New York City is the undisputed financial capital of the world. The largest banks and the biggest hedge funds are all located in New York or the surrounding tristate area, not to mention the biggest exchanges, with the deepest and most liquid capital markets in the world. The city has not always been the most pleasant place to live. Some people are concerned that Zohran Mamdani might make it an even less pleasant place to live if elected mayor and are speculating that New York's vast and profitable financial industry will relocate to places like Nashville, Austin, Miami, or Atlanta in the event of the self-described socialist being put in charge of the home to the beating heart of capitalism.
New York City has survived more than a few spells of mismanagement—in the 1960s and 1970s, and again in the late 1980s. Poor management made the city almost uninhabitable, yet the financial industry remained. Things are different today. For example, the New York Stock Exchange's market share of stock trading has dropped to 10 percent today, and most exchanges are electronic and can operate from anywhere. During the pandemic, most of the big banks' trading floors operated virtually, enabled by the Bloomberg Terminal's indispensable chat feature. These days, trading can happen from anywhere.
Industries tend to cluster in specific locations—health care in Minneapolis, energy in Houston, insurance in Hartford, and finance in New York. There are beneficial network effects from clustering, but when business can be conducted virtually, the clustering benefits all but disappear. In the past five years, there have been a handful of large financial firms that have set up shop outside of New York. The first to leave was AllianceBernstein, an asset manager, which built a brand-new headquarters in Nashville. The enormous hedge fund Citadel is in the process of setting up an office in Miami. Even Goldman Sachs is setting up a large presence in Dallas and Miami. In total, 158 firms with $1 trillion in assets have left NYC in the last five years. This is probably just the beginning.
