Why the hedge fund world loved Obama in 2008—and viscerally despises him today.

In May 2007, when Barack Obama was but an upstart challenger of Hillary Clinton, he attended a gathering of several dozen hedge fund managers hosted by Goldman Sachs at the Museum of Modern Art in New York. It was not a fund-raiser, just a chance for Obama to introduce himself to the investment wizards who had helped turn the hedge fund sector into the most lucrative and alluring corner of the financial universe. And the first question for Obama was as blunt as one would expect from this crowd. “If you’re elected president,” asked one guest, “what will you do to the taxes on the people in this room?” “I’ll raise them,” Obama fired back. “Which I admired,” recalls one of the attendees, Leon Cooperman, head of Omega Advisors. “And half the guys in that room voted for him.”

Obama surely knew that brusque candor would serve him well. He had gone to college and law school with these hyper-successful types and had raised money from some of them for his 2004 Senate run. He proceeded to rake in large sums from them for his presidential effort—$1.5 million, more than double John McCain’s take. This was in part because savvy investors like to pick winners, and, as the race developed, Obama’s campaign looked like a winner. But many fund managers also felt a personal connection with Obama. Just as they had carved out a successful niche within finance by thinking big and against the grain, Obama had risen by promising to transcend conventional bounds of race and politics. “They loved the guy,” says a Washington lobbyist who has represented the hedge fund industry. “He was an exciting, bright guy—like they are. He went to the best schools because he was the best student, not because daddy got him in there. Many of them are the first generation to have wealth, and they view it from a meritocratic standpoint—they made a phenomenal amount of wealth and they feel they earned it. They felt that he’s earned his success as well. It resonated with them.”

Four years later, that bond is broken. The hedge fund community has overwhelmingly shifted its backing to the Republicans: Mitt Romney has so far outraised Obama by a four-to-one ratio among hedge fund employees, pulling in more than $500,000—not to mention the seven-figure checks his super PAC has received from several top fund managers.

It makes sense that Obama would lose support from traditional Wall Street. The banks feel aggrieved at having been singled out for blame for the financial collapse—above all in the Dodd-Frank law, which is already crimping their profits. But Obama’s deep unpopularity in the hedge fund world is harder to figure. For one thing, hedge funds may actually benefit from Dodd-Frank. They will have to register more information with regulators—a departure for an industry defined since its beginnings in the late 1940s by its exemption from oversight—but they could also get new business as a result of restrictions on proprietary trading by banks. For another, while the hedge fund sector has shrunk since the crash, the top 40 managers still made $13.2 billion combined last year. And yet, the antipathy that many fund managers are now exhibiting toward Obama is more intense even than what he is facing from bankers. “They hate him now,” says one former Obama administration official.

Trying to trace this shift of support leads one deep into the collective mindset of an industry that defined pre-crash America like no other—into a complex web of motivations where political philosophy, self-interest, and ego intersect. The lobbyist, for one, chalks it up to a romance gone bad. “A lot of people’s love of Obama was not completely balanced, and their dislike of him now is not completely balanced,” he says. “Maybe that’s what happens when you fall in love.” Bill Daley, who served as Obama’s chief of staff last year, attributed the hedge funders’ change of heart to a failed “leap of faith.” “The 2008 campaign was something that a lot of people who had traditionally not been supportive of a Democratic candidate came to,” he told me. “They were tired of Bush and nobody was really enthusiastic about McCain, ... so they attached to the president. What he said in the campaign wasn’t that dramatically different than what he ended up doing, but they either didn’t listen, or they didn’t believe him.”