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Hedge Funds Increase Political Clout Via Lobbying, Donations

Especially now that the news has leaked that hedge fund managers are raking in incredible salaries-some making more than $1 billion a year-Congress is undoubtedly going to be taking a serious look at increasing regulation of hedge funds, according to a number of reports. And that has many hedge fund managers stepping up their political contributions, hiring lobbyists and, in some cases, forming their own political action committees, according to The Economic Times.

In 2000, hedge fund executives donated $576,000 to candidates, according to the Centre for Responsive Politics. In 2004, that jumped to $2.3 million, and in 2006, $6 million.

"We're making a very, very big drive to grow our political action committee," said John Gaine, president of the Managed Funds Association. "There's a broader awakening of our membership to the need to pay attention to Washington."

One key question regulators are likely to consider is whether it's fair to tax hedge fund executives' future anticipated earnings at the 15% capital gains rate rather than at regular income tax rates of up to 35%.

Changing the tax code is possible, given the fact many have been criticizing the government in recent years for favoring the wealthy.

In addition, talk has been brewing about restricting the amount of money that pension funds can invest in hedge funds for fear of the risk jeopardizing people's retirement.

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