Hedge Fund Chiefs, With Cash, Join Political Fray

By LANDON THOMAS Jr.
The New York Times
January 25, 2007

Lisa Perry loves Hillary Rodham Clinton.

So much so that two large portrait photographs of the senator by Chuck Close grace the hallway of her 1960s-themed penthouse apartment on Sutton Place in Manhattan.

“It’s a beautiful picture because Hillary is beautiful,” said Ms. Perry, a top Democratic fund-raiser, whose husband, Richard, runs a prominent $12 billion hedge fund. “I will be there for her emotionally, and I will raise.”

There are no Pop Art portraits of Rudolph W. Giuliani in the home of Paul E. Singer, a longtime hedge fund executive and a primary fund-raiser and policy adviser to Mr. Giuliani, but his support is no less ardent.

“Rudy Giuliani is the right leader for the times,” Mr. Singer said.

Hedge fund money, which now exceeds $1 trillion, has emerged in the last several years as a potentially powerful force in politics, as underscored by the significant role it is playing in the presidential aspirations of Mrs. Clinton and Mr. Giuliani. During the 2006 election cycle, executives who work at the 30 biggest hedge funds made $2.8 million in contributions to political candidates or party committees, almost double the amount in 2000.

Yet it is not just the money they donate directly that makes people in hedge funds attractive to campaigns. They also offer access to other potential donors in the financial world, which in recent election cycles has become one of the biggest sources of political contributions. That pipeline has made it easy for well-connected candidates like Mrs. Clinton, Mr. Giuliani and Senator John McCain to consider forgoing public funding. (Mrs. Clinton has done so; Mr. McCain is expected to opt out; and Mr. Giuliani has not yet addressed the topic.)

And top candidates for the 2008 campaign are expected to raise a lot of money quickly — at least $100 million each by the end of this year by some estimates.

“Are hedge fund guys going to be happy with their art collections and their houses in Greenwich or are they going to take the next step?” said Byron R. Wien, the investment strategist at Pequot Capital. “As Hollywood once invaded politics, you will see the same with hedge funds.”

Money from Wall Street has long been a factor in Washington and has tended to flow, with a policy agenda, to the ascendant political party. Giving by people in hedge funds, on the other hand, tends to be more personal and ideological. Some of the most aggressive donors have been Democratic supporters like George Soros, David E. Shaw of D. E. Shaw and James H. Simons at Renaissance Technologies, as well as younger executives like Thomas F. Steyer at Farallon and Marc Lasry at Avenue Capital, all of whom gave generously during the 2006 election cycle.

While hedge fund money appears to be tilting toward Democrats of late, Republican donors like Julian H. Robertson Jr., the founder of Tiger Management, who has given more than $700,000 over the last three cycles, and Bruce Kovner at Caxton Associates have backed their party’s candidates and causes.

Still, compared with the billions of dollars that hedge fund magnates have spent on art, mansions and other extravagances, these political donations are a pittance, held in check by federal finance laws that limit personal contributions to $2,100 and by a general reluctance to step into the public limelight.

But with the rapid growth of their money and stature, an increasing number of the hedge fund wealthy are not just putting their money to work, they are forging personal and professional ties with a generation of politicians who have come to spend as much time raising money as they do drafting legislation.

The courtship has been slow.

After all, the essence of the industry’s success has been its unregulated status and secrecy, so hedge fund titans must weigh the thrill of proximity to political power with the increased public scrutiny that inevitably follows.

The connections can take different shapes and forms. For John Edwards, the Democratic presidential candidate, the 14 months he spent as a paid senior adviser at Fortress Investment, a $29.7 billion hedge fund and private equity firm, helped him to bond with the fund’s liberal-leaning executives, several of whom have given money to Mr. Edwards.

As to what Mr. Edwards, a trial lawyer with no previous financial markets experience, did at Fortress, an adviser to the candidate said that Mr. Edwards “advised on where there might be investment opportunities and where he saw the global economy going.” Mr. Edwards resigned from Fortress last month before declaring his candidacy.

And Avenue Capital, a $12 billion fund run by Mr. Lasry, a prominent financial supporter of the Clintons, hired their daughter, Chelsea, last year.

Mr. Singer and Ms. Perry represent different sides of the same coin. Mr. Singer, 62, is the founding partner of Elliott Associates, a $7 billion hedge fund with a conservative, risk-averse bias that has been in business since 1977, making it one of the oldest funds around. A reserved, private man who would answer questions only via e-mail, Mr. Singer is a self-described conservative libertarian who has given millions of dollars to Republican organizations that emphasize a strong military and support Israel.

They include Progress for America ($1.5 million in contributions), a political advocacy group set up to advance the policies of the Bush administration; Swift Vets and P.O.W.’s for Truth; and the Jewish Institute for National Security Affairs, which includes Vice President Dick Cheney and Richard N. Perle, an adviser to the former Defense Secretary Donald H. Rumsfeld, among its past and current advisory directors.

Mr. Singer said that his support for Mr. Giuliani sprang from an appreciation of Mr. Giuliani’s work as mayor. “Rudy’s stewardship is primarily responsible for making New York one of the greatest cities of the world,” he said.

A trustee at the Manhattan Institute, the conservative policy group that has been a source of many of Mr. Giuliani’s core policies, like welfare reform and a focus on quality-of-life issues, Mr. Singer sees Mr. Giuliani as the “strongest, most conservative candidate in the race.”

While Kenneth G. Langone, a co-founder of Home Depot, held Mr. Giuliani’s first public fund-raiser last month, a campaign strategy notebook that was leaked to The Daily News of New York this month pointed to Mr. Singer as the locus of Mr. Giuliani’s fund-raising network. “I will be raising money for Rudy in professional and personal circles,” he said.

Asked to describe his political philosophy, Mr. Singer says his conservatism dates back to Barry Goldwater and is founded on free enterprise and a belief that the government should “not be taking from one person and giving to another.” He abhors what he calls social engineering and he has financially supported state propositions that advocate preventing state agencies from collecting racial information.

He believes in the doctrine of American exceptionalism and is wary about United States involvement in “international organizations and alliances.” As for the war in Iraq, he said, “America finds itself at an early stage of a drawn-out existential struggle with radical strains of pan-national Islamists.”

In an industry known for its secrecy, Mr. Singer keeps a particularly low profile. He does all that he can to keep his picture from appearing in the media and does virtually no marketing for his fund, which had a return of 17 percent last year. Given his wealth, his disposition is frugal.

“He is not a trophy collector,” said Lawrence Simon, the co-founder of Ivy Asset Management and an investor with Mr. Singer for more than 25 years. “I don’t even know if he has a second abode. He is very quiet in the way that he carries himself.”

A graduate of the University of Rochester and Harvard Law School, Mr. Singer practiced law before he began to dabble in what was then an obscure investment strategy called convertible arbitrage. By buying convertible bonds and selling the attached stock short — or betting that its price would fall — he realized that he could achieve a decent investment return in up and down markets.

Steeled by the bear markets of the 1970s, he worries that managers may have become punch-drunk from a surfeit of happy investment times. “I am struck by the size of the hedge fund community and the amount of money being managed by people who have little experience in risk management and adverse market environments,” he said.

In contrast to Mr. Singer’s quiet approach, Ms. Perry’s embrace of Mrs. Clinton has taken on a more celebratory cast. She has tapped New York’s art world for fund-raising parties and opened up her Long Island house, in Sag Harbor, for gatherings for the senator.

Over the last three election cycles, Ms. Perry, 48, has given more than $1 million to Democrats, putting her in the most elite tier of Democratic donors. Given that she wrote her first check in 1998, when she was a stay-at-home mother, it has been a rapid evolution and one that has been fueled by her belief that there are not enough women senators in Washington. Her litmus issue is a woman’s right to an abortion and it is what first attracted her to Mrs. Clinton in 1999.

Now she considers her a personal friend. “We have a strong bond,” she said. “She is the smartest, the most worldly. I just think she would be the most fabulous president.”

She admits to getting a bit emotional at the thought of a woman in the White House. “I feel it so strongly,” said Ms. Perry, who is in the midst of starting her own line of Lisa Perry-branded clothing. “I’m a strong feminist so I really want it to happen.”

Mrs. Clinton’s advisers are quick to give Ms. Perry her due.

“Lisa is an active, effective supporter,” said Alan J. Patricof, the finance chairman of Mrs. Clinton’s two Senate campaigns. “She is not a frivolous person.”

While her husband, Richard, is also a Democrat, Ms. Perry points out that her giving and fund-raising are driven by her own politics, not his. Still, he, too, is a supporter of Mrs. Clinton.

“He thinks she is one of the smartest people he has ever met,” Ms. Perry said.

But it is her own largess that gives her a sense of pride. “Not a lot of women write their own checks,” she said.