Tuesday’s election results rang the death knell for a divided Congress. Republicans have earned clear majorities in both the House and Senate for the first time in twenty years. How this will affect economic policy, tax reform and market regulation is the subject of considerable interest and no small measure of speculation in the hedge fund community.

Four top-of-mind issues include Dodd-Frank, tax policy, energy, and healthcare. Let’s take a brief look at each.

Dodd-Frank

Those anticipating new allies in rolling-back any of Dodd-Frank’s onerous regulations may want to curb their enthusiasm. Soon-to-be Senate Majority Leader Mitch McConnell recently declared, “The big guys are doing just fine under Dodd-Frank.”

Republican Senator Richard Shelby, waiting in the wings to chair the Senate Banking Committee has been described as “no friend of Wall Street” and is on record as having cast a nay vote for Dodd-Frank. However, equally telling, was Shelby’s nay vote on the 1999 Gramm-Leach-Bliley law. This legislation would have eliminated the boundary between commercial and investment banking.

Tax Reform

Corporate tax reform is on the table as “doable” for the second time in the Obama administration’s history. Lest anyone get overly excited, this issue was also cited after the 2010 mid-terms as an issue on which the administration and the GOP might find common ground. It did not happen then and there is no reason to believe it will happen now.

Republicans prefer a comprehensive tax reform bill, not a bill that addresses one aspect of the troubled tax policy. This increases the likelihood that nothing will happen with tax reform.

Energy

Approval for the Keystone XL pipeline is the holy grail of energy related legislation for the GOP.  The pipeline has considerable public support and, as a result, could sway a sufficient number of Democrats to vote in the affirmative … but will it be enough to override a Presidential veto?

Healthcare

A repeal of the Patient Affordable Care and Protection Act, a/k/a Obamacare, has already passed the house. Conceivably it could pass the Senate. However, portions of the legislation enjoy broad support, making full repeal an unlikely goal for the 114th Congress. Moreover, Republicans know full well that President Obama would never sign it. The GOP strategy will likely be one of nibbling away at unpopular and dysfunctional portions of legislation; for example, the medical device tax.

The Impact for Hedge Funds

Presidential veto power severely dampens the possibilities for any significant legislative headway beyond what was discussed here. Any successful remedial efforts to Dodd-Frank will inure to the benefit of community and regional banks, offering no regulatory relief to hedge funds or Wall Street interests. Corporate tax reform is unlikely and comprehensive tax reform will lay dormant until 2016.

On the energy front, the Keystone XL pipeline has substantial momentum for approval even if that means over-riding a presidential veto. Obamacare will absorb a few punches, but in the main, survive substantially intact.

Hedge Fund Jobs Outlook

Republicans will be unable to push through any legislation that has significant potential to enhance job opportunities in the hedge fund industry. Organic growth will continue to be the principal driver for job opportunities through the first half of 2015.

Bookmark and Share

{ 0 comments }

While perception and reality frequently converge, this is not always the outcome. Millennials are an excellent case in point. Conventional wisdom suggests that adult Millennials (a/k/a generation “Y”), those between 18 and 33 years old, have no money.

Prudent hedge fund managers, particularly those aspiring to grow assets under management by way of the retail market, should not overlook generations “X” and “Y”. The Shullman Research Center’s report titled Millionaires Have Their Own Generation Gap suggests that fully twenty-three percent of adult millionaires in the United States are Millennials. An additional twenty percent belong to generation “X”—persons aged 34 through 48 years.

The Contrast

Marketing professionals of all stripes have relentlessly pursued Baby-Boomers (the 49 to 67 year-old demographic) whose ranks account for forty-nine percent of all adult millionaires. Heretofore, the perception has been that Boomers define the wealthiest generation.

The extraordinary facts, as revealed in the Center’s report, establish with a fair degree of certainty, the combined financial clout of the “X” and “Y” generations is the rough equivalent of the Boomers’ economic sway. In raw numbers, the Millennial and Gen-X demographic accounts for fifty-four percent of the population, while Boomers represent thirty-two percent.

An Under-Served Market

Hedge fund managers, keen on attracting new investors, should weigh the merits of implementing a marketing strategy focused on the Gen-X and Millennial demographic … if one is not already in place.

The wealth and, by default, the investor potential of generations “X” and “Y” have been underestimated. As a result, this demographic has been poorly served, not only by hedge funds, but by the financial industry in general.

Differences Beyond the Balance Sheet

While the Shullman Research Center’s report provides invaluable financial data, hedge fund managers and other financial service professionals need to recognize the differences in the attitudes displayed by each demographic. Crafting a successful marketing strategy depends on careful comparison. Contrasts and similarities must be identified and incorporated into the strategic marketing plan.

Morgan Stanley Private Wealth Management, in concert with Campden Wealth, recently conducted a Millennial-focused survey, which offered useful insights on investment preferences and general attitudes toward wealth management. However, the Shullman Research Center’s report provides more depth by way of contrasts among Baby-Boomers, Millennials and Gen-Xers … something a marketing department can really sink its teeth into.

The facts are inescapable. The Boomers’ economic powerhouse days are in the rear-view mirror. Increasingly, the financial services industry is waking up to this fact and taking proactive steps to court Millennials and Gen-Xers on their terms. Hedge funds, for the most part, are not the point-of-the-spear in this regard and will be playing catch up if they don’t get on board soon, or worse, not be playing at all!

On the Jobs Front

As hedge funds ramp-up marketing efforts directed at capturing the Millennial and Gen-X investor pool, it is likely to generate job opportunities, particularly for candidates that have experience in dealing with this demographic. Naturally, hedge fund start-ups and small hedge funds will have the edge, as they will be more nimble in pursuit of Millennial and Gen-X investors than their larger competitors.

Bookmark and Share

{ 0 comments }

Judge Lamberth Stops Payment on Perry Capital’s Reality Check

October 20, 2014

The United States District Court for the District of Columbia rebuffed Perry Capital LLC, dismissing its much publicized lawsuit against The Department of the Treasury and The Federal Housing Finance Agency regarding the manner in which Fannie Mae and Freddie Mac profits are distributed. Perry Capital’s litigation was doomed from the outset. The boiler plate […]

Read the full article →

Big Investor Says Nine Out of 10 Hedge Fund Managers Are Overpaid

September 22, 2014

With most hedge funds substantially underperforming the major stock market indices year after year since the 2008 financial crisis, it is only natural for hedge fund investors to expect some concession on the fees they pay to hedge funds. However, despite reports of some hedge funds offering to lower asset management fees, it appears that […]

Read the full article →

Value Investing Hedge Fund Rinehart Capital Shuts Down

September 8, 2014

Nashville-based hedge fund Rinehart Capital Partners, which specializes in value investing, is closing its operations, lamenting that the current market does not reward funds that employ value investing as a strategy. The seven year old fund was funded, in part, by hedge fund veteran Lee Ainslie who himself is a specialist value investor and who […]

Read the full article →

Hedge Fund Exposure Cut at Some Pension Funds

August 25, 2014

Patience is wearing thin among some large public pension funds with regard to their hedge fund investment returns. Years of weak returns combined with high investment fees have forced a few prominent pension funds to consider reducing allocation to hedge funds. Among the pension funds planning cuts in hedge fund allocation include the largest US […]

Read the full article →

US Hedge Funds Force Argentina to Default on Its Sovereign Debt

August 11, 2014

The extraordinary influence hedge funds can sometimes have on markets was on full display recently when a small number of hedge funds and some individual investors together forced the sovereign South American country Argentina, with a population of almost 42 million people, to default on its debt commitments. The group led by US hedge fund […]

Read the full article →
Real Time Web Analytics