Private equity pros have been content to toil away in private, answering to their investors and jockeying for position among their peers. But Mitt Romney’s run for the president has now brought an unwanted spotlight on the industry, and brought critics out of the woodwork.
The presidential debates have already raised public questions about the industry, not the least of which is the 15% tax rate on carried interest enjoyed by private equity managers, reports the Wall Street Journal. The public debate also rages over whether private equity pros are “asset strippers” and job killers, rather than turning around anemic companies for a profit. Surprisingly, some private equity insiders think having Romney in the White House would be bad for the industry.
“We were sitting around, a group of us, four or five months ago and said, ‘Can you imagine how bad it’s going to get if Mitt’s the nominee?” said Christopher Stadler, a managing partner of CVC Capital, at the Dow Jones Private Equity Analyst Outlook conference.
“If we end up with a private equity guy in the White House, it’ll get worse. Not better,” said Mark Yusko, chief executive of asset manager Morgan Creek Capital Management. “Limited partners will be skittish.”
Meanwhile, a new report by law firm Weil Gotshal & Manges LLP says the private equity industry as a whole is poised for a shakeout.
A combination of macro-economic factors, such as the U.S. debt downgrade and the sovereign debt crisis in Europe, together with political uncertainty stemming from the presidential election and regulatory landscape will cause a “sea change” in how private equity operates, say the authors of the report in a Wall Street Journal article.
Top-performing managers will solidify relationships with their investors. Lesser-performing managers will have a harder and harder time raising capital. And the largest players in the market will continue their march toward transforming themselves into “alternative asset supermarkets.”
How are you adjusting your search for a private equity job in light of these industry developments? Add your comments below.
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