Former Treasury secretary of U.S. calls for higher taxes on fund managers
A backlash against the tremendous wealth being created by managers of hedge funds and private equity funds may be gaining strength.
On Tuesday, Robert Rubin, who was the Treasury secretary during President Bill Clinton's term, argued that private equity and hedge fund managers should pay more than double the low rate in taxes they now enjoy.
It looks to be a response to the gangbusters profits being pulled in by hedge funds
The compensation of private equity and hedge fund managers has become a hot-button issue as their pay has surged.
James Simons, chairman of Renaissance Technologies, earned $1.7 billion last year, while the average compensation of the top 25 managers was $570 million, according to Alpha, a magazine published by Institutional Investor.
Stephen Schwarzman, the co-founder of Blackstone Group, made $400 million last year.
Schwarzman plans to cash out as much as $677.2 million after Blackstone's initial public offering and will own a stake worth $7.5 billion if the offering is priced in the range the company's underwriters have planned.
Should hedge funds be punished for leveraging unrestricted trading and knowledge of complex derivatives and options for massive gains for sophisticated (aka rich) investors?
Hard to believe that a topic regarding my business would hit the boards.
This NEWS piece is certainly misleading, or at the very least, incomplete.
To be fair, the issue is really focused on "carried interest," which we have been able to treat as capital gains. We argued for years that carried interest could be assigned the same level of risk as post event income. The truth is, most GPs, investment bankers, fund managers, etc, begin collecting on carried interest immediately and too often we do so ahead of the risk. In fact, most deals we do today provide for payouts on carried interest once they reach a pre set value i.e. 120% of cost.
So, in a nutshell, Rubin is asking that we treat our ordinary income like uh...ordinary income with the resultant tax rates.
Call me one of the few liberal investment bankers in the world, but I think this is entirely fair. It's ordinary income and should be taxed as such.
IPOD
RADIO
freshprncebelair
Ellicott City, MD
June 2004
JUN 13, 2007 02:35 PM