After Gov. Dannel P. Malloy failed to mention hedge funds in a major policy speech, some in the industry question whether he is giving adequate public credit to the sector”™s critical contributions to the state economy ”“ and, by extension, whether he is adequately committed to helping the industry grow.
The Connecticut Hedge Fund Association (CTHFA) is calling on the governor to openly acknowledge the fact that Connecticut is now an asset management capital.
CTHFA President Bruce McGuire had this piece of advice for Malloy: “With respect to the governor”™s State of the State address, we applaud the governor for his pro business comments. We do, however, wish that he would publicly acknowledge the importance of our industry to the state.”
McGuire said that “It is fine for Connecticut to reclaim its position as an insurance capital. However, we are already an asset management capital. Perhaps the elimination of the advertising ban (on hedge funds) will allow officials like the governor to more openly acknowledge and take pride in that fact.”
Malloy made no mention of hedge funds in his Feb. 8 address titled “Building an Economic Revival.” Hedge funds play an increasingly important role in the state”™s economy, spearheaded by the presence of many large funds in Fairfield County.
On its website, the CTHFA highlights the fact that Connecticut is the number two global domicile of hedge funds in the “billion dollar club,” with 29 funds managing more than $150 billion in assets.
Fairfield County itself is the “hedge fund capital of the world,” McGuire said. As a state, Connecticut ranks third behind New York and London as a world hedge fund capital.
Bridgewater Associates, the Westport-based hedge fund that is the world”™s largest, manages $58.9 billion all by itself, according to Institutional Investor”™s AR Magazine. Other members of the “billion dollar club” that are based in Fairfield County include SAC Capital in Stamford and the Greenwich hedge funds ESL Investments, Tudor Investment Corp., Lone Pine Capital and AQR Capital Management.
Asked for more data on how important hedge funds are to the state, McGuire referenced database manager and alternative investment consultant Albourne America L.L.C. of Rowayton. David Harmston, Albourne”™s U.S. head of client services, said that there are 120 Connecticut-based hedge fund management companies that have reported returns to Albourne at least once in the last year. Including all those that have not reported, Harmston said he has identified 225 hedge fund management companies in the state.
Malloy is no stranger to the industry, having spent 14 years as mayor of Stamford. In a speech to the CTFHA”™s Global Alpha Forum last year, Malloy said “we understand that this industry is very important to our future ”¦ It has led to many hedge funds and their officers moving to Connecticut.”
However, there was no mention of the speech on the governor”™s website nor did his office issue a press release on it.
Keeping a low profile on hedge funds might be sound politics. The industry has received a wave of unfavorable publicity recently, including charges of insider trading at three prominent Fairfield County hedge funds, Diamondback Capital, Level Global and SAC.
Then there is the sensitive issue of preferential tax treatment, allowing super-rich hedge fund managers to pay taxes at a rate that is roughly half that paid by many ordinary workers.
There have also been liquidations of large Connecticut hedge funds since the 2008 financial crisis, including Pequot Capital Management, Tontine Partners, FrontPoint Partners and Level Global, underscoring the industry”™s reputation for high risk.
