| (Photo courtesy of Kristin Davis)|
Kristin Davis is a fan of hedge funds and not merely because some managers used to patronize her stable of escorts. Davis, who counted elite athletes and former Governor Eliott Spitzer as clients of her profitable prostitution ring, got her start in the back office of a California hedge fund.
The Anti Prohibition party nominee’s platform centers on legalizing marijuana, prostitution, casino gambling and gay marriage, but she’s also got some concrete policy proposals for keeping hedge funds in New York.
That comes from nearly a decade working in the hedge fund industry. Davis started her career at Brookhaven Capital Management, a now-closed Menlo Park, Calif.-based fund. She began in 1994 in an administrative position and says she worked her way up over six years to controller at the age of 25 (a former Brookhaven executive confirmed her employment, calling her a “quick learner” and “very entrepreneurial”).
Next, Davis did back-office support—regulatory filings, net asset value calculations, processing securities—for hedge funds at third-party administrators Conifer Securities (a spokesman for Conifer confirmed only that Davis worked at the company from February 2002 to March 2003) and Hemisphere Management, where she says she was vice president of operations in charge of a staff of 40 in the firm’s Boston office, which could not immediately be verified.
AR recently asked Davis, who was convicted of promoting prostitution and served four months on Riker’s Island, about her hedge fund experience and how she’d use it as governor.
AR: How would your hedge fund experience help you to run New York State?
KD: My hedge fund experience most definitely helped prepare me for everything I've encountered in life. My first employer was great, but also very tough, which gave me a strong work ethic. If I was off even a basis point in our monthly accounting, I had to search through millions of trades—and dollars—to find the discrepancy.
My boss used to say “under promise, over deliver.” I carry that saying with me now because most people underestimate me because of the way I look, and I realize it makes it easy to over deliver since the expectations are low.
I also went through bankruptcy with Brookhaven and worked with the firm to try and save it, so I understand how to deal with companies in crisis.
Lastly, I've also worked with portfolio managers whose egos won't allow them to dump failing stocks or to change their trading strategy and I understand how pride and ego need to be taken out of the equation when running a business.
If governor, how would you manage the state pension system? Would you allocate more to hedge funds?
If elected, I would move the state pension to be directed by a board of trustees rather than the current system where all investment decisions are made by the comptroller. Having one man in charge of billions of dollars invites corruption. I favor a diversified portfolio with hedge fund products included.
How would you approach hedge fund taxation?
I am opposed to higher levels of taxation. I oppose the stock transfer tax as well as the New York City tax. The New York City tax specifically has forced many hedge fund managers to relocate outside the state to areas like Stamford, Connecticut.
New York City has a separate income tax in addition to New York State income tax. This can be up to 3.6%, which has driven a number of hedge funds out of the city (and state) to areas that don't have this additional tax. I don't think businesses should be penalized (from a tax perspective) for doing business within NYC.
I favor repealing that tax to attract funds to come back to the city and generate revenues for the state. I also favor cutting the state corporate tax rate in half to stimulate economic growth. Lowering the taxes would allow companies to expand as they will have more capital. This is simple economics.
Are the new SEC/state registration and disclosure rules strong enough?
I cannot assess the SEC rules right now because I don't think they are properly being enforced. We need to enforce the rules we have, and then examine them to see if they are adequate—and working.
Should hedge funds be allowed to market themselves?
Yes, hedge funds should be allowed to market themselves. Like any other investment vehicle, hedge funds deserve the same right to market. Now that hedge funds need to register with the SEC, they should be allowed to market themselves.
Did clients of your escort service include hedge fund employees?
Yes, my agency had many hedge fund clients. I spoke with a many of them on the phone when I booked their appointments. I talked shop with them and a few of them offered me jobs at their firms. I told them they couldn't afford me.