Hedge fund managers are the last people you’d expect new Prime Minister John Key to offend, considering he is a former investment banker wealthy enough ($50 million) to make NBR’s Rich List.
But it appears we should expect the unexpected with Mr Key, and incurring the wrath of fellow super-wealthy investors is no exception to that rule.
While in Peru for the Apec meeting, Mr Key made a comment that appears to have ruffled some feathers in the New Zealand Absolute Return Association, which represents local hedge fund managers.
“We can no longer afford to ignore the effect that the amount of risk that hedge funds are able to take through leverage that is arguably completely disproportionate to the real economy,” said Mr Key in his first speech since being sworn in as New Zealand prime minister.
NZARA chairman Anthony Limbrick was quick to deprive the story of oxygen, giving a diplomatic response to the prime minister’s hedge fund baiting.
“We’re waiting for further comments from the government regarding our industry and at the moment we don’t think we know enough to make a judgment on the position they’ll take,” he says.
It’s understandable Mr Limbrick doesn’t want to make a loud fuss, as hedge fund managers aren’t the most popular people around right now.
However, the NZARA may warrant more attention than it is getting in the media (none at all).
While local hedge funds are only worth around $1.5 billion, they are growing quickly and performing much better than the world average; New Zealand’s hedge fund index has risen by 15.8% so far this year.
And if the NZARA’s stated goal of becoming “the Switzerland of the South Pacific” ever comes to fruition, our prime ministers of the future will have to be much more careful about offending hedge fund managers.