Purchase
Tim Middleton's
new book
"The Bond King"
at MSN Shopping.
Mutual Funds
Recent articles:
• A model fund manager must be beyond reproach, 3/2/2004
• Momentum pulls stalled fund out of value trap, 2/24/2004
• 4 funds that get you in the merger game, 2/17/2004
More...
| | Mutual Funds
Fund industry banks on its D.C. friends
The industry is a major contributor to re-election campaigns, and it's handing out plenty of money as it faces repercussions from the first major scandal in its 60-year history.
By Timothy Middleton
You won't find the mutual fund industry in the undecided column of any election polls. It's backing the elected officials who can do the most to help it, especially as it faces a host of new regulations.
The re-election campaigns of President George W. Bush, Sen. Charles Schumer, Sen. Chris Dodd and Rep. Dennis Hastert and many other candidates in a position to influence the industrys future are bulging with contributions from the folks who run your funds, including Fidelity Investments, Federated Investors and the Investment Company Institute, the industry's trade group.
Its a very effective way to prevent legislation from happening, says Mercer Bullard, chief executive of Fund Democracy, a shareholders advocacy group. They will freely and aggressively use their campaign finance system to achieve their ends in Congress. Consumer interests dont have that kind of clout.
All of this comes at a crucial time for the industry, embroiled for the first time in its 60-year history in sweeping scandals focused on management-company abuses and fund-director neglect. Congressmen and the Securities and Exchange Commission are proposing reforms that would rein in fund management -- and fees.
Targeted contributions
While soft-money contributions to political parties have been eliminated, thanks to McCain-Feingold, limits on hard-money contributions by individuals have been roughly doubled, and highly paid investment pros are among the biggest political contributors.
Contributions from individuals in 2004 already exceed the entire 2002 election cycle, says Steve Weiss, spokesman for the Center for Responsive Politics, which tracks political giving. With contributions typically heaviest in the months immediately before the election, We may not even be halfway through the election cycle . . . yet, he says.
Related news and commentary on MSN Money
Not surprisingly, the money-management industrys contributions go to politicians who control its destiny. Bush, whos getting nearly $5 from Wall Street for every $1 going to his Democrat challenger, Massachusetts Sen. John Kerry, supports the partial privatization of Social Security, which could channel billions of fresh assets into the industry.
Contributions are targeting other political titans in positions to favor the industry. Among these is Richard Shelby, R-Ala., chairman of the Senate Committee on Banking, Housing and Urban Affairs, who has received $323,650 from the industry even as he calls for reform.
Schumer, a Democrat, is senior senator from New York, the industrys hometown, and a banking committee member. So is Dodd, a Democrat who represents Connecticut, traditional home of the insurance industry, and also serves on the Senate committee that oversees pensions.
Hastert, who has collected more contributions from the industry than Dodd, is House speaker and thus in a position to green- or red-light legislation important to financial services firms.
Big recipient
The Senates minority leader, Tom Daschle, D-S.D., is also a big recipient of Wall Street contributions. Majority leader Bill Frist, R-Tenn., isn't running this year, nor is New Yorks junior senator, Democrat Hillary Clinton.
| Top recipients from securities and investment industry, 2004 election cycle | | Candidates | Contributions | Committees | | Presidential candidates | | | | George Bush | $5,024,961 | n/a | | John Kerry | 1,072,825 | n/a | | | | | Senate | | | | Schumer, Charles (D-NY) | 632,079 | Banking | | Dodd, Chris (D-Conn.) | 373,197 | Banking
Labor and Pensions | | Shelby, Richard (R-Ala.) | 323,650 | Banking (chairman) | | Bayh, Evan (D-Ind.) | 279,148 | Banking | | Daschle, Tom (D-S.D.) | 214,270 | Minority leader | | | | | House of Representatives | | | | Hastert, Dennis (R-Ill.) | 479,650 | Speaker | | Emanuel, Rahm (D-Ill.) | 226,650 | Financial Services | | Oxley, Michael (R-Ohio) | 120,606 | Financial Services | | Lantos, Tom (D-Calif.) | 100,100 | Gov't Reform | | Lowey, Nita (D-N.Y.) | 95,800 | Appropriations |
|
Notes: n/a -- Not applicable. Taken from Federal Election Commission filings as of 2/9/2004.
Source: CRP
So far in the current two-year election cycle, the securities and investment industry has given $28.5 million to political candidates and their parties, 45% of them Democrats and 55% Republican. In the 2002 cycle, the industry gave $59.7 million, split 48%/52% between Democrats and the GOP.
Contributions from individuals amounted to $24.9 million of the total, or 87%, in the current cycle, up sharply from $23.8 million, or 40%, in 2002.
Center for Responsive Politics data include numerous industries under the securities and investment rubric, including commercial and investment banking, venture capital and securities brokerages, as well as mutual funds. Funds are, however, major givers.
| Top industry donors | | Organization | Total contributions | | | 2004 | 2002 | | Securities & investment industry | $28.5 million | $59.7 million | | | | | Chicago Mercantile Exchange | 388,150 | 628,040 | | Fidelity Investments | 334,383 | 685,594 | | Natl Venture Capital Assn | 307,000 | 905,450 | | Investment Company Institute | 295,235 | 778,600 | | Federated Investors | 257,050 | n/a | | Bond Market Association | 220,404 | 791,946 | | Chicago Board Options Exchange | 216,900 | n/a | | Chicago Board of Trade | 206,100 | n/a |
|
Notes: Selected groups from among top 20 in 2004 cycle. n/a = Not available; group was not among top 20 donors in 2002 cycle.
Source: CRP
At mutual fund firms, political giving varies widely. Among the largest contributors in the current election cycle to the political action committee of the Investment Company Institute are nine partners of Lord, Abbett & Co., who gave $5,000 each, and six officials of Davis Selected Advisers, who gave $2,000 to $3,000 each.
Giving $1,500 each were 20 partners and other employees of PIMCO and related entities (including co-founder Bill Gross), and four officials of T. Rowe Price (TROW, news, msgs).
Together, these contributors accounted for more than half of the ICI PACs contributors of $1,500 or more.
Most of the nations largest mutual fund complexes don't have political action committees, relying instead on the ICI. Two exceptions are Fidelity and Federated.
Individuals lead the way
Even there, however, PAC giving is small in comparison with individual donations by officers and employees. At Fidelity, 26% of 2004 contributions have come via PACs and 74% directly from individuals. At Federated, individuals account for 92% of the total.
Fidelitys giving is tilted 79% toward Republicans, according to government filings. Federated has given 92% in the current cycle to the GOP and its candidates.
The ICI says that since its most recent filing with the Federal Election Commission its giving has increased to $470,027, of which 61% has gone to Republican candidates and 39% to Democrats. A spokesman, John Collins, says recipients have got to demonstrate the political leadership to address the issues that involve mutual funds.
So far in the 2004 election cycle, financial services groups have accounted for six of the top 20 contributors to politicians and campaigns, paced by Goldman Sachs (GS, news, msgs) ($2.3 million), Citigroup (C, news, msgs) and Lehman Brothers (LEH, news, msgs) ($1.1 million each).
Other big givers include Wal-Mart Stores (WMT, news, msgs) ($1.4 million), the National Association of Realtors ($1.3 million) and the Association of Trial Lawyers of America ($1 million).
Mutual funds aren't themselves political contributors. Gifts come from their sponsors and their employees, who in turn are paid by funds management fees.
At the time of publication, Timothy Middleton didnt own any securities mentioned in this article. He is the author of a book on Gross, "The Bond King: Investment Secrets from Pimcos Bill Gross."
|
