Friday, 25 July 2014
Last updated 29 min ago
Nov 13 2008 | 12:55pm ET
A quintet of top hedge fund managers are set to defend their embattled industry before Congress today.
George Soros, Harbinger Capital Partners’ Philip Falcone, Paulson & Co.’s John Paulson, Renaissance Technologies’ James Simons and Citadel Investment Group’s Kenneth Griffin are set to testify before the House Committee on Oversight and Government Reform. The hedge fund honchos are set to be grilled on their extremely profitable bets against subprime mortgages and what blame, if any, the industry deserves for the current hedge fund crisis. Both Rep. Henry Waxman (D-Calif.), the committee’s chairman, and Rep. Thomas Davis (R-Va.), its top Republican, have suggested that the hedge fund industry is in need of greater oversight and possibly regulation.
But Soros, a major contributor to Democratic Party causes, urged the committee against “going overboard” with “ill-considered” regulation that could adversely affect an industry already reeling from the market turmoil.
“Excessive deregulation has inflicted enormous losses on the general public and there is a real danger that the pendulum will swing too far the other way,” the Quantum Fund founder said in written testimony submitted to the committee. “The bubble has now burst and hedge fund will be decimated. I would guess that the amount of money they manage will shrink between 50% and 75%. It would be a grave mistake to add to the forced liquidation currently dislocating markets by ill-conceived or punitive regulations.”
For his part, Falcone recommended greater oversight for the industry. But he also defended hedge fund against accusations that managers make too much money.
“This is not a case where management takes huge bonuses or stock options while the company is failing,” he wrote.
Paulson echoed that sentiment.
“In our business, one of the most fundamental principles is alignment of our interests with those of our clients,” he wrote. “All of our funds have a ‘high-water mark,’ which means that if we lose money for our investors, we have to earn it back before we share in future profits.”
Of course, Paulson has no worries on that account. Unlike some of his fellow testifiers, his funds are up double-digits this year, after his triple-digit returns last year.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…