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Alternative investment industry foresees change in control of congress at midterm elections

Monday, August 28, 2017
Opalesque Industry Update - Though it is the seemingly endless battle over the future of the Affordable Care Act that has dominated headlines since the Trump administration took the helm, there are many other issues the alternative investment industry is eager to see play out in the 115th Congress. From potential tax changes such as the treatment of carried interest, to a possible repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the alternative investment industry is keeping a close watch on Congress and how it will handle multiple issues that could significantly impact alternative investments.

"A Town Hall Style Meeting with Congressional Representatives Claudia Tenney & Thomas Suozzi," was the topic of the New York Hedge Fund Roundtable's July event, where the two freshmen members of Congress weighed in on the current state of politics in the U.S. -from the American Health Care Act, to taxes, immigration, Dodd-Frank and the economy.

"[Dodd-Frank] didn't touch what actually caused the financial crisis… what it created was a number of huge government agencies that now can come in and exact all kinds of regulations against people. It has really just prevented the free market from happening," said Tenney (R-N.Y.), who represents New York's 22nd district -a seat she secured after winning one of the most expensive races in the country. "At the hedge fund level you're regulating people who re all pretty sophisticated and they have a lot of money. I think there's a point where we've gone overboard in our regulatory scheme. You're not dealing with the couple that is retired down the road that is living on Social Security, plus maybe a modest pension. You're dealing with people that are in another realm," added Tenney, who serves on the House Financial Services Committee.

"We don't need to repeal the whole thing [Dodd-Frank] -it would be disastrous if we did that... There are something like 70 pieces of the Dodd-Frank reform bill that were put before the House that Democrats and Republicans did agree on in committee, but they put a bunch of other stuff in there that was just too unattractive and it couldn't sustain getting any Democratic votes for the changes and the repeal of Dodd Frank that they wanted to do. So I don't think it will happen in the Senate, and I don't think we're going to get it," said Suozzi (D-N.Y.), who represents New York's 3rd district.

"These are complicated, tough issues. I think there are a lot of people of good will that really want to fix the problems that exist, but it's not happening in this current culture because everybody's trying to demonize the other side," added Suozzi, who serves on the House Foreign Affairs Committee, the House Armed Services Committee, is Vice-Chair of the Problem Solvers Caucus and Co-Chair of the Quiet Skies Caucus.

When it comes to any significant changes that Republicans will be able to push through Congress, Roundtable members believe the party's dominance will be short lived and is unlikely to last beyond the midterm elections. Of the respondents to the July survey, based on where things currently stand, 76% believe that the Democrats will win seats at the midterm elections and gain control of Congress.

New York Hedge Fund Roundtable members had the opportunity to weigh in on this topic both at the Roundtable's July event, as well as through an online electronic poll.

*Of the respondents to this survey, 43% were fund managers; 10% were allocators; 18% were risk management or trading; 24% were service providers; and 5% were other industry participants.

Following are some of the key findings to this year's survey, compared with answers to the same questions in recent years:

· When asked how the U.S. economy will perform over the next 12 months and whether the Fed will likely raise interest rates again in 2017, 61% of respondents said they believe the economy will strengthen and that the Fed will raise rates at least one more time in 2017; 27% think it is still unclear how the economy will perform and that, as a result, the Fed will hold off on raising rates again until 2018; and 12% think the U.S. economy will weaken and, as a result, the Fed will be forced to hold off on its plans to raise interests rates until 2018.

· Asked what Congress is likely to do with taxes under the current administration, 47% of respondents said they think Congress will lower taxes for individuals and businesses across the board; 37% think that Congress will ultimately make no changes, or will change very little, regarding taxes; and 16% think that Congress will cut taxes for the wealthiest portion of the country.

· When asked what will ultimately come of the Affordable Care Act (a.k.a. Obamacare), 55% of respondents said they believe it will be modified; 27% think that because of the difficulty of coming up with a bi-partisan solution, the ACA will remain in place as it currently is; 10% think it will be repealed with no replacement; and 8% think that it will be repealed and replaced with "Trumpcare."

· 94% of respondents believe that the U.S. will remain a global economic superpower; while only 6% believe it will not.

· Asked whether there will be any policies implemented that will successfully reduce illegal immigration, 53% of respondents said they think there will not; while 47% believe there will.

· Asked whether any policies introduced by the current administration will encourage or discourage trade, 53% of respondents said they believe they will discourage trade; 25% think they will encourage trade; and 22% believe that the partisan divide is so dramatic within Congress that the current administration will ultimately be unable to implement any new policies.

The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers. For additional information about the Roundtable, visit: www.nyfr.org

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