Hedge Funds:
Crossroad of International Affairs and Money
One would hardly perceive politics as a source of income
outside the realm of the government agencies or consultancy firms, yet a great
deal of wealth is being generated by an unorthodox type of politicians,
politicians who didn’t have to integrate the parliament to make enough money
for a decent living and beyond! As we sit tight in our desks, contemplating the
course of events the world has sailed on or the dynamics geopolitics has
imposed on the international chessboard, many are turning history not into a
set of lines inscribed in encyclopedias and articles, but into checks with as
high as 9 figures.
While politics might seems as the end in itself for standard
politicians, for such individuals it turns out to be a mean to generate cash
without necessarily contributing to shaping the policies or decisions usually
upheld with triumph by congressmen and statesmen.
Nor do these people abide by the virtues and precepts of
theorists. Not concerned with the philosophical implications of communism,
expressing disdain for the ethical controversies raised by capitalism, they see
and read politics in the most convenient ways: the way of making money out of
it regardless of the nature of a political system. If the political tide turns
bright, they invest long, while if it darkens and announces sour shortcomings,
they sell short: Moral of the story, they make money!
These people, with a deep appreciation for analysis and
great disdain for practice, are the men and women populating the numerous hedge
funds proliferating throughout the globe. Traders, not necessarily overlooking
the Bull in their ivory towers in Wall Street, have grown to display a strong
affinity for international affairs and world dynamics, and understood the power
of geopolitics and Realpolitik in generating wealth without great deal of
debate or heated conversations.
While the policy makers struggle to pass on bills or promote
certain military agenda in order to earn their wages, it has now become
possible to take the ready product of such political debates and analyze its
implications worldwide in order, after a quick call to your broker, to make
some cash flow in your balance.
Quick example: with the Russian invasion of Georgia a couple
of years ago, one could look up the geography of the country and easily notice
the pipeline going through its borders, thus realizing that the implications of
the war would be disastrous for the pipeline in terms of output and net
delivery. A trader resumes such analysis in a quick short selling of the shares
of the Oil and Gas companies benefiting from the pipeline, therefore making
money once the shares of BP soar in the stock market.
The availability of hedge funds, their cumulative ceiling of
operations hovering around the 2.5 trillion $[1],
their ability to outperform the market and their various level of operations
now allows many to integrate these financial institutions that are still widely
underrated, and to put at use one’s appreciation of politics, business and
international affairs. The trend now is in favor of exploiting political
intelligence through consultancy firms; yet as the usage of singled trusted
firms makes it hard to be unique in choosing the right investments to make for
hedge funds, it is projected to see funds hiring their own political analysts
or political evaluation departments in order to avoid investing like everyone
else.
Daniel Celeghin, a partner with the advisory firm
Casey Quirk in the US, argues that the world’s top 30 hedge funds will probably
all be consulting top-tier political experts, whether it is former policy
professionals or high-profile government figures.[2]
The combination of politics and economics is widely seen as
an academic choice meant to be split on the edge of professional tracks, yet
today it is possible and profitable to opt for something beyond sole economic
or political career path, it is possible to marry both and still make more
money than previously hoped for. The power of knowledge and foresight is an
invaluable commodity in the trading floor, and being able to speculate on the
course of events in far away lands based on a great understanding of
international affairs and politics is an asset most hedge funds look crazily
for.
A decade ago, Political science was labeled an academic
choice for theorists and students without a clear vision for their future
professional involvement. The 9/11 attacks were a turning point in the
perception of politics in the youth environment given the fact that
international affairs and foreign political systems acquired ideological and
physical reach in the heart of the Western World. The rush for Poli sci set the clock for a new wave of
diplomats, ambassadors and intelligence officers with an acute knowledge of the
various cultural, political, religious and social factors that shape the public
opinion and political systems in Eastern nations. We are now living the 3rd
revival of politics and international relations, a revival strengthened by the
realization that politics and international affairs today can generate the most
cherished commodity ever: profit!
Traders are no longer required to be astute in math and
economics, but are demanded to absorb abundant knowledge of geopolitics and international
relations in order to know how does Iran missile tests affect oil prices, or
how “Fiscal Cliff aversion” spending cuts in the military budget drive down the
shares of Lockheed Martin.
To conclude, it is an ever growing joy to see politics adapting
to the tides of the markets, and to witness the evolution of international
relations from a set of factors affecting bilateral treaties taught in
university, to a critical asset used to place trades in the stock market and
foresee financial implications of political decisions, or indecisions. Most of
all, it is a confirmation that the rigid politics we are brought to believe in
is simply the pic of an iceberg widely undiscovered, and that the confinements
of governmental policy making are not the only representation of politics, but
rather the apparent limitations of a system of thought that expands beyond the
government and bears practicality in virtually all field of human interactions
and transactions.
[1]
Foreign Affairs, Will Hedge Funds Survive, http://www.foreignaffairs.com/articles/64936/martin-j-gross/will-hedge-funds-survive
[2]
Financial News, Hedge Funds Consider Political Risk http://www.efinancialnews.com/story/2011-11-07/hedge-funds-consider-political-risk
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