With all the uncertainty that exists around the November presidential elections, some hedge funds are gambling that proposed rules would be dulled with a Republican president.
One of my favorite things to do is debate politics. When I can couple that with another passion—drinking beer—then I'm as happy as a pig in mud.
For context, my parents think I'm a bleeding-heart liberal journalist; my colleagues think I'm a hardcore conservative who goes to Tea Party rallies. To keep the conversations going, I don’t necessarily dispute either assertion.
Since my job requires me to cover capital markets technology, I can’t really talk about same-sex marriage, immigration, debt or drone strikes. Where politics and the capital markets meet, however, is in the bank—literally. I’m referring, of course, to Wall Street campaign contributions—which may portend what firms want, or believe will take place, from a regulatory perspective.
Wall Street isn't exactly falling over itself to get into President Barack Obama's good graces—at least not the same way it was in 2008. According to nonprofit, nonpartisan blog OpenSecrets.org, which is part of the Center for Responsive Politics, the hedge fund and private equity industries have not shown the president much love. Despite the fact that President Obama has out-raised de facto Republican nominee Mitt Romney by more than $100 million overall, the former Massachusetts governor has received nearly $2.5 million from hedge funds and private equity (PE) firms, compared to a little more than a half million for Obama.
Of the total presidential fundraising pie, 82 percent of the money coming from hedge funds and PE firms has gone to Republican nominees.
This has implications when it comes to IT budgets, specifically in terms of compliance with regulations like the Dodd–Frank Act, including the Volcker Rule, and on the buy side, Form PF. I’d normally bet on the incumbent winning on November 6. But, there's reason to believe that this will be a close race and that Romney might just be able to pull this out. After all, a recent USA Today/Gallup poll had Obama and Romney even among registered voters in 12 swing states.
Hedge fund managers, faced with the decision whether or not to embark on a new compliance initiative, have no doubt been watching closely as final rules and deadlines continue to be delayed. In recent weeks, for example, the Volker Rule deadline for final compliance was moved from July 21 of this year to July 21, 2014.
Some industry organizations, including the Managed Funds Association (MFA), have stated in the past that regulators are expected to lessen the burden of data points required after firms go through this first round of filing. Not only that, but we've already seen a rule stemming from Dodd–Frank shot down by an appeals court in Washington DC.
So with all this evidence of uncertainty, just how aggressively should firms push for tech overhauls? The hedge fund technologists I’ve spoken to recently about Form PF say, “Not very hard.”
Most large hedge funds are more concerned with their manual processes and governance issues and are slowly moving on the technology side of the equation.
Wall Street is by its very nature a speculative, risk-taking entity. There's reason to believe that President Obama could lose. If that happens, the Dodd–Frank Act could be in trouble. Even if he does get a second term, there are plenty of reasons to believe that the force of many of these rules will be dulled.
I think it was Spock who said that preparing for something that is not inevitable is illogical. (Just don’t get Spock going about education reform ... he tends to fly off the handle.)
Want to talk politics? Email me at firstname.lastname@example.org or call me at +1 646 490 3973. I’m also on Twitter @A_Malakian.
More from Buy Side Technology
Updating your subscription status
Winner's Announced: Buy-Side Technology Awards 2014
The winners of the 8th annual Buy-Side Technology Awards 2014 were announced in London on November 7, recognizing the leading technologies and vendors in their area of expertise, through an auditable and transparent methodology . To view the winners across the 31 categories click here.
The over-the-counter (OTC) derivatives market is in the midst of a global regulatory restructure. Authorities in Europe, Asia and the US are currently...
A fast, flexible and reliable investment decision-making process must be based on access to accurate and consistent information throughout an organization....