(Bloomberg) -- Joe Biden, who says he wants to tax capital gains at the same rate as ordinary income and pushes left-of-center economic policies, seems an unlikely favorite of private equity firms and hedge fund managers.
But supporters linked to those industries have poured more than $21 million into his campaign and outside groups backing him, according to the Center for Responsive Politics, a rate much higher than the support they gave Hillary Clinton in 2016. By contrast, they’ve given President Donald Trump and his allied super-PACs just $3.6 million.
Through April, Biden’s campaign has received $1.4 million from hedge fund and private equity donors writing checks of $2,800 or less in the year since he announced his candidacy. In 40 months of raising money for his re-election, Trump’s campaign has gotten $361,811 from them.
Biden’s also received backing from some of the Democratic Party’s biggest donors, including hedge fund manager S. Donald Sussman, who’s given $8 million to super-PACs backing him, Renaissance Technologies LLC founder James Simons, who’s given $3 million, and Joshua Bekenstein of Bain Capital LP, who’s given $1 million.
Big Republican donors who in the past have given millions to super-PACs, like Paul Singer of Elliott Management Corp. and Robert Mercer, the former co-chief executive officer of Renaissance Technologies, have mostly stayed on the sidelines so far this cycle.
Mercer gave $355,200 to Trump Victory in February, much less than the $2 million he gave to a super-PAC backing him in 2016. Singer, who gave $5 million to a super-PAC that supported the presidential campaign of Florida Senator Marco Rubio in the 2016 nomination fight, hasn’t donated to Trump or the super-PAC backing him in 2020.
Donors from private equity and hedge funds have never lavished money on Trump. In 2016, they gave Clinton and her allies $61.7 million compared to $18.7 million for Trump and his backers. Notably, that cycle the industries gave slightly more to Republican presidential candidates overall -- $69.5 million to the major GOP candidates and their super-PACs, including Trump -- than to team Clinton, which got $61.7 million.
This year, the difference in donations is even more stark as Trump flags in polls, falling behind Biden both nationally and in must-win battleground states. And Trump, who planned to campaign for re-election on the back of a strong economy, now faces twin crises of the Covid-19 pandemic and widespread protests over racial injustice, which are diverting attention from any economic recovery.
The tilt toward Biden is motivated by several factors, financial insiders say, most of which have to do with his opponent. Trump’s economic policies and chaotic governing style, roiling markets by imposing billions of dollars in tariffs or with a single tweet accusing China of reneging on a deal to end the trade war, can upend the carefully crafted plans of investment and fund managers.
Biden, they say, would offer a return to normalcy.
“If you go with Biden, a lot of the chaos stops,” said Julius Krein, who worked in finance before founding the American Affairs journal. “I don’t know if you get any major policy changes but you do get just a total change in tone.”
The Trump administration has bent over backward to be helpful to private equity, which historically has tilted Republican, Krein said, but the uncertainty around trade has exhausted industry executives, who want to see a deal with China come into full fruition.
Krein added that he expects the private equity and finance industries to become even more consolidated around the Democratic Party as Trump’s leadership becomes more focused on appealing to his base.
“The Republicans are increasingly a working-class party and Trump accelerated that,” Krein said. “I don’t think private equity has anything really to fear from Trump himself, or the current leadership, but longer term there’s much more interest in industrial policy and much more skepticism of financialization and the financial industry.”
Closed Wallets
Some donors who backed Trump in 2016 have given nothing so far in 2020. Stephen Feinberg of Cerberus Capital Management LP gave $339,400 in June 2016 to Trump Victory, the vehicle for large-dollar donations to his campaign and the Republican National Committee, and another $1.5 million to an allied super-PAC. Trump appointed Feinberg to lead the President’s Intelligence Advisory Board in May 2018, an unpaid position. Feinberg has yet to donate in 2020.
Carl Icahn gave donations totaling $200,000 to Trump Victory in 2016. Trump named him a senior adviser on regulatory reform, an unpaid position that wasn’t subject to federal conflict-of-interest prohibitions. In March 2017, a proposed rule on ethanol requirements he backed that would have benefited oil refiners, including his CVR Refining, led administration critics to accuse him of benefiting from the position.
Icahn stepped down from the position the following August.
A year later, he wrote that while he still supported many of Trump’s policies, the experience persuaded him, “Washington is not for me” in an opinion piece in the Washington Post. A representative for Icahn declined to comment this article.
Since the president took office, Trump Victory hasn’t received a single donation from employees of Bain Capital, Warburg Pincus LLC, the Carlyle Group Inc. or KKR & Co.
Lew Eisenberg, a former senior adviser to KKR, was Trump Victory’s first national finance chair and is now ambassador to Italy. He hasn’t donated to the committee either.
Warburg Pincus and Bain capital didn’t provide a comment for this article.
Trump still has the backing of Blackstone Group Inc. co-founder Stephen Schwarzman, who endorsed Trump in 2016. Schwarzman, who declined to comment through a spokeswoman, gave America First Policies $3 million in January. The same month, he told Yahoo Finance that he thought Trump, who he’s known for years, “would do a very good job on economic issues.”
On Taxes, Similar
However, on one of the biggest issues for hedge funds and private equity, Biden and Trump’s positions are similar. Both want to do eliminate the carried interest provision, which taxes profits taken by general partners as compensation from funds as capital gains rather than income.
In 2016, Biden told CNBC there was “no justification for it.” As a candidate, Trump promised to eliminate carried interest and other loopholes he said were good for Wall Street investors and wealthy individuals including himself but were unfair to American workers. Though he didn’t completely follow through on that pledge in his 2017 tax overhaul, which lowered corporate rates to 21%, the law did require firms to hold investments for three years, rather than one, to qualify for the favorable treatment.
Trump said his opinion of the loophole hadn’t changed since his campaign in a May 2019 interview on Fox News, and that he’d still like to repeal it.
Biden’s tax plan calls for taxing capital gains as ordinary income and raising the corporate rate to 28%, but unlike some of his Democratic rivals for the nomination, including Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, he hasn’t made attacking Wall Street the centerpiece of his campaign.
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