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Financiers' deep pockets leave some critics questioning the affect of support
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Staff Writer
Published May 6 2007
Controlling more than $1 trillion in assets and tied into a vast network of politically connected clients, the hedge-fund industry is drawing increased notice in presidential politics for its fundraising prowess.
The Center for Responsive Politics, for example, said the industry has become such "a big political player" that the Washington, D.C., watchdog is devoting an entire section of its Web site to hedge funds and the candidates their employees support.
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The phenomenon is also raising the question of why members of the industry might be so eager to donate to and host fundraisers for some of the candidates.
"It may just be another hobby for them, or it may be them trying to continue Washington's hands-off treatment of their industry," said CRP spokesman Massie Ritsch.
Sens. Hillary Rodham Clinton and Barack Obama, the top two contenders for the Democratic presidential nomination, are both tapping the support of the industry. Greenwich will play host to fundraisers for both candidates hosted by hedge-fund managers starting this week.
Open to a limited class of clients with a high net worth, hedge funds typically invest in stocks, commodity futures, options and emerging market debt.
Hedge funds are not bound by the same financial disclosure and registration requirements of mutual funds and other investment vehicles directly regulated by the Securities and Exchange Commission, said Peter Van Doren, a senior fellow at Washington's Libertarian Cato Institute think tank and editor of the quarterly journal Regulation.
One rule change that would affect the industry would raise the income eligibility minimum for accredited hedge-fund investors from $1.2 million, where it has been for more than 20 years, according Van Doren, who said the regulation could reduce the number of potential clients.
Some political observers and scholars are drawing a connection between political fundraising and efforts to regulate the hedge-fund industry.
"People don't give money away for no reason at all," said Kenneth Dautrich, a public policy professor at the University of Connecticut. "It's only reasonable to believe that money does buy influence, particularly when you're talking about a lot of money."
Van Doren said hedge fund executives may be compelled to help a candidate out of necessity rather than to gain an advantage, and could be sought out by politicians because of their deep pockets.
"They feel like they're being held up," Van Doren said. "Once there's a large amount of money in what you do and other entities like you are regulated, it becomes very difficult to mind your own business."
Yale University political science professor Donald Green said next year's election is far away and there were better ways for those in the hedge-fund industry to influence the rule-making process. "It must be that these hedge funds invest in pretty long-term futures," Green said.
On Tuesday in Greenwich, former President Bill Clinton will headline a $2,300-per-person dinner for his wife at the home of Clifton Robbins, the CEO of Blue Harbour Group.
Billionaire Paul Tudor Jones II will follow that up on May 19 by opening his waterfront estate in Belle Haven to Obama for a $2,300-per-person fundraiser hosted by several of the hedge fund world's biggest names, including George Soros.
A spokesman for Robbins, who launched his hedge fund in 2004, said the host of the fundraiser has a long history of political activism.
"The Robbins have been long-standing supporters of the Clintons, from Bill's presidential campaigns to Hillary's Senate and presidential campaigns," Robbins spokesman Adam Weiner said in a statement.
A spokesman for Jones said the head of Greenwich-based Tudor Investment Corp. had no comment and referred questions to the Managed Funds Association, an industry professional group, where several telephone messages were left Friday.
Messages seeking comment from Obama and Clinton's campaigns were also left on Friday.
Green noted that Soros, who pumped $26 million into the unsuccessful effort to defeat President Bush in 2004, is among other hedge fund investors who have a record of supporting political causes.
"I have a feeling that they are more guided by broad ideological concerns than financial interests," Green said.
One of the leading advocates for stricter regulations on hedge funds held a similar view.
"I don't know why these individuals should be regarded any differently than other political contributors who may be simply civic-minded and public spirited seeking to support the best candidate," said Attorney General Richard Blumenthal, a Greenwich resident and a Democrat.
"I continue to be an advocate of greater transparency and accountability for the hedge-fund industry generally, but generosity to good causes, whether educational, health care or political, should be encouraged," Blumenthal said.
Rep. Christopher Shays, R-Conn., said hedge funds help drive the state's economy.
"The fact is they are extraordinarily important for the well-being of our area," Shays said. "They have their interests. They want a system that is sensibly regulated. They're going to get their story out."
Shays, who has made campaign finance reform a major part of his legislative agenda, also noted that federal law limits contributions to candidates to $2,300 per person for the primary and $2,300 for the general election.
"They can't buy a member of Congress in my judgment," Shays said.
Copyright © 2007, Southern Connecticut Newspapers, Inc.
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