In Depth

Democratic Fundraiser Targets Hedge Fund Pros

Feb 22 2008 | 8:15am ET

Over the past three election cycles, hedge fund managers and their colleagues have become some of the most important donors to Democrats and Democratic candidates. The alternative investment industry is giving more than ever to politicians—almost $7 million has been contributed to presidential candidates this cycle, according to OpenSecrets.org—with an ever-increasing share of that pie going to Democrats.

Of the more than $3 million in hedge fund cash given to presidential candidates last year, 75% went to Democrats. That margin has helped the leading Democratic presidential candidates to raise almost three times as much as the presumptive Republic presidential nominee, Sen. John McCain (R-Ariz.). Party leadership is hoping to leverage this newfound strength with a New York fundraiser aimed specifically at hedge fund professionals.

“The importance of political leadership to the functioning of the economy and the markets has never been as clear as under the present administration,” Dan Loeb, who runs New York activist hedge fund manager Third Point, told FINalternatives. “Understanding how the current crop of political candidates assess these challenges and plans to address the economic issues threatening our country makes this the most important and interesting election in our lifetimes.”

Loeb is joining private equity chieftain (and New Jersey Investment Council chairman) Orin Kramer and the interim chief investment officer of Harvard University’s endowment fund, Robert Kaplan, as a panelist at next Thursday’s fundraiser at the Feldman Gallery. Half-market forecast, half-insider strategy session, the event also features former Vermont Gov. (and 2004 presidential candidate) Howard Dean, the chairman of the Democratic National Committee, who will talk about the remarkably tight race between Sens. Hillary Clinton (D-N.Y.) and Barack Obama (D-Ill.).

Cynthia Nicoll, chief investment officer at fund of hedge funds shop Tremont Capital Management, who will moderate the financial markets panel, and Philip Murphy, the DNC’s National Finance Chair, will also participate.

According to event chair and organizer Leonard Carr, a marketing director for a New York-based hedge fund, “this is the hottest ticket in the industry.”

“The intent wasn’t to raise a lot of money,” he says, pointing to ticket prices as low as $250. “The interest was in getting a leading group of investment professionals together to speak and give their opinions on the financial and political markets.”

“We have, in the name of Democratic politics, the ability to attract real leaders in the investment and hedge fund space to speak,” he added. “We wanted to capitalize on those relationships to reach out and talk to other people in the hedge fund space.”

Even after last year’s aborted attempt by Democratic congressional leaders to more than double the tax rate paid by some in the alternative investment industry, hedge fund money continues to pour into the party’s coffers. According to Carr, the roughly 125 tickets to next week’s fundraiser sold out “almost instantly.”

“When people with high incomes, or who benefit from particularly low capital gains rates, support Democrats, it’s because they care about the posture of the United States abroad,” Kramer says. “They might think Iraq was a mistake. They care about an utter lack of fiscal discipline. In other words, there is a set of issues that people care about that becomes more important than their marginal tax rate.”

“If you have people with high incomes who are strong Democrats, that says they are motivated by a set of considerations—because they care about their country—that are independent of their own short-term economic interest,” he adds.

Carr attributes the Democratic Party’s success in cultivating a hedge fund donor base to the fact that the industry “is dominated by young people, and people who want to look at ideas differently and from a different light.”

While the panel’s participants have taken sides—Kramer and Loeb are major Obama supporters, while Kaplan backs Clinton—the event is strictly non-partisan, from a candidate standpoint, anyway, with all funds raised going to the DNC.


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