West Palm Beach (HedgeCo.Net) – At a crucial time in the race to secure the democratic nomination, Barack Obama is garnering support from the very individuals his tax laws are going to target.  Hedge Funds are donating large sums of money to the current front-runner, in what is a stark change from their once Pro-Hillary stance.     

Senator Clinton, who received almost $700,000 last year from hedge funds alone, has long been regarded as being “pro-business,” and her alliance with many of the big names on Wall Street was supposed to help catapult her right onto the presidential ticket.   

But the tables have started to turn.  Obama has won the support of Chris Dodd, senator from Connecticut, the hedge fund capital of the world, and head of the Senate’s banking committee.  Obama has also managed to collect over $50,000 from large hedge funds in the month of January alone.  

However, some believe his recent blitz in caucus wins and the ensuing front-runner status bestowed on him has led some hedge funds to jump on the Obama train. The sudden support comes as a surprise, after he candidly outlined his plans for tax reform.

Hedge Fund managers receive income in two different ways. The first is the management fee, which is usually 2% of the funds value. The other is the performance fee, which is usually 20% of the total profits. This 20% is called “carried interest,” and is taxed at the rate of capital gains, which right now, is only 15%. Obama has proposed that this rate be changed to 35%, to even up the playing field so to speak. Let’s say a hedge fund manager makes $10 million. Currently, he would have to pay $1.5 million in taxes. With the 35% rate, that number jumps to $3.5 million.

The shift in momentum towards Obama is a major blow for Hillary, who has deep ties with the hedge fund industry.

Through the support of friends like billionaire Marc Lasry, who runs the Avenue Capital Group in New York City, and Thomas Steyer of Farallon Capital management, Clinton positioned herself nicely among the hedge fund elite. Of course, her recent statements catering to middle-class America may have had something to do with the shift.

In a recent campaign speech, Clinton asserted that hedge fund managers don’t do “real” work. Chelsea Clinton, who works for the Avenue Capital Group, looked on as her mother promised to bring financial equality to hedge fund managers and truck drivers alike.

Citing a “glaring inequity” in the current tax laws, Clinton vowed that she would “reform our tax code to ensure that the carried interest earned by some multi-millionaire Wall Street managers is recognized for what it is: ordinary income that should be taxed at ordinary income tax rates."

So whether hedge funds now a days are supporting Hillary or Barack, the backing of democratic candidates by high net worth Wall Street players is a trend not usually seen in recent presidential elections. It will be interesting to see the actual course of action that either Hillary or Obama will take, pending their Presidency. Will they bite the hand that feeds them? Or will they gradually shy away from the issue in hopes that the American public will forget about the promise of equal taxes across the board?

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net]

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com