Some hedge funders are happy about what Trump can do for their industry.
At the Absolute Return Symposium on March 16, four out of the five hedge funders polled on a panel said they thought that the president was good for business. The fifth declined to say.
Some of the panelists said they believed hedge funds are over-regulated and were hopeful that the new administration would pare policing efforts.
Chris Hardy, chief compliance officer at Whitebox Advisors, which paid a $US1.2 million settlement in 2014 after the Securities and Exchange Commission investigated the firm for illegal short selling, said he was hopeful that the agency would pull away from its so-called broken windows approach.
That strategy, Hardy said, involves “investigating managers and holding them accountable for pretty minor infractions in a really significant way. It’s the theory that if you take out the small stuff, the big stuff will take care of itself.”
“Hopefully we’ll see some pullback from that,” Hardy told an audience of Wall Streeters at a tony conference center overlooking Central Park.
Last year, the SEC issued a record-number of sanctions, likely a result of the agency enforcing more minor cases, according to a Wall Street Journal report from the time.
Hedge fund execs often say that complying with regulations is costly, and Hardy brought that point up at the panel. He cited a document that managers must file with regulators, called the Form PF.
“I have significant doubts they’re even taking the data and analysing it in any meaningful way,” Hardy said. “The amount of money firms have had to drop in to find solutions to that is a fairly ridiculous thing.”
Trump has picked Jay Clayton, a longtime partner at law firm Sullivan & Cromwell, to head the SEC. Clayton is known for his ties to the hedge fund industry, and has previously represented hedge fund managers like Bill Ackman’s Pershing Square and Paul Tudor Jones, the New York Times reported.
Another hedge funder on the panel, Patrick Kelly, cofounder of Brigade Capital Management, said he was “encouraged” by the Trump administration’s ties.
“The last eight years, we’ve had a situation where they were assuming that you maybe weren’t as legit as you lived your life to be,” Kelly said. “I’m encouraged by the commercial nature of the people there, who understand that the mortgage crisis was maybe not caused by the things you read about in the paper, and there were other things behind it.”
“If we get back to a business isn’t bad approach, I think it benefits everybody,” he added.
Brigade managed $US4.5 billion in hedge fund assets as of midyear 2016, according to the HFI Billion Dollar Club ranking. Whitebox managed $US4.2 billion.
Richard Shapiro, partner at $US3 billion Wexford Capital, and Andrew Rabinowitz, president of $US13 billion Marathon Asset Management, also participated in the panel. Both said they thought Trump was good for the hedge fund business.
The fifth panellist was Alex Litowitz, founder of $US13.5 billion Magnetar Capital. Following the financial crisis, the SEC investigated Magnetar for more than a year after the fund created risky deals betting on the mortgage crisis that lost billions of dollars. Magnetar wasn’t charged with wrongdoing.
Asked on the panel whether he thought Trump was good for the hedge fund industry, Litowitz declined to say.