BOSTON (Reuters) - Hedge fund managers are famous for betting against conventional wisdom, and this year many are doing just that by backing Democrat Barack Obama’s White House bid and defying Wall Street’s usual embrace of Republicans.
New figures show the Illinois senator and presumptive Democratic presidential nominee has drawn $822,375 in campaign contributions from employees of hedge funds, compared to $348,300 for his Republican rival, Arizona Sen. John McCain.
The figures, compiled for Reuters by the Center for Responsive Politics, a nonpartisan campaign finance research group, reflect mounting concern over the rising cost of health care and other domestic issues where several hedge fund managers said Obama had an edge over McCain.
“My goal is not to pay less taxes,” said William Ackman, head of hedge fund Pershing Square Capital Management, who is known for pressuring management of companies to improve profits by cutting costs or selling divisions. “My goal is to elect an incredibly smart and capable guy.”
Traditionally, investment managers have funded fiscally conservative presidential candidates who promise to keep taxes low and regulation at bay.
McCain would appear to fit that mold better than Obama. McCain wants to keep in place President George W. Bush’s 2001 and 2003 tax cuts, which are set to expire at the end of 2010, and he would double a $3,500 deduction for parents.
Obama would let the Bush tax cuts expire for those making more than $250,000 per year. He proposes a $500 per person tax credit and would eliminate taxes for elderly people making less than $50,000 per year.
Some managers in the $2 trillion hedge fund industry say they are concerned that an Obama administration would lead to a tougher regulatory climate, citing Obama’s recent call for tighter regulation on oil speculators, including hedge funds.
But his plans for healthcare and education are resonating with many in the industry who say those issues are more crucial to the economy and their own pocketbooks than tax cuts and tighter regulation of their industry.
Employees at $20 billion hedge fund Citadel Investment Group, run by Kenneth Griffin, rank as Obama’s top hedge fund backers, donating $185,300 to their home-state senator so far.
Employees at New York-based Taconic Capital Advisors donated $42,650 to Obama and $500 to McCain, while employees at D.E. Shaw & Co, also headquartered in New York, gave $41,915 to Obama and nothing to McCain.
Political activism is not uncommon in the hedge fund industry. Chelsea Clinton, the daughter of former first lady and Democratic presidential contender Hillary Clinton, worked in 2006 at Avenue Capital Group, a $12 billion hedge fund manager whose founder contributed to many Democratic Party campaigns.
McCain also has considerable hedge fund backing. Managers and other staff at Moore Capital Management LLC in New York donated $42,600 to his campaign. In May, McCain raised more money from the industry, netting $59,875, compared to Obama’s $20,400, the data show.
While Citadel ranks as Obama’s biggest donor, its employees also gave $11,400 to McCain this campaign season. Highbridge Capital Management, the hedge fund arm of JP Morgan Chase & Co, donated $14,800 to Obama and $15,900 to McCain, the data show.
“People are clearly looking to gain influence with the candidates down the line and are making their bets accordingly,” said a hedge fund manager in Chicago who declined to be identified so he could speak candidly.
Anecdotal evidence also suggests that thousands of young, highly educated hedge fund managers are more aligned with the Democrats than the Republicans this cycle.
Part of the reason may be what one New York hedge fund manager called deep frustration with Bush’s Republican administration.
“People want to throw this party out and so you are seeing even people whose financial interests might be elsewhere line up behind the Democrats,” said the manager, who also declined to be identified.
Another draw for Obama could be more elusive — his star power. Many hedge fund managers, who have proven their mettle in forcing change at some of the biggest U.S. corporations, may identify with a young, charismatic candidate who they see as a bit like themselves.
“They clearly want to be with other stars” and Obama is considered to be that right now, said Philip Duff, a hedge fund industry veteran who launched Duff Capital Advisors in Greenwich, Connecticut, in March.
(Additional reporting by Dane Hamilton in New York)
Editing by Jason Szep