Assorted conservatives have been complaining that John Edwards worked for a (gasp!) hedge fund. Maybe it’s because I’m not schooled in the nature of various types of investments, but I’ve got no idea why conservatives think hedge funds are such a bad thing to be associated with.
So, why exactly are hedge funds evil? Illuminate me.
I’d have to say they’re terrible because Edwards worked at one.
That would, of course, discount the near infinite amount of other democrats and republicans who have worked at them over the years.
Hedge funds aren’t a big deal except as a made up thing to beat up Edwards about.
One thing might be that they generally require sizeable minimum investments, so working for a hedge fund might translate as “helping the rich get richer.”
Just a guess.
You may be over-reacting to think of Martin Hyde as “assorted conservatives.” Hedge funds are a way for the very rich to speculate widely. The only point is to dig at Edwards for a lack of honesty in his portrayal of himself as the champion of the downtrodden.
BTW, FWIW here is more detail about Edwards and the hedge fund issue. Yeah, MH has a point that Edwards is a bit of a goof to claim that he worked for the poster child of how the richest skirt the regulations that others deal with and get richer as a way to learn about it so he could help the poor better.
My biggest problem primarily came down to him saying he was doing it for educational purposes. I don’t have a problem with hedge funds because in general the people investing in them are rich and understand risk, and they aren’t going to become a burden on society if they end up investing in a bad fund.
I do believe part of the general hypocrisy of Edwards is that he spent 2006 working for a company that helps to reinforce the divide between the “two Americas” that Edwards talks about.
I also don’t have any problem with candidates who are multi-millionaire lawyers, or who made money endorsing products for a fee prior to running. I guess part of being a conservative is being okay with people trying to make an extra buck, even when they’re already wealthy.
But Edwards presents himself as being a champion for the poor and consistently proves he’s extremely detached from the poor in America. I thought the $400 haircut was an overblown political incident, but it wasn’t a unique incident, either. Working for a hedge fund isn’t a far trip from say a Democratic candidate who is advocating on behalf of America’s poor also coincidentally being employed as an oil executive.
I’ve always hoped that candidates could be evaluated based on their stances on the issues and their actual actions as politicians (voting record, past policies et cetera.) But the political climate we live in doesn’t seem to feel that’s the best way to choose a politician, instead it’s all about who can make the other guy look worse before election day.
Considering how conservative the investment management industry trends, I doubt that Edwards conservative detractors are railing against the evils of hedge funds.
DSeid, would you care to explain:
Fair warning - while I am no conservative (nor liberal), I consult to the investment management industry, specializing in hedge funds and hedge fund service providers, and have been involved in the industry for ~15 years. I can speak at length about the good and the bad of the industry, but I haven’t a clue as to what you are getting at.
ETA:
Unfortunately, do to the size and leverage of the massive hedge funds, they do pose more than a risk than just one to its investors. Long Term Capital Management, Amaranth, and now Bear Stearns hedge funds have or are roiling the market, posing risks greater than just losing their investors principal.
The issue is not only that he worked for the fund - he also invests with the fund, to the tune of 25 million bucks. And the fund’s business practices are wildly at odds with many of his political stances.
All in all, a perfectly legitimate area for discussion. If I were John Edwards (sweeps hair back) I’d just avoid the whole mess, just like Hillary Clinton just did, and pull my money out of speculative investments and into blind trusts.
I don’t understand this objection. If hedge funds are somehow eeeevil, and somehow increase the divide between rich and poor, you’d like to have a better idea of how they do these things than just ‘somehow,’ otherwise you have no idea how to sensibly rein in their worst aspects. I doubt there’s an undergrad class you can take somewhere than would explain these things in any detail; a year of part-time work with the hedge fund, if done right, might give one some serious insight into what they do, whether it’s good or bad and why, and what if anything might be done to regulate the hedge fund sector.
Wrong thread, I expect.
This all seems to boil down to, “if you’re trying to enrich yourself and say you care about the poor, you’re a hypocrite.”
I’d spin that off into a separate thread, but it seems like such a silly notion (and filled with obvious and important counterexamples in 20th century American politics, such as FDR and Eleanor Roosevelt, JFK, RFK, and Teddy Kennedy) that it’s hardly worth bothering with.
Again, wrong thread. This is about hedge funds.
D_Odds, being a poster child is, of course, always all about perception.
Hedge funds are an investment vehicle generally open only to those with extremely sizable amounts of money to play with (“a qualified purchaser” means having over $5,000,000 in investment assests) . They have little to do with the volitility-lowering investment technique of hedging investments (it really is an ironic name) and everything to do with being exempt from the usual registration and regulation requirements that the funds open to those who are less qualified have to choose between.
As you have pointed out, this lack of regualtion, coupled with certain hedge funds’ affinity for highly leveraged positions, have, acording to some, placed entire markets at risk for ill effects in the service of allowing the very rich to have a convenient speculative investment vehicle. Altogether this amounts to the public seeing these funds as a poster child for how “one America” gets richer by skirting the rules that others must deal with.
Edwards worked for them while those episodes that you referenced had provoked calls for greater regulation of these vehicles and presumably they wanted a lawyer to help them figure out how to get around any new regs. Or a way to feed money to a possible future President through salary rather than donations.
Again, nothing wrong with making money. But yes, his facile claim of doing it in order to educate himself for better service to the poor does enhance Edwards’ image as a phoney. (Even he said he could have learned about hedge funds in a class just as well
-from the article previously linked.)
RTF, yup, and the preacher who bought teen porn and Ecstasy was just researching what the sinners do in order to serve the faithful better. Must be. How else could he learn?
I think this is a potentially much stronger argument than the one about Edwards’ merely working for the hedge fund. (One I hadn’t previously encountered, btw.)
So, is Centex some sort of predatory lender, enticing people into loans they really don’t have the resources to pay off? I think that’s the question that needs to be answered. Because if your investments aren’t in a blind trust, then I agree that your investments do say something about your ethics. I think it’s possible for a company to make loans in an ethical manner to the subprime market, but it’s also obvious that a lot of subprime lenders were loaning to people who had little or no income or assets, who just plain shouldn’t have been eligible for loans.
Lots of colleges and universities list their course offerings online. Do they really have classes on hedge funds that one can take without lots of prerequisites?
Oh c’mon.
[list=a]
[li]There is no shortage of classes that he would have the prerequisites to take.[/li][li]Do you really think they hired someone for whatever gadzillion they paid who needed to learn about how hedge funds work? [/li][li]If they did then praytell, why?[/li][/list]
About hedge funds having high returns but being risky, I submit this.
Sounds like we’d all been better off had Edwards invested with him.
Here’s another article about hedge fund risks, and mentions the same guy I know.
DSeid, my issue, I guess, was with the term ‘skirt’. Hedge funds operate primarily under the Securities Act of 1933 (as amended) and the Investment Company Act of 1940 (as amended) - two acts that predate the inception of hedge funds by about a decade (in other words, the Acts weren’t created or funded by hedge funds for the benefit of hedge funds). These acts defined the terms accredited and qualified investor. That said, the U.S.’ largest pension fund, CalPERS, has a sizable investment in alternative investments, of which approximately half goes to hedge funds. They’ve even started a hedge fund incubator to help new managers gain traction. More and more pension plans invest in hedge funds every month, so the ‘little’ man is starting to get some taste.
The term ‘lack of regulation’ is a misnomer - it’s a phrase easily rattled off and understood when speaking to the public. What hedge funds are is secretive - partly because the managers believe that exposing their positions and styles would dilute their performance, and partly because, as a result of regulations, hedge funds cannot advertise. They must screen an investor before they are allowed to speak to the investor about their hedge fund. I cannot tell you the number of managers I’ve spoken to, especially the smaller ones, who would love to get their name out there, but they are very limited to word of mouth advertising, and can do nothing to promote it.
The secrecy does work against the investor, especially smaller investors (among the ranks of qualified or accredited investors) who do not have the resources to look into the history of the funds’ managers. It’s very common for an underperforming manager to close shop and re-open a few months later. Due to the nature of performance fees and high-water marks, this is usually a more profitable option for the manager than trying to make up the shortfall. I work in the industry, and I find it hard to track managers who do this. People with less information at their fingertips will have no clue.
That said, hedge funds provide incredible liquidity to the markets. They do allow people who have more money to risk, but not the knowledge of financial markets, to invest in riskier vehicles. Despite working in the industry and understanding the instruments, I have no business, financially-speaking, investing in complex derivative products. However, Bill Gates can certainly handle the financial risk, and hedge funds are a way for him to pay someone smarter in capital markets to make investment decisions.
Lastly, despite the fact that news of leveraged behemoths investing in high-yield foreign debt (LTCM), energy (Amaranth), and the sub-prime market (Bear Stearns) dominate the news when speaking of hedge funds, the greatest concentration of invested funds are in long/short and market-neutral hedge funds. Both of these are equity styles normally used to lower down-side risk while still taking advantage of rising markets. I will note that non-equity investment strategies have been increasing, and do take up more than 1/2 the market currently (I believe they broke the 50% barrier around 2002), but no single style dominates like the long/short - market neutral combo.
Honest question: Why would the fund pay Edwards 500K? Surely for that much they could get a lawyer with some actual experience if not an expert right?
Half a million for a part-time job to a lawyer who with no hedge fund expertise who they also donated, what, another $167K to? … well obviously they care a lot about educating him. For the sake of the poor. You know they were thinking of giving scholarships to the needy but figured that he needed the scholarship money more.
Two Americas. The one Edwards invests with and is beholden to and that represents the smallest splinter of the wealthiest. And the rest of us I guess. RTF it isn’t only conservatives who see him as a flim flam man. The kind of guy who in another time would be selling snake oil or “faith-healing.” Some of us liberals really dislike his plastic fakery too.
D_Odds thanks for the additional information about the history of hedge funds and I know that you understand what I meant by “skirt”.
The top guys at Fortress drop that much at lunch. That said, Edwards gives them access. John Edwards is a man whose phone calls are returned, and whose ideas are given serious credence in DC. Plus, many DC politicians are pretty much in the blind about hedge funds, and most will only hear when they become news. Hiring Edwards puts someone on the hill who understands that ‘hedge fund’ is not synonymous with ‘illegal trading’. Someone has to counter Chuck Shumer, who believes that anyone earning better returns than he is must be cheating and regulated out of business.
Cite? 
The whole hypocrisy angle is a bit problematic. It is not that unusual for a man to dedicate himself to amassing wealth, and, having done so, to experience a degree of epiphany or enlightenment that urges him to philanthropy. It is a quality of my fellows that offers some hope. I, personally, have taken back at least half the stuff I said about Bill Gates, I think his program to eradicate malaria is a splendid example.
You really can’t spend a billion dollars, there is only so much cocaine to snort off the butts of supermodels. However, and whenever, a man comes to this realization, well, hell, more power to him!