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The Obama risk

President Obama’s first attack on private equity has largely fallen flat. But that’s no reason for the industry to ease off on its lobbying efforts.

For fund managers in this industry, politics matters. Public perception matters. If the concept of private equity conjures images in the public mind of well-heeled vampires sucking the life out of corporate America, it will make for some uncomfortable conversations with LPs (specifically public pension plans) subject to political pressures.

That said, there was no need for a crystal ball to predict that President Barack Obama would campaign against Republican challenger Mitt Romney’s private equity past, as part of his bid to secure a second term. But who could have predicted that such a substantial faction of the press would be so critical of the President’s framing of the issue?

Sure, the newspapers read by business folk might have been expected to take a positive view of private equity. But what about more left-leaning titles? Well, the Boston Globe described Obama’s approach (of attacking select Bain investments whilst trying to avoid a debate about the merits of the industry more broadly) as his “awkward private equity dance”. The editorial board of the Washington Post agreed, suggesting that the president “[wanted] it both ways” on the issue.

The White House’s message – that Bain had overleveraged companies at the cost of honest American jobs – doesn’t even seem to have gone down very well with Democrats, his core constituents. Obama ally Cory Booker, the fast-rising Newark mayor, recently made headlines by slamming the president’s strategy as “nauseating”. Other centrist Democrats have struck a similar tone.

Not exactly a promising start for the President’s campaigning on the issue, then.

But it would be a mistake to think the public perception risk has suddenly gone away. The well-oiled Obama reelection machine will no doubt be considering a change in tactics, given the lacklustre reaction to its anti-private equity message. So it’s all the more important for lobby groups like the Private Equity Growth Capital Council – which has, to its credit, ramped up its public defense of the industry in recent months – to redouble their efforts to talk about the positive impact private equity can have. The media may have taken the industry’s side this time round, but they might not need much persuading to change gears.