NEW YORK (
) -- Private equity and hedge funds have not been shy about throwing money around the political arena over the past several years, but despite increasing political and regulatory challenges the may need to close the checkbook.
With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule and an increase in carry-interest tax on private equity alternative asset firms face myriad of issues.
However, the passage of a new rule by the
Securities and Exchange Commission
may stifle their ability to contribute and shape the political debate.
In July the SEC adopted Rule 206(4)-5, dubbed the "Pay to Play Rule" that increased transparency around asset managers' political donations.
With SEC regulations creating stricter disclosure and maintaining the ethical relationship between the firm and clients, many private equity firms and hedge funds are maintaining stringent contribution arrangements. "KKR does not have a political action committee. All donations are by individuals and we have strict compliance rules around those donations," KKR spokesman Peter D. McKillop told
in an email in regards to compliance policies the firm has in place.
Still, private equity and hedge funds are supporting those that have the most influence on Wall Street. Sen. Charles Schumer (D-NY), who sits on the powerful Senate Committee on Banking, Housing, and Urban Affairs, received most of the funds from both private equity and hedge funds. According to the Washington D.C.-based
The Center for Responsive Politics
, which runs Opensecrets.org, private equity firms donated $461,300 and hedge funds donated $488, 849 to Schumer in the current year.
"What we have seen over the years is that individuals in industries give to lawmakers that have a lot of power of the industry. That Schumer is getting money from hedge funds stands to reason he is a member of the Senate with influence over financial policy," said Dave Levinthal, a spokesman for the Center for Responsive Politics. "Sen. Kristen Gillibrand (D-NY) is also up there."
So far, Schumer has raised $23.2 million for the elections in November,
according to the New York Daily News.
His republican opponents Gary Berntsen and Jay Townsend didn't make it on the list of Opensecrets' top recipients.
Even though the SEC pay to play rules does not take effect until March 14, 2011, private equity firms and hedge funds are tightening up policies concerning political contributions to make sure their employees will not be penalized.
The private equity industry contributed $9,430,471 to political campaigns in 2010, according to Opensecrets.org. About 59% of those funds went to Democrats and 41% to Republicans. The breakdown was similar to 2006 midterm elections when private equity donated $7,107,341 to primarily democratic campaigns. Private equity firms gave much more during the presidential elections in 2008. Firms donated $25,534,557 to campaigns, with 56% going to Democrats and 44% going to Republicans.
The top PE firms to contribute were
. Blackstone donated the most, with $596,759 going to primarily democrats.
Only 29% of those donations went to Republicans. Bain Capital contributed $412,750, with 86% to Democrats and 14% to Republicans. KKR donated $347,916 with 17% to Democrats and 83% to Republicans. Apollo donated $227,650 with 100% to Democrats and TPG donated $209,250 with 84% to Democrats and 16% to Republicans. The top private equity firms that supported the Republican parties included KKR,
Madison Deerborn Partners
Cerberus Capital Management
Bridger Capital Management
Jw Childs Assoc.
Castle Harlan Inc
"Democrats continue to get the lions' share of money from the private equity industry, but that has a potential to change," says Levinthal. "If you look at a very broad view of the industry, Republicans have been getting a greater percentage of the pie; greater than last year."
Hedge funds also contributed mostly to democratic campaigns this year, raking in a total of $6,309,194 for 2010. That's over the $5,371,583 that came in 2006, but still nowhere near the $17,928,381 that came in 2008 during the presidential elections.
The top hedge funds that made political contributions this year are
, which has given $1,296,656 to primarily the Republicans.
donated $511, 376, with 82% of that money going to Democrats.
gave $452,349, with 96% of that cash going to the Democrats.
Managed Funds Association
has donated $249,350 so far this year, with 57% going to Democrats.
has donated $247,600, with 92% going to Democrats. Lastly,
Fortress Investment Group
has donated $218,105, with 72% of that cash going to Democrats.
--Written by Maria Woehr in New York.
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