By Michelle Celarier
As the midterm elections approach, it’s worth pondering one of the biggest trends in the hedge fund world since the financial crisis that swept Democrats into power—the craving for institutional investors. Most hedge funds have shrunk considerably since the crash of 2008, leading even the biggest and most illustrious on a desperate hunt for stable capital that these investors
—primarily pension funds
—can provide. But with Republicans poised to gain power on November 2
—with the blessing of a number of prominent Democratic hedge fund managers
—there could be far fewer of those investors around.
Why? Schoolteachers, firefighters, police officers and assorted government bureaucrats are just about the only workers left in the United States who have pensions. But if Republicans, including their shock troops in the Tea Party, have their way, public sector jobs, and thus their pension funds, will be slashed. That’s already happening. But it could get worse if the deficit hawks gain control of Congress. Government, they argue, is the enemy. Entitlements
—an Orwellian term if ever there was one
—must be slashed in an effort to avoid inflation.
Curiously, there’s little discussion of cutting military spending, even though many hedge fund managers who supported Barack Obama in 2008 said they did so in no small part because of George W. Bush’s ill-conceived Iraq War adventure. Nor, of course, are these folks eager to let the Bush tax cuts expire. (“Why not just tax net worth?” responded one manager famous for his brilliant critiques of bloated government deficits when I asked about ending the Bush tax cuts to alleviate the problem he abhors.)
Hedge funds’ love affair with Democrats has proved short-lived. Many who are politically active have moved to the right, angered by what they consider Obama’s demonization of Wall Street-and undeterred by their own criticisms of the Street during 2008 and the profits they made shorting it.
Perhaps it’s too harsh to call this hypocritical. Let’s just say it’s inconsistent. Financial reform is weak, and the only real issue hedge funds can complain about is a proposal for an enterprise tax should they sell their businesses
—a move few are inclined to make anyway.
Some say they don’t like House Speaker Nancy Pelosi. Perhaps they forget how tirelessly she worked to get the bailout through Congress when Republicans like House minority whip Eric Cantor-now a darling of the hedge fund set-were vehemently against it. Let’s face it: Many more hedge funds would have collapsed without the government aid the banks (and markets) received. Shall we call these entitlements too?
Others say their pet projects haven’t been adopted by Obama. And these are powerful people with big egos who no doubt hoped their cash would buy them some sort of influence.
It’s depressing, to say the least, that an industry that doesn’t want to be vilified by the public can’t act better than this during a time when unemployment remains high and the gap between rich and poor continues to widen.
