One year ago
»» Podesta Group lobbyist Andy Lewin took a glimpse into a world
beyond the midterm elections and predicted what the rapid rise
of the Tea Party could mean for hedge funds.
"Tea Party members and Republicans generally would
likely agree to oppose discriminatory changes to carried
interest taxation and would probably oppose attempts made
during the Dodd-Frank process to effectively tax hedge funds to
pay for systemic risk regulation," Lewin said. "At the same
time, populist Tea Partiers tend to distrust Wall Street and
big banks as much as those on the left and, like most members
of Congress, many of them likely wouldn’t
distinguish between Wall Street and hedge funds."
Lewin was mostly correct, as Tea Party members fell
into ranks with fellow GOP congressmen to compel President
Barack Obama to extend Bush-era tax cuts for wealthy Americans.
But they did not prove much of a force against big banks or
hedge funds, despite distaste for the wealthy institutions from
many mainstream voters who propelled the Tea Party to its
Reflecting back this week, Lewin told AR "the prediction that the Tea Party would value
confrontation over compromise has been borne out, from the
April government shutdown fight to the debt ceiling debacle to
the most recent government shutdown mess just this week."
"On taxes, the influence of the Tea Party has been
apparent on everything from carried interest to marginal rates,
with the Tea Party pushing House and Senate Republicans and the
Republican presidential candidates to the right of Ronald
Reagan on a lot of tax issues, and even the general notion that
some taxes might, once in awhile, have to increase just a
little bit. Most Tea Party members haven't gotten into the
weeds on hedge fund-specific issues, but their presence and
devotion to confrontation has created (or at least exacerbated)
a volatile environment in which hedge funds have to operate,"
Lewin wrote in an email.
»» D.E. Shaw managing director Darcy Bradbury was unanimously re-elected chair
of the board of the Managed Funds Association, the hedge fund
industry’s chief lobbying group.
Bradbury, along with a host of new board members from such firms as AQR
Capital, Highbridge Capital Management and TPG-Axon Capital,
was tasked with staying on top of new regulations.
Last week, Maverick Capital chief operating officer
William Goodell, who was also previously the former general
counsel for Julian Robertson’s Tiger Management,
was unanimously elected as the MFA’s new
In an interview with AR, Goodell said he
was looking to expand the organization’s influence
internationally, particularly in Europe. He also said he would
continue to focus on taxes in the U.S. (see the full Q&A here).
"Perhaps the most egregious example of hedge funds
being singled out is the proposal to impose an enterprise value
tax," Goodell said. "I am simply astounded to think that one
form of business would be discriminated against in this way and
hope that Congress will abandon that option."
Senate banking chair discusses hedge funds,
An Obama backlash
Five years ago
»» The U.S. House of Representatives
passed a bill calling for a
"Hedge Fund Study Act" from the President’s
Working Group on Financial Markets. While at the height of the
market boom, the study would have examined "the potential risks
hedge funds pose to investors and the financial markets."
But the bill never made it past the Senate. Three
years later, in 2009, Rep.
Mike Castle (R-Del.) reintroduced the bill when Democrats
took control of all three branches of government, but it did
not make it out of committee. And Castle is no longer around to
champion the cause, having been defeated by Christine
O’Donnell last year when he ran in the GOP primary
to become the party’s candidate to succeed the
Senate seat vacated when Joe Biden became Vice President.
Though the study was never executed, the
President’s Working Group has since released
several papers that touch indirectly and directly on hedge
funds. Many have been without serious bite. In one 2007 set of
guidelines for "private groups of capital," the
group demonstrated a flair for the obvious when it
suggested that, "Investors in a private pool of capital should
carefully evaluate the strategies and risk management
capabilities of the private pool to ensure that the
pool’s risk profile is compatible with their own
appetites for risk."
Colleen Murray, a spokeswoman
for the President’s Working Group on Financial
Markets, did not respond to a request for comment.
The devil in Dodd-Frank,
Why the proxy access rule decision is a loss for activist hedge
Congress looking at offshore tax issues