Hedge fund manager lashes back at Obama on Chrysler

Date: Wednesday, May 6, 2009
Author: Svea Herbst-Bayliss, Reuters.com

Prominent hedge fund manager Clifford Asness has struck back at the Obama administration, saying hedge funds had the right and responsibility to hold out on last week's Chrysler restructuring deal.

"Managers have a fiduciary obligation to look after their clients' money as best they can, not to support the President, nor to oppose him, nor otherwise advance their political views," Asness, who oversees about $20 billion (13.3 billion pounds) at AQR Capital Management wrote in an undated letter.

Asness, who made his reputation and fortune in quantitative investing where computer models select stocks and bonds, spoke out days after Obama forced the automaker into bankruptcy protection and called several holdout lenders "speculators."

In a rare flash of anger, Obama scolded a small group of holdouts on Thursday and said he does not stand with these people when everyone else is making sacrifices.

The secretive and powerful $1.3 trillion hedge fund industry is seething in private. Asness responded more publicly.

In a letter, widely circulated on Wall Street and obtained by Reuters, Asness complained that Obama has gotten the industry all wrong and effectively misunderstands what investment managers must do for their clients.

"Let's be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can," Asness wrote.

"If they give away their clients' money to share the 'sacrifice,' they are stealing."

A spokesman for the firm said Asness wrote the letter.

While Asness said his firm is not involved in the Chrysler matter, he decided to speak out because he is "aghast at the President's comments."

Known for writing detailed letters to investors, Asness did the same here. He also worried about the consequences.

"It's really a bad idea to speak out. Angering the President is a mistake and, my views will annoy half my clients," he predicted.

Still, he felt he needed to respond widely because no one else was. Industry managers are reacting with anger to the President's words and demands, Asness said, but he also said they were buckling to demands.

"One by one the managers and banks are said to be caving to the President's wishes out of justifiable fear," he said.

As he went on, his tone became ever more insistent.

He said it was untrue hedge funds benefited from taxpayer money.

"Last but not least, the President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large," he wrote. "Find me a hedge fund that has been bailed out."

He closed the letter by saying the system usually fixes itself: "Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President."

(Reporting by Svea Herbst-Bayliss; Editing by Andre Grenon)