hedge funds, buyout firms giving to Dems
Hedge Funds, Buyout Firms Favor Democrats With Campaign Money
Aug. 14 (Bloomberg) — Democrats are collecting more than two-thirds
of the campaign donations from employees of the biggest hedge funds
and buyout firms, as the party taps into one of Wall Street’s fastest-
growing sources of wealth.
Of the $7.4 million contributed by employees of the 100 largest hedge
funds and 50 biggest buyout firms in 2005-06, Democrats received $5
million, Federal Election Commission records show. The biggest checks
went to congressional campaign committees led by New York Senator
Charles Schumer and Illinois Representative Rahm Emanuel, which took
in $2.8 million.
Donors say they’re giving more to Democrats because of their dismay
over President George W. Bush’s performance on issues such as the war
in Iraq and because they see a real chance for Democrats to win
control of Congress for the first time in 12 years. They say they
view Schumer and Emanuel — who are courting Wall Street donors — as
key to that goal.
“Rahm and Senator Schumer are pretty charismatic guys — they’ve
been extremely aggressive in making sure they target the right people
and talk to the right people,” says Marc Lasry, managing partner at
New York-based Avenue Capital Group, among the biggest hedge funds.
“Iraq has made it easier for Rahm and Senator Schumer to raise money.”
The trend among hedge-fund and buyout-firm donors contrasts with
political giving by the wider financial community, which has long
favored Republicans and continues to do so this year.
Business PACs
Political action committees in the finance and insurance industries
have given 64 percent of their $34.8 million in donations to
Republican candidates for this year’s election, according to
PoliticalMoneyLine, a Washington company that follows money in politics.
“Hedge-fund and buyout-fund giving is largely the personal giving of
wealthy individuals who probably lean Democratic in their personal
beliefs,” says Kenneth Gross, a campaign-finance lawyer in
Washington. PACs are “more prone to back incumbents in support of
legislative programs. The PAC ship won’t begin to turn significantly
unless the Democrats actually gain control.”
Mallory Factor, a New York merchant banker who raised at least
$500,000 for Bush and the Republican Party in 2004, says the hedge-
fund industry perceives the mood of the country as moving against
incumbents, most of whom are Republicans.
“Hedge-fund guys happen to have a very good awareness of what is
happening,” Factor says. “They understand trends.”
Ties to Funds
Schumer, 55, and Emanuel, 46, are capitalizing on their ties to hedge
and private-equity funds to boost Democratic fund raising from the
industry. Schumer is a New York City native and counts Wall Street as
a constituency. During his 2004 re-election campaign, he raised more
money from hedge-fund executives than any Democrat in Congress.
“It is our good fortune that a lot of these people happen to live or
work in New York and that Chuck Schumer knows them,” says Phil
Singer, spokesman for the Democratic Senatorial Campaign Committee
led by Schumer.
Emanuel, who leads the Democratic Congressional Campaign Committee,
is a former managing director of the New York investment firm
Wasserstein Perella Group, now owned by Frankfurt-based Dresdner Bank
AG. He was finance chairman of President Bill Clinton’s 1992 campaign
and also has a foot in the hedge-fund industry.
John Simpson, chief operating officer of Canyon Capital Advisors in
Beverly Hills, California, is treasurer of Emanuel’s individual PAC.
Canyon Capital manages $7.9 billion. Emanuel wasn’t available to
comment.
Worked `On the Street’
“Rahm used to work on the Street,” Lasry says of Emanuel. “He
knows the guys and how people think.”
Hedge funds manage $1.2 trillion globally, up $200 billion in one
year. U.S. private-equity companies have $544.1 billion in capital
under management, according to the National Venture Capital
Association, using figures from Thomson Financial. The 8,500 hedge
funds and 566 U.S.-based private equity funds are overwhelmingly
located in heavily Democratic cities.
The donations “are not entirely surprising if you consider the
demographics of highly educated people living in New York, Boston and
San Francisco,” says Jim Lucier, a senior political analyst at
Prudential Equity Group in Washington.
Lasry, of Avenue Capital Group, and his wife have given $110,000 to
Schumer and Emanuel’s committees since January 2005, according to FEC
figures. They gave $51,000 for the 2004 elections. Lasry has held
fund-raisers for Emanuel and the DCCC at his townhouse on Manhattan’s
Upper East Side.
`Grew Up a Democrat’
Tim Collins, founder and chief executive of the New York- based
buyout firm Ripplewood Holdings LLC, and his wife have given at least
$42,000 to Schumer and Emanuel’s House and Senate party campaign
committees, according to FEC figures.
“I grew up a Democrat, I’ve been a Democrat all my life and I don’t
mind paying higher taxes if it means taking care of people less
fortunate than myself,” says Collins, 49, whose firm is one of the
50 largest buyout firms.
Hedge-fund employees also gave more to Democrats in the 2002 and 2004
elections, though not to the same degree as this year. In 2004,
executives at the 50 biggest hedge funds gave about 62 percent of
their donations to Democrats.
While the overall trend in the industry favored the Democrats,
Republicans benefited the most from donations given by employees of
New York-based hedge fund Elliott Associates LP, which had the most
generous political donors among the 150 firms. The fund’s executives,
led by founder Paul Singer, have made at least $503,050 in
contributions since January 2005.
Republicans `Better’ on Issues
“I believe strongly that everyone should participate in the
political process,” Singer says. “I continue to believe that the
Republican Party is better on important issues like national
security, energy policy, taxes, judges, litigation reform and the
economy.”
Employees of Boston-based Bain Capital LLC, a private-equity firm,
ranked second, giving at least $362,300. Most of the money went to
Democrats.
Senator Hillary Clinton, a New York Democrat, raised the most of any
individual candidate from hedge funds, taking in at least $144,460
from January 2005 through June 2006. Indiana Senator Evan Bayh, also
a Democrat, did the best among private equity or buyout firms,
receiving $124,625.
The Democrats are tapping into an important source of campaign cash
for Republicans. Three potential 2008 Republican presidential
candidates — Senator John McCain of Arizona, Governor Mitt Romney of
Massachusetts and former New York Mayor Rudolph Giuliani — count
executives of hedge funds or buyout firms as their biggest corporate
contributors, according to FEC records.
McCain’s top financial supporters are executives of New York-based
Kohlberg, Kravis, Roberts & Co., the biggest buyout firm. The largest
donors to Romney are employees of Bain Capital, which he founded
before entering politics, and executives of Elliott Management are
Giuliani’s biggest company supporters.