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TRUMP: Hedge Fund Guys Are Getting Away with Murder

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Pensions, sovereign wealth funds, endowments and wealthy individuals are all major types of investors in hedge funds. Hedge funds and private equity funds pay capital gains tax versus the higher percentage amounts of an income tax. The top rate for capital gains is 20% versus the top rate on regular income of 39.6%. The argument is contentious on both sides. Raising taxes on risk taking could have a drawback on investing. This is compared to an argument that many Americans aren’t able to pay lower capital gains and face higher-rate income taxes in traditional 401Ks and IRAs.

Hedge Fund Profitability

Hedge funds could be at risk for new taxes. Two contenders gaining much traction in U.S. presidential polls are Democrat Primary Presidential Candidate Bernie Sanders, and on the opposite side of the political spectrum Republican Primary Presidential Donald Trump, both having positions on hedge funds in which an increase in taxes is possible. On the CBS show “Face the Nation”, on August 23rd, Trump stated he would change the tax system to make hedge funds pay more in taxes. In the exchange, Trump said, “They’re paying nothing and it’s ridiculous. I want to save the middle class.” He adds, “The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.”

In his campaign, Sanders introduced ways to pay for public education and to impose a “Robin Hood” tax on hedge funds, investment houses and other “speculators” of 0.5% on stock trades, 0.1% fee on bond trades and a 0.005% fee on derivatives.

Basket Options

Hedge funds like Renaissance Technologies, a US$ 25 billion hedge fund founded by James Simons, have used unique structures to avoid taxes, one such is called a basket option – complex financial structures that allowed these hedge funds to bypass taxes on short-term trades. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, September 19, 2018

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QIA Eyes Investment in Chinese Lender Lufax

The Qatar Investment Authority (QIA) is in talks about a possible investment into Shanghai-based Lufax, one of China’s largest online lenders. The seller of the possible stake is China’s Ping An Insurance (Group) Co. Ltd. Lufax’s official name is Shanghai Lujiazui International Financial Asset Exchange Co. Ltd.

Wealth Funds Back Hotpot Giant

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Japanese Government Capital Provides Initial Life for Texas Bullet Train

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Dallas-based Texas Central Partners, LLC is the developer of a proposed high-speed rail system, dubbed the Texas Bullet Train, between Dallas and Houston. Project costs are estimated between US$ 12 billion to US$ 15 billion. The developer secured US$ 300 million in project loans from Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN) and the Japan Bank for International Cooperation (JBIC). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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DOJ Investing Tesla Over Musk Comments

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The U.S. Department of Justice (DOJ) is conducting a fraud investigation over Tesla as its CEO Elon Musk made public statements on twitter. This is a criminal probe. In addition, earlier, SWFI reported the U.S. Securities and Exchange Commission (SEC) is conducting a civil inquiry into Elon Musk regarding his statements.

This all surrounds Musk tweeting in August that he was thinking of taking Tesla private and had “funding secured” for the transaction. Both government authorities are seeing if Musk misled investors and violated federal securities laws with his public statements.

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