Hedge funds betting big on US presidential race

Date: Monday, December 3, 2007
Author: AFP.com

WASHINGTON (AFP) — Wealthy hedge fund managers closely guard their investment strategies, but mounting political donations reveal how some "hedgies" are betting in the crowded US presidential race.

Hedge funds' campaign donations have skyrocketed in recent years as trading profits have ballooned and the industry has lobbied Congress aggressively this year against raising taxes on managers' often multimillion-dollar earnings.

Democratic White House hopefuls have been more successful so far, compared with their Republican rivals, in winning funds.

The top-grossing recipient is Democratic Senator Christopher Dodd who garnered 714,500 dollars in donations from the hedge fund industry in the first nine months of the year, according to the Center for Responsive Politics (CRP).

The CRP, which tracks political cash flows, says Republican presidential aspirant Rudolph Giuliani holds second place with donations of 565,000 dollars followed by Democratic contenders Barack Obama, Hillary Clinton and John Edwards.

"They want to make friends in Washington and campaign contributions are a good way to do that," said Massie Ritsch, a spokesman for the research center.

Ritsch pointed out that Dodd is charged with overseeing the industry because of his chairmanship of the powerful Senate Banking Committee while Giuliani, a former New York mayor, has strong ties to the city where many hedge funds are based.

Paul Singer, the founder of the nine-billion-dollar hedge fund Elliot Associates, is one of Giuliani's backers and has also made a corporate jet available to him.

Federal Election Commission (FEC) records show Singer has made a maximum individual donation of 4,600 dollars to Giuliani's campaign this year. Elliot Associates's staff have stumped up a combined 200,000 dollars.

Singer, who could not be reached for comment, became an advisor to Giuliani earlier this year.

Gregory Chase, who runs Chase Capital Management, says he has spent about 500,000 dollars of his own money promoting Democrat Mike Gravel, a former senator.

"I've been very unhappy with the United States foreign policy and its dependence on foreign oil over the last few years," Chase explained.

The currency trader can spend as much as he wants because he is acting independently of Gravel's official campaign and not bound by US campaign laws, like Singer, which cap donations.

Chase has placed advertisements in USA Today, The New York Times, The Washington Post and other major newspapers in support of Gravel.

He offered to buy one million dollars in advertising from NBC in October after the nationwide television network locked Gravel out of a debate featuring the seven other Democratic candidates on fundraising grounds.

"I think there're a lot of people in the financial industry who take issue with the political turn that the United States has taken lately. My goal is at least to sway, maybe in some very small way, public opinion," Chase said.

Gravel advocates cutting US dependence on foreign oil, withdrawing American troops from Iraq, simplifying the tax code and cutting the Pentagon's budget.

Other investment gurus are also placing bets.

Marc Lasry, the founder of the 20-billion-dollar Avenue Capital Group, has dug into his wallet for Hillary Clinton. Lasry has long supported Democrats and his fund employs Clinton's daughter, Chelsea.

Lasry has also supported the Clinton Global Initiative set up by former president Bill Clinton to address poverty alleviation and other social issues.

FEC records show Lasry has given 4,600 dollars to Hillary Clinton's presidential bid while the CRP says Avenue Capital has donated funds to the campaigns of other Democratic lawmakers.

An Avenue Capital spokeswoman said Lasry was not available for comment.

Employees at the Fortress Investment group have supported former Democratic senator John Edwards and Republican Mitt Romney has gained funds from executives at Bain Capital which he co-founded during a prior business career.

FEC records show Republican Senator John McCain and former Republican senator Fred Thompson have also secured hedge fund donations.

The investment pools used to be restricted to rich investors, but now count pension funds and universities as investors. Hedge funds typically chase lucrative returns through risky investment strategies.

Concerns about investor protections have increased following the six-billion-dollar implosion of the large Amaranth hedge fund in 2006 and because of several high-profile cases of insider trading.

The trillion-dollar industry is represented in Washington by the Managed Funds Association which runs a well-funded political action committee to support its lobbying efforts.