One of the larger hedge fund managers is fighting back against the Obama Chrysler backlash. Cliff Asness, whose firm manages $20 billion of assets, has written an open letter blasting the President for his attack on the hedge fund industry in the wake of this bankruptcy.
I find this article quite interesting because his points of view are indeed accurate and in some cases, legally binding. For example, he states that “it is the job and obligation of all investment managers, including hedge fund managers to get their clients the best return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the ‘sacrifice,’ they are stealing.”
Asness is entirely right. As a matter of fact, if you, I or even Mr. Obama (when he was a private citizen) had reason to believe that our hedge fund manager wasn’t trying to get the best possible price for our investment in Chrysler, we would have real grounds to sue his fund. After all, we only invested our hard earned money because we believed that it’s manager was going to do everything within his legal means to generate as high a return as possible. The fact that many constituents (including our government) are trying to save Chrysler has little to do with what might be good for me or you as an investor in the automotive company’s bonds (especially if we could save some of our return if the company went bankrupt). And, to call those investors ‘selfish’ is truly a bullying tactic that fundamentally cuts across the grain of what our stock market investment philosophy has always been about.
Now, unfortunately for Perella Weinberg Partners (the investment firm behind all of this) being right isn’t always reasonable or prudent. And, in the most egregious cases (like so many collapses in this bizarre economy,) being willfully tone deaf when the President of our country is on the bully pulpit screaming at you is just kind of stupid. The reality is that every constituent within the Chrysler deal had to sacrifice something. Many had to give in to almost every concession. So, when Perella Weinberg Partners didn’t back down until the heat became unbearable, they received an oral lashing in the worst type of way from Obama. And, that translated to becoming the sacrificial lamb on the front page of every newspaper in America.
Stories in the media are like snow men. They melt away very quickly when the weather changes (or in this case another story comes along). This story too shall pass pretty quickly. Although, it feels like the hedge fund industry is finally at a point where it is about to start fighting the moniker of being the everyday man’s selfish villain. I think Asness’ letter is a smart approach to tell the industry’s side of this story. I just wouldn’t want to get caught in the cross hairs of the president’s next Wall Street damning because no one really cares about the other point of view as that is happening.