Hedge fund money flows to US candidates in 1st qtr

By Svea Herbst-Bayliss

BOSTON, June 1 (Reuters) - Managers at top hedge funds contributed $1.1 million to U.S. presidential candidates during the first three months of 2007, sending the bulk of their donations to Democrats, a monitoring group said on Friday.

Managers at Fortress Investment Group (FIG.N), SAC Capital Advisors, Farallon Capital Management and other funds wrote checks worth thousands of dollars to front-runners like Democratic candidate Sen. Hillary Rodham Clinton and Rudolph Giuliani, a Republican.

But they donated most generously to Connecticut Democratic Sen. Christopher Dodd, the Center for Responsive Politics found. Dodd, whose state is home to many of the world's biggest hedge funds and who also chairs the U.S. Senate Banking Committee, received $347,300 in the first quarter.

John Edwards, the Democratic vice-presidential candidate in 2004, followed in second place with $190,650 raised, ahead of Clinton with $164,600.

Hedge fund industry magazine AbsoluteReturn asked the center to compile the data.

While the hedge funds' $1.1 million makes up only a fraction of the roughly $130 million that candidates raised in the first quarter, the number suggests that managers in the $1.5 trillion industry are becoming more politically active.

"One reason that donations are increasing is that the industry is growing," said Massie Ritsch, a spokesman for the Center for Responsive Politics. "It is a largely unregulated and not very well understood industry and many in the industry would like to keep it that way, so this might be seen as a defensive move," he said.

For the first time ever, a hedge fund -- Fortress Investments -- ranks among the top 10 donors in the securities and investment industry, Ritsch said. Goldman Sachs (GS.N), Citigroup (C.N), Merrill Lynch MER.N and other investment banks and brokerages have long dominated that list.

While prominent hedge fund managers like George Soros have waged public campaigns for political candidates, managers at more publicity-shy funds are now getting involved.

For example, managers at SAC Capital, one of the industry's most successful hedge funds which tries hard to stay out of the limelight, donated $209,600 to Dodd, its home-state senator.

Elliott Associates, a New York-based group, donated $52,200 to Giuliani, who used to be New York City's mayor and counts on support from Wall Street.

John Edwards, who has worked as a consultant for Fortress, raised $182,250 from that group.

"You can't discount the fact that the Senator who represents the home of the industry or the former mayor of the city that is home to lot of hedge funds will pull in a lot of money," Ritsch said.

But hedge fund money still makes up only a small subset of money raised from the securities and investment industry which gave the top amounts to Republican candidates in the first quarter.

Former Massachusetts Gov. Mitt Romney, a Republican, raised $1.9 million from donors in the financial industry followed by Giuliani with $1.8 million. Clinton was next with $1.7 million.