The first time John Paulson tried to hold a fundraiser for presidential candidate Mitt Romney, Hurricane Irene was barreling up the Atlantic coast. Paulsons $41 million Southampton estate was decked out last August for what would have been a glittering affair, but the fundraiser had to be postponed until the following weekend.
Not even an act of God, it seems, could derail Paulsons support for the pro-business, Wall Streetfriendly Romney. That the former Massachusetts governor and Bain Capital co-founder is well liked by the worlds top hedge fund managers is hardly a surprise. Whats not well known, however, is that nearly all of the hedge funds led by supporters of Romneys super political action committee (PAC), Restore Our Future, manage money on behalf of public pension funds.
For instance, public pension fund investors in Paulson & Co. include the Public School and Education Employee Retirement Systems of Missouri and the Public Employees Retirement Association of New Mexico. Another major Romney super PAC supporter, Paul Singer, runs Elliott Management, which counts as its clients such public entities as the Rhode Island Employees Retirement System and the Missouri State Employees Retirement System.
To be sure, hedge fund managers are entitled to their First Amendment right to free speech. But the fact that the fees these managers rake in from running public pension money is being funneled to the Romney super PAC could make for some spirited question-and-answer sessions in public funds boardrooms, to say the least. Defined benefit pension plans, many of which invest in both private equity and hedge funds, are coming under fire by some members of the Republican Party. On the other side, Big Labor the source of public pension money is increasingly mobilizing itself against threats to the defined benefit system, even as benefits paid out by public pension systems drain cash-strapped municipalities dry.
Super PACs can become the equivalent of the operating arms of candidates campaigns in spite of the law prohibiting coordination between the committees and their candidates. Donating to them opens a new avenue for a rhetoric of resentment around wealth and the influence that Wall Street financiers can have on the political process, says Thomas Mann, a fellow at the Brookings Institution, a left-leaning Washington think tank. When it comes to their own money, hedge fund managers appear to be the classic freewheeling, swashbuckling individuals who do whatever they feel like, says Mann.
Although it manages very little outside money, John Griffins Blue Ridge Capital does have an investment from the Virginia Retirement System. The Commonwealth of Virginia also invests in Lee Ainslies Maverick Capital. Julian Robertson Jr.s Tiger Management, which operates as a seeding fund of funds investing in outside managers and recently reopened to outside capital received a $250 million commitment from the Pennsylvania State Employees Retirement System last year.
Citadel founder Kenneth Griffin, Moore Capital founder Louis Bacon, Caxton Associates founder Bruce Kovner, Appaloosa Management founder David Tepper and Tudor Investment founder Paul Tudor Jones II have each donated $100,000 or more to Romneys super PAC.
Super PACs are not restricted by campaign finance limits. According to the Federal Election Commission, Robertson has given $1.25 million to the PAC; Singer and Paulson have given $1 million each. Kovner and Bacon both have donated $500,000, while Tepper, Jones and John Griffin have given $375,000, $200,000 and $125,000, respectively. Ken Griffin and Ainslie have given $100,000 each. (See below for an extensive breakdown of public pension plans that have invested in and paid fees to funds managed by Romney super PAC donors.)
Romneys Restore Our Future had raised more than $36 million as of January 31. Not to be outgunned, President Obamas supporters have quietly set up a number of super PACs of their own, including Priorities USA Action, to which talk show host Bill Maher recently pledged $1 million. Moreover, donations to super PACs can come directly from unions. Service Employees International Union, one of the most powerful labor organizations, has given $1 million to Priorities USA Action. Look for even more tension between union bosses and the hedge fund managers who invest for their pension plans as the campaign heats up.