Romney Seen Costing Private Equity Fundraising

[highplainsdem]

http://www.bloomberg.com/news/2012-01-27/romney-seen-costing-private-equity-as-pensions-warn-of-backlash.html

Mitt Romney’s campaign for the Republican presidential nomination may be costing his private- equity backers a lot more than they bargained for.

Attacks by opponents portraying Bain Capital LLC, Romney and other buyout managers as corporate looters who enrich themselves at the expense of ordinary workers have put a spotlight on the industry that will affect negotiations about future investments, according to officials and trustees at public pensions. As firms struggle to raise funds, pensions may be more reluctant to commit money and may ask for more details on job creation and push for lower fees, these officials said.

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When Romney set out to raise Bain’s first fund in 1984, he steered clear of pension funds, pursuing ultra-high net worth individuals who contributed about $37 million to form the fund, according to a person who worked with Romney at the time. KKR’s co-founders, by contrast, received early capital from Oregon’s and Washington’s pensions, with the latter contributing $12 million to KKR’s first fund in 1982.

The success of Bain’s first fund, which generated a 61 percent average annual return, according to marketing documents from 2004 obtained by Bloomberg News, helped attract other investors who wanted to share in the profits and allowed Bain to charge a premium for its investment services. The firm collects 30 percent of the profits it earns on its investments, the highest in the industry. Pensions historically have been less willing to pay Bain the higher performance fees.

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Bain is charging 50% more than most private equity firms, 30% compared to 20%.

And more attention should also be focused on how Romney first raised money for Bain, his pursuit of "ultra-high net worth individuals" -- which included, according to Salon, "wealthy oligarchs from El Salvador, including members of a family with a relative who allegedly financed rightist groups that used death squads during the country’s bloody civil war in the 1980s":

[link:http://www.salon.com/2012/01/20/the_roots_of_bain_capital_in_el_salvador/singleton/|The roots of Bain Capital in El Salvador’s civil war
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