Pension Funds Get Queasy over Private Equity

Mitt Romney’s campaign for the Republican Presidential nomination may be creating funding headaches for his former colleagues in the private equity industry. Romney’s opponents have characterized Bain Capital—the firm he helped found in 1984 and left in 1999—and other buyout managers as corporate looters who enrich themselves at the expense of ordinary workers. The issue is likely to remain in the news should Romney win his party’s nomination and face President Obama in the general election.

With public scrutiny focused on private equity funds, pension funds are more reluctant to invest and may ask for more details on job creation and push for lower fees, according to officials and trustees at public pensions. “Pension funds have boards. They don’t want to be giving money to an industry that has a taint,” says Tony James, president of Blackstone Group, the world’s largest private equity firm. “Similarly, boards of directors don’t want to sell their company to organizations they don’t view as respectable. So it could be very damaging for the industry.”