The Democrats’ Answer to Carlyle Group?

In case you missed it, Madeleine Albright is part of a hedge fund start-up, according to Slate. And before you dismiss the ability of a Jewish (well, by ancestry) anti-babe to pull in big bucks, let us not forget the considerable sucess of Abby Joseph Cohen.

Till recently, there was no better way to monetize government service that a late career switch to lobbying or law. But now there’s a new business for the over-the-hill Washington player: hedge funds.

As Lynnley Browning reported in the New York Times last Friday, Richard Breeden, former chairman of the Securities and Exchange Commission, is now a hedge-fund manager….”Mr. Breeden is now perhaps the most senior former government official ever to run a hedge fund.”

But not for long. Last week, Clinton Secretary of State Madeleine Albright, who has the same amount of investing experience as Breeden (zero)—announced the formation of an emerging-markets hedge fund. Albright Capital Management is backed with $329 million in seed money from PGGM, a Dutch pension….

Let’s set aside the question of whether the arrival of politicians is a neon sign to hedge-fund investors to Cash Out Now! Instead, let’s try to explain the phenomenon. There are several reasons—millions of them, actually—why high-ranking former officials are signing up with hedge funds. The money is excellent…

But…why would a hedge fund want them?

First, hedge funds and private-equity funds are in a constant state of raising funds… In a world of 8,000 hedge funds, many of them run by very rich but generally anonymous traders, it helps to bring boldface names along for sales pitches.

In addition to acting as highly paid greeters, former government officials can also function as doorkeepers….Given the political issues that frequently surround international investments, funds need gray-haired globe-trotters to smooth the way…

Albright is taking it a step further. Former foreign-policy hands such as Henry Kissinger supply advice to hedge funds and Fortune 500 companies on how geopolitical events affect their investments. Albright is taking this practice a few rungs up the value chain. Rather than simply sell advice based on her experience and connections, she’s selling investment-management services based on her experience and connections. Investment management has much higher profit margins.

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  1. Yves Smith

    The preference in the securities industry for non-ethnic men in sales positions is well known. For example, Jonathan Knee in his book “The Accidental Investment Banker” discussed the fact that Goldman Sachs has pretty much only blond, Midwestern, athletic men in its Investment Banking Services department (they are the relationship managers/gatekeepers for big corporate accounts). To quote Knee, “The image of the square-jawed, blond, blue-eyed Goldman banker reflects the demographic make-up of this sales force. Indeed, one could be forgiven for mistaking a photograph from an IBS retreat in the mid-1990s [note that’s when Knee was at Goldman] with that of a German Olympic swimming team.” People I know at the firm today defend the practice.
    Hedge funds have similar tastes. If they are large enough to have dedicated marketing types, they are a classier subset of the demographic you see on institutional sales desks on Wall Street. Very male and not very ethnic.

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