Hedge fund managers leery of activist Uncle Sam

By Joseph A. Giannone

LAS VEGAS (Reuters) - Many hedge fund managers, though confident in the recovery of their investments and their industry, are leery of the U.S. government's intervention into a number of issues from financial markets and bonuses to Chrysler's bankruptcy.

Following a brutal 2008 of losses, plunging assets and the Madoff scandal, the activities of the Obama administration were a primary worry among the nearly 500 hedge fund managers and other industry executives gathering at a Las Vegas conference this week.

"When you have government intervention at the scale we have, you do something the markets abhor: you create uncertainty," said Sean Mathis founding partner of New Centurion Capital Partners. "We have uncertainty where markets are going and what the rules of the road will be."

The Obama administration, even as it courts private investors to help buy up toxic bank assets, has targeted Wall Street bonuses and called for tougher market regulation.

Yet it was President Barack Obama's outspoken criticism of some Chrysler's hedge fund creditors as "speculators" and subordination of Chrysler's secured lenders that left fund managers feeling wounded.

Hedge fund executives at the conference said Obama's deal undercut bankruptcy court rules that have long given priority to secured lenders. The White House move and its combative stance with hedge funds may keep some managers on the sidelines or chill investment in some companies.

Gary Kaminsky, former managing director at Neuberger Berman, told conference members that government involvement began last March with the forced sale of Bear Stearns to JPMorgan Chase (JPM.N) and has not let up since.

"You have to assume the government will be involved. You have to assume the free market is not as free as it was in the past and won't be for the next 20 years," Kaminsky said.

Federal lawmakers also raised a fuss about luxurious business travel, especially for banks that received taxpayer-funded bailouts. SkyBridge Capital co-managing partner Anthony Scaramucci, whose firm decided to host the conference in the gambling mecca, told attendees that a few prominent hedge fund managers begged off the trip to Las Vegas to avoid any political backlash.

(Reporting by Joseph A. Giannone; Editing by Steve Orlofsky)