Tags: Hedge | Funds | Inside | Washington

Hedge Funds Pay Big Bucks for Inside Washington Information

By Dan Weil   |   Thursday, 06 Oct 2011 07:24 AM

Decisions made in Washington can have a huge impact on stocks – in the financial services and healthcare sectors, for example. Information about those decisions can prove very profitable for hedge funds when they buy or sell stocks in these industries. So the funds are paying up to get the scoop from Washington insiders, The Wall Street Journal reports.

Paulson & Co. has former Federal Reserve Chairman Alan Greenspan on its payroll as an adviser. Ex-Treasury Secretary John Snow has a gig at Cerberus Capital Management. And former congressional aides have found work at SAC Capital Advisors and Eton Park Capital Management.

Lobbyists are in on the act too. "I have information from doing my day job as a lobbyist," one of them tells The Journal. "That information has value on Wall Street. So I sell it."
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To be sure, the practice is completely legal. Government officials and lobbyists are paid to discuss policy issues with interested parties.

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(Getty Images photo)
"The ultimate [investing edge] is insider information, so you want to get as close to the line as possible without crossing the line," Sanford Bragg, CEO of Integrity Research Associates, tells The Journal.

Meanwhile, government regulators are looking at hedge fund practices in another area, Bloomberg reports.

The Securities and Exchange Commission is “very much focused” on possible illegal activity by traders using computer-based trading strategies, Bruce Karpati, co-chief of the SEC Enforcement Division’s asset management unit, said.

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Decisions made in Washington can have a huge impact on stocks in the financial services and healthcare sectors, for example. Information about those decisions can prove very profitable for hedge funds when they buy or sell stocks in these industries. So the funds are...
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