Former White House Chief of Staff Michael Mulvaney and Wall Street veteran Andrew Wessel are launching a hedge fund based on the premise that investors can gain an edge by thoroughly understanding how Washington works and closely watching legislators and regulators.
The two announced the new fund, called Exegis Capital, on Standard & Poor’s Global Markets' podcast "Street Talk."
The fund will focus on investments in financial services companies, which are heavily regulated and widely seen as the likely targets of regulatory changes if Vice President Joe Biden moves into the White House in January.
"We're looking to take advantage of changes in regulation and legislation impacting the financial services industry ... and we hope to differentiate ourselves from other sector funds by combing (our investing and Washington backgrounds)," Wessel said.
Factors affecting investments will include not just the nature of regulations, but also which party is running things in Washington.
The fund, the founders said on the S&P podcast, will adopt a long/short strategy. This means the fund's stock-pickers will try to identify companies that are likely to gain value over the long haul and other companies that are likely to lose value in the short term.
Mulvaney said the fund will seek to capitalize on the reality – lamentable, from his perspective – that regulations will play an important role in the performance of companies.
"You'd like to think the market moves on fundamentals, and in a perfect world it probably would, but it seems Washington D.C. is becoming more and more a part of those fundamentals," he noted.
Mulvaney added that regardless of who wins in November, "politics is going to be a very turbulent thing in the near future."
For most of 2018, Mulvaney, who goes by "Mick," ran the Consumer Financial Protection Bureau (CFPB), one of the agencies the new hedge fund will keep an eye on, according to the founders' podcast interview. He now is President Donald Trump's envoy to Northern Ireland.
Wessel told "Street Talk" that fundraising for the new hedge fund began in earnest in mid-July and that the fund is likely to launch on Jan. 1.