October 07, 2006
Hedge Fund Gets Political Legitimacy
Back in the good old days when black was black and white was white, hedge funds were the bad guys who had all the fun. They still have fun, but the lines are somewhat blurred now. On the one hand you have the Amaranth collapse and the SEC bid to regulate the industry. The regulation attempt is being portrayed as reining in a wild horse. Well!! Anyways, when you look at the flip side, you have pension funds and even the Nobel institution (the ones that instituted the Nobel Prize) investing in hedge funds. This grants them much needed legitimacy.
With this background in mind, what would you make of a politician who has put more than half of his campaign treasury into a hedge fund? Andrew M. Cuomo, the Democratic candidate for attorney general, is one of the few New York politicians to invest campaign money in anything riskier than a sure bet. And there’s also an interesting aspect to this story. The hedge fund in which Mr. Cuomo invested was directed by one of his largest financial backers, a man who also handled Mr. Cuomo’s personal money. Mr. Cuomo, who had invested $750,000, got a return of nearly 20 percent after one year.
So how are the government and SEC reacting to this new trend of investing campaign money in hedge funds? Well, there is a lot of concern. The main reasons being cited are their unregulated nature and their secrecy. So, a high return could also be a campaign supporter’s efforts to evade contribution limits by padding the return of a favored campaign account.
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