Beware hedge fund managers trashing US policy

Billionaire hedge fund manager Stanley Druckenmiller argued that the U.S. Treasury Department's efforts to lower interest rates by intervening in bond markets would only worsen inflation and the country's fiscal problems, in an [op-ed](https://www.wsj.com/opinion/let-the-bond-market-speak-81529d74) published in the Wall Street Journal on August 24. (Editing by Jeffrey Goldfarb; Production by Maya Nandhini) ((For previous columns by the author, Reuters customers can click on GANDEL/ [stephen.gandel@thomsonreuters.com](mailto:stephen.gandel@thomsonreuters.com))) As policy critiques from big fund managers go, the one [crafted by artificial intelligence](https://www.notus.org/media/stanley-druckenmillers-wsj-op-ed-bessent-ai) and published in the Wall Street Journal under Druckenmiller's name was relatively restrained. Elliott Management CEO Paul Singer once warned that then-Federal Reserve Chair Ben Bernanke's response to the financial crisis would "destroy the value of money" and "uproot societies." Baupost boss Seth Klarman called the central bank "immoral." Bill Ackman, who leads Pershing Square Capital Management, has accused the government of being "greedy" for clinging to federally backed mortgage buyers Fannie Mae and Freddie Mac. The common thread is policies that threaten to undermine market-beating returns. Lower borrowing costs tend to reduce wild swings in stocks and other prices, which are the source of many hedge fund opportunities. A [2020 study](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3650981) by Bocconi University's Centre for Applied Research in Finance found that unconventional Fed and European Central Bank monetary policies hurt common investment strategies ranging from convertible arbitrage to equity market-neutral trading. Druckenmiller may have valid points. He raises legitimate concerns about the Treasury using tools designed for liquidity crises when no such emergency exists. Bessent's encroachment on monetary policy also could undermine the ability of Fed Chair Kevin Warsh, another former Druckenmiller colleague, to manage the economy and ultimately lead to higher interest rates. It is Druckenmiller's proposed alternatives that are telling. He says little about raising taxes, which would fall heavily on wealthy people like himself. Instead, he advocates spending cuts, a burden more likely to be shouldered by poorer Americans. Lower interest rates help people buy homes, finance cars and manage monthly expenses. They also do encourage excessive government borrowing, but when assessing any hedge fund manager's policy criticism it's important to follow the money. *The author is a Reuters Breakingviews columnist. The opinions expressed are his own.* By Stephen Gandel NEW YORK, Aug 25 (Reuters Breakingviews) - How do you know when a hedge fund manager is talking his book? His mouth is moving. Billionaire Stanley Druckenmiller provides the punchline this time. He publicly [rebuked](https://www.wsj.com/opinion/let-the-bond-market-speak-81529d74) Treasury Secretary Scott Bessent, his former protégé, for meddling in bond markets, warning that it threatens to stoke higher inflation. If the Trump administration's efforts to suppress interest rates are successful, it also would dampen volatility that is prized by traders like the man who once oversaw $12 billion at his Duquesne Capital Management and now runs a family office.

Beware hedge fund managers trashing US policy

Context

Policy criticism and the incentives behind it

Druckenmiller's alternatives and the broader burden

Hedge fund criticism of policy may reflect self-interest

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