So Greenwich became the hedge fund capital of the east coast and income taxes from this small town pay 11% of the state’s budget. Hartford has a problem with that first part so wants to impose new regulations on the funds, as designed by financial mavens from such towns as Shelton, Derby and Norwich.
Among the bills’ proposals are requirements for hedge funds to get a state license, independent financial audits, fee disclosures and changes in management or management strategy, as well as barring individual investors with less than $2.5 million in assets, or institutions with less than $5 million, from investing in hedge funds.
Who cares if the funds move? We’ll always have casinos, right? And conveyance taxes from Greenwich generated when its citizens pull up stakes. Remember, for politicians, nothing is more important than our children’s future. Or a politican’s future, whichever comes first.
For What It's Worth 
Chris, it’s over for the hedge funds. Just this morning, the Obama team said that hedge funds will be taxed at personal income rates after the Bush cuts expire in 2010 (so, 39%), rather than at capital gains rates (so, 20%). That is a 20% chunk of change – gone.
The money-making machine, even if it comes back, will be producing 20% less.
“However, hedge fund and private equity executives will be taxed on “carried interest” – their share of profits on investments – at the higher income tax rate rather than the lower capital gains tax rate as at present.”
http://www.ft.com/cms/s/0/797459da-0111-11de-8f6e-000077b07658.html
(in case you didn’t see it)
CEA
Yeah, CEA, I mentioned that this weekend. All these politicians, national and state, want to balance their budgets by soaking the rich while simultaneously crushing the industries that produce wealth. My guess is that they’ll treat financial services the way they do cigarettes – tax them as much as they possibly can while not crossing the barrier that causes too many smokers to quit. You’ll notice that Connecticut receives something like $50 million a year from the cigarette settlement and spends five cents per year on smoking cessation programs. Wonder why?
Many who graduated from college in mid-’90s lamented that they had missed the go-go ’80s Milken/Drexel era when Mike earned >$600MM in one year alone
PE industry was described as “dead” by many back in early ’90s, as “experts” thought they could never again make easy money like during ’80s LBO era
HF industry has many of world’s smartest guys…smartness defined by ability to manage risk and return in a complex, ever-changing world
If anything, suspect most proven HFs will be able to charge higher fees than during Bubble as smarter, more risk-sensitive investors carefully evaluate risk-adjusted returns, net of fees…and weak-performing HFs will close….Darwinian selection
Rather finite universe of talented hedgies; perhaps <100 really smart guys enter business every yr and many retire every year, often while in 40s…but a chronic oversupply of dumb hedgies, just like dumb IBers or PE guys….or any other lucrative business where mediocre guys routinely earn 7 and 8-figure annual incomes