NYHFR Survey: Hedge Fund Industry Expects Republicans To Lose Control Of Congress Next Year

Aug 28 2017 | 4:07pm ET

The deeply divided political landscape has focused the attention of alternative asset managers on whether sweeping reforms in such things as healthcare, taxes, carried interest, and the regulatory environment will actually take place, according to a new survey by the New York Hedge Fund Roundtable.

Alternative managers are also beginning to handicap how the environment may shift following 2018’s midterm Congressional elections, the survey showed. 

The political situation was the topic of NYHFR’s July event, in which members heard two freshmen members of Congress, Representatives Claudia Tenney & Thomas Suozzi, weighed in on the current state of politics in a town-hall style setting. 

“[Dodd-Frank] didn’t touch what actually caused the financial crisis… what it created was a number of huge government agencies that now can come in and exact all kinds of regulations against people. It has really just prevented the free market from happening,” said Tenney (R-N.Y.), who represents New York’s 22nd district, in a statement from NYHFR. 

“At the hedge fund level, you’re regulating people who are all pretty sophisticated,” she added. “I think there’s a point where we’ve gone overboard in our regulatory scheme. You’re not dealing with the couple that is retired down the road… living on Social Security, plus maybe a modest pension. You’re dealing with people that are in another realm.” Tenney is a member of the House Financial Services Committee.

“We don't need to repeal the whole thing [Dodd-Frank] – it would be disastrous if we did that,” continued Suozzi (D-N.Y.), who represents New York’s 3rd district, at the event. “There are something like 70 pieces of the Dodd-Frank reform bill that were put before the House that Democrats and Republicans did agree on in committee, but they put a bunch of other stuff in there that…couldn't sustain getting any Democratic votes. I don't think [a repeal of Dodd Frank} will happen in the Senate, and I don't think we're going to get it.” 

As for the midterm elections, Roundtable members believe Republican dominance is unlikely to last beyond the midterm elections. Of the respondents to the July survey, based on where things currently stand, fully 76% believe that the Democrats will win seats at the midterm elections and gain control of Congress.

Other key findings of the NYHFR survey:

  • 61% of respondents said they believe the economy will strengthen over the next 12 months and that the Fed will raise rates at least one more time in 2017; 27% think it is still unclear how the economy will perform and that, as a result, the Fed will hold off on raising rates again until 2018; and 12% think the U.S. economy will weaken and, as a result, the Fed will be forced to hold off on its plans to raise interests rates until 2018.
  • 47% of respondents said they think Congress will lower taxes for individuals and businesses across the board; 37% think that Congress will ultimately make no changes, or will change very little, regarding taxes; and 16% think that Congress will cut taxes for the wealthiest portion of the country.
  • When asked what will ultimately come of the Affordable Care Act, 55% of respondents said they believe it will be modified; 27% think that because of the difficulty of coming up with a bi-partisan solution, the ACA will remain in place as it currently is; 10% think it will be repealed with no replacement; and 8% think that it will be repealed and replaced with “Trumpcare.”
  • 94% of respondents believe that the U.S. will remain a global economic superpower; while only 6% believe it will not.
  • Asked whether policies will be implemented that will successfully reduce illegal immigration, 53% of respondents said no, while 47% said yes.
  • Asked whether any policies introduced by the current administration will encourage or discourage trade, 53% of respondents said they believe they will discourage trade; 25% think they will encourage trade; and 22% believe that the partisan divide is so dramatic within Congress that the current administration will ultimately be unable to implement any new policies.
  • Of the respondents to this survey, 43% were fund managers; 10% were allocators; 18% were risk management or trading; 24% were service providers; and 5% were other industry participants.

The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers.

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