Hedge Fund Managers Invest in Politics

On the heels of a court victory repealing requirements for them to register--and subsequent promises from regulators to watch them closely--hedge fund managers seem to be betting on political campaigns this year, according to MSNBC.

In fact, 20 of the country's top hedge fund managers have collectively poured $3.1 million into political campaigns between 2005 and 2006, compared to $1.1 million during the 2002 mid-term election season, campaign finance records show.

George Soros, head of Soros Fund Management, leads the pack with $2.3 million worth of donations to Democrats, compared to $112,500 last election cycle.

Others, such as D.E. Shaw &Co honcho David Shaw, have cut contributions. Shaw this cycle has given $78,600, compared to $638,000 in 2002, according to PoliticalMoneyLine.

Records show that traditionally, hedge fund managers give more to Democrats than to Republicans and tend to give to politicians who espouse pet issues, rather than those who oversee the industry.

But times are changing.

"It seems now the giving is becoming more business motivated," said John Gaine, president of the Managed Funds Association (MFA), a lobbying group in Washington.

"We've increased participation in or PAC (political action committee) as the membership becomes more aware of our mission, he said.

MFA has donated $122,500 this election cycle, compared to $7,000 in 2001-2002.

U.S. House Capital Markets Subcommittee Chairman Richard Baker (R-La.), collected $10,000 worth of MFA's money this cycle.

Hedge fund political contributions are only a small portion of the $38 million financial service firms have collectively kicked in to campaigns.

Almost two-thirds of that money has gone to Republican candidates.

Still, the $1.3 trillion industry's new attention toward PACs is not surprising, industry-watchers say.

"The SEC registration episode served to draw greater attention to Washington within the industry," Gaine said.

And as much as managers hope that increased political acuity helps in the future, it might also add hurdles. "The hedge funds have tremendous political clout but they also have significant enemies. The mutual funds hate hedge funds [and] the corporate community sees them as destabilizing," said John Coffee, a law professor at Columbia University Law School.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.