Spurred by recently enacted tax codes, a surge in foreign direct investment and an aggressive municipal outreach campaign, alternative investment companies are leaving New York for Miami.

The impetus behind this financial migration is largely due toSection 457A of the Internal Revenue Code that requires hedge fund managers to move all deferred fees before 2009 and related earnings out of offshore accounts and back into U.S. by 2017. A hedge fund manager who lives in Miami will pay significantly less in state income taxes than his counterpart in New York.

Another driving factor is Miami’s Downtown Development Authority’s (Miami DDA) Financial Sector Initiative, launched in 2013 to attract hedge funds through targeted one-to-one outreach; recruitment events in New York and Connecticut; and partnerships with local finance leaders.

Miami DDA’s pitch: Miami’s vibrant culture and cosmopolitan lifestyle offers all the benefits and quality-of-life factors that can be found in other major markets, without the high tax rates, and with direct access to investors from emerging markets who frequent the city.

The financial district of Miami, located in the neighborhood of Brickell, is already the second-largest financial hub in the U.S., after New York City, with 60 international banks and nearly 100 alternative investment companies, including prominent hedge funds, mutual funds and private equity firms such as Everest Capital, HIG Capital and Universal Investments. Most recently, Miami DDA announced the arrival of the largest independent investment broker in Brazil.

In June, XP Securities opened an office on Brickell Avenue with 15 employees relocated from the NYC office, with 30 more to follow by the end of the year and 100 full-time employees on staff by mid-2015. “Financial services firms like XP Securities and Universa are discovering they can avoid paying high income taxes in New York without sacrificing access to technology, Class A office space and the quality of life of a large metropolitan city,” said Miami Commissioner Marc Sarnoff, chairman of the DDA, in a news release.

A Tale of Two Cities: How Miami stacks up to NYC

The proof is in the numbers. Florida has no personal income tax, no estate tax and no capital gains tax. New York and Greenwich, CT, on the other hand, have personal income tax rates of 8.82 percent and 6.6 percent respectively.

New York’s cost of living is some 30 percent above the national average, compared to Miami’s 10. The median sale price for a new home in Miami is approximately $208,000 less than homes in New York, making it cheaper to own than to rent, with substantially lower office costs.

The political climate in Florida is more favorable as well. While New York’s deBlasio administration wants to raise taxes for the wealthy, Florida Gov. Rick Scott, a former venture capitalist, wants to roll out the red carpet to create an“opportunity economy” where businesses can thrive.

A strategic geographical location and emerging talent base

In addition to tax incentives, Miami’s proximity to Latin America offers companies an ideal opportunity to expand into a thriving investment community.

“People in Latin America will prefer to come to Miami because the environment and the language is closer to what they have at home, and the cost of doing business in Florida is also relatively attractive versus going to New York…There is also a perception that any broker-dealer, investment banker or fund manager in New York is way too expensive,” said Andrew H. Jacobus, CEO of the FINSER Group at a recent Opalesque round table series.

Miami International Airport is also a gateway to offshore financial centers like the Bahamas, the British Virgin Islands and the Caymans. And nonstop flights from Moscow, and more recently, from Doha via Qatar Airways, new investment opportunities and inbound talent are plenty.

In the past one needed to find quality talent in places like New York, but that has changed according to Julie Neitzel, a partner at WE Family Offices.

“10 years ago, I had difficulty finding qualified talent, particularly with investment expertise. Today there is a much deeper bench of talent which is exciting, not only for the firms that are coming in to this market but also for the young professionals that are trying to find their place in their professional careers or progression opportunities. As a result, there is a whole ecosystem of professional providers that will continue to support the dynamic growth for financial firms in the Miami area.”

Can the “Safe Have Effect” secure Miami’s financial future?

This recent surge of inbound activity has allowed Miami to maintain a diverse economy with new technology companies and a massive influx of foreign direct investment into real estate development.

However, while economists and elected officials maintain that a so-called “safe haven effect” can secure a city’s financial future, critics have pointed to the erosion of a city’s character and increased housing costs.

Historically, limited regulation of foreign direct investment in real estate markets has been a hotbed for corruption. Yet for some people, like Marc Lehmann of Riverloft Capital, that skepticism towards Miami-based managers is bound to change:

“It’s certainly true that people are still suspicious of why people live in Florida. There have also been some bad actors here who have sadly blazed a negative path before us. Not that there weren’t plenty of bad actors in New York but for whatever reason, the reputation stuck here in South Florida and it’s our job over time to change that and do a better job.”

Miami’s local industry has evolved. And while it is still much easier to raise big money in NYC, institutional investors and family offices continue to sprout up in Miami. If this trend continues, Miami will reach a tipping point and the influx will accelerate.

Miami emergent: Challenges ahead for “Wall Street South

Looking ahead to 2015 and beyond, if Miami can continue to overcome hurdles associated with rapid urban growth and enjoy continued economic support from local and state governments, it will no longer just be the place to buy a second or third home, or to visit conferences once a year. Miami has the benefit of sitting in the catbird seat to capitalize on future investments and hedge fund migration.