
Florida may be the destination of choice for A-list money managers looking to flee Wall Street. But in the post-pandemic economy, Texas is rising, welcoming a rush of talented, wealthy people from California, New York and Illinois with the lure of lower taxes, luxury suburbs and opportunities to invest their cash—even as state lawmakers cast a wary eye at their potential blue-state politics.
In the last year, Tesla Inc. broke ground on a pickup-truck factory in Austin, and Oracle Corp. said it would shift its headquarters to the Texas capital. Hewlett Packard Enterprise Co. announced it was moving to the Houston area. Charles Schwab Corp. left San Francisco for the affluent Dallas suburb of Westlake, where Fidelity already has a campus. Vanguard plans to open an office in the area early next year.
And hedge funds are sprouting up or expanding all over Dallas. Izzy Englander’s Millennium Management, which has had offices in Texas since 2016, is backing a new fund, Meridiem Capital Partners, that’s expected to start trading in the second half of this year with $1.5 billion. Canyon Partners, which manages $24 billion, should have 55 employees in town by year end.
“A change of scenery sometimes is a great way to energize an organization, and Texas is clearly a very, very business friendly state,” Canyon co-CEO Josh Friedman said in an interview with Bloomberg TV. “Dallas has a particularly good base, I think, of very sophisticated families and it’s a good community intellectually in which to run a business.”
Cinctive Capital Management opened an office in Dallas this year with capacity for about 20 people. The fund, which manages about $1 billion, is expanding its Texas operation believing there are talented managers in the state that might be overlooked by other firms. Avidity Partners has more than doubled its footprint in the state since it began in 2019, and its assets have swelled to $4 billion. All of these moves are according to people familiar with each fund’s plans.
A lack of income tax is only part of the draw. Housing is relatively affordable. The health care system in Houston and other cities feature some of the best hospitals in the country. In addition to a warmer climate, plentiful restaurants, activities for families and lots of space to roam, job creation in the state has served as a magnet.
“Employment growth has typically been twice the national average over the years,” said Pia Orrenius, an economist at the Federal Reserve Bank of Dallas. “And when you compare it with places like California and New York, the cost of living is still substantially lower, even though it’s starting to rise.”
Texas has long used cash grants and local-tax incentives to coax companies to relocate. Now, a slew of growth-minded local businesses are attracting money to an economy that state leaders say would be the world’s ninth largest if Texas were an independent country.
“Covid really just accelerated it,” said Andrew Brock, the Austin-based head of J.P. Morgan Private Bank for Central Texas. “People are coming here to invest. They’re coming here because they believe there are opportunities to deploy capital.”
Family Offices, Private Equity
Brock says Austin is benefiting from an influx of family offices and private equity firms looking to scale up growing businesses alongside established giants as Dell Technologies Inc. and more recent successes such as Yeti Holdings Inc.
Texas was already in the midst of robust growth. In the past decade, Dallas and Houston added more people than any other metro areas, pushing the state population to about 29 million. Austin expanded at the fastest clip for urban areas of at least a million people.
The state picked up two seats in Congress over the last decade while California and New York each lost one. The Golden State lost population in 2020 for the first time. The most popular destination for people fleeing: Texas.