Politics & Policy

Obama’s Base Banks with Bain

Liberal institutions rely heavily on private-equity returns.

As Democrats convene in Charlotte this week, they likely will double down on their claim that Bain Capital is really the Bain Crime Family. They will accuse Republican nominee Mitt Romney and Bain’s other “greedy” co-founders of stealing their profits, evading taxes, and lighting cigars with $100 bills on their yachts. But Democrats will ignore this inconvenient truth: Bain’s private-equity investments have enriched dozens of organizations and millions of individuals in the Democratic base — including some who scream most loudly for President Obama’s reelection.

Government-employee pension funds are the chief beneficiaries of Bain Capital’s economic stewardship. New York–based Preqin uses public documents, news accounts, and Freedom of Information Act requests to track private-equity holdings. Since 2000, Preqin reports, the following funds have entrusted some $1.56 billion to Bain:

‐ Tennessee Consolidated Retirement System ($15.0 million)

(For further details on these and other limited partners of Bain, see this spreadsheet.)

These pension funds aggregate the savings of millions of unionized teachers, social workers, public-health personnel, and first responders. Many of them would be startled to learn that their nest eggs, or even their current pensions, are incubated by the company that Romney launched and the financiers whom he hired.

Major universities have profited from Bain’s expertise. According to Infrastructure Investor, Bain Capital Ventures Fund I (launched in 2001) managed wealth for “endowments and foundations such as Columbia, Princeton, and Yale universities.” The Wall Street Journal’s James Freeman noted on July 18 that Harvard “has also invested with Bain.” Thus, Michelle and Barack Obama’s undergraduate campuses (Princeton and Columbia, respectively) and the university where they earned their law degrees (Harvard) all have enjoyed Bain Capital’s financial prowess.

According to BuyOuts magazine and S&P Capital IQ, Bain’s other college clients have included Cornell, Emory, the Massachusetts Institute of Technology, Notre Dame, and the University of Pittsburgh. Preqin reports that the following schools have placed at least $424.6 million with Bain Capital between 1998 and 2008:

‐ University of Washington ($33 million)

Major center-left foundations and cultural establishments also have seen their prospects brighten thanks to Bain Capital. According to the aforementioned sources, such Bain clients have included the Charles Stewart Mott Foundation, the Doris Duke Foundation, the Metropolitan Museum of Art, the Ford Foundation, the Heinz Endowments, and the Oprah Winfrey Foundation.

Why on Earth would government-union leaders, university presidents, and foundation chiefs let a company with Bain Capital’s reputation oversee their precious assets?

“The scrutiny generated by a heated election year matters less than the performance the portfolio generates to the fund,” California State Teachers’ Retirement System spokesman Ricardo Duran recently told the Boston Globe. CalSTRS has pumped some $1.25 billion into Bain. Since 1988, Duran says, private-equity companies such as Bain have outperformed every other asset class to which CalSTRS has allocated the cash of its 856,360 largely unionized members.

“We remain focused on investment performance for all of our commitments, including Bain,” Jodi O’Neill, a spokeswoman for the Indiana Public Retirement System, told Reuters. “Election rhetoric has neither a positive nor negative impact on our assessment of a fund’s performance.”

“These government-union pension funds call the shots,” says my friend Brett A. Shisler, a Manhattan financier and former private-equity executive. “They want Bain to do one thing: make money. They do not evaluate Bain on how many jobs they create or environmentally friendly products they launch. No, they just care about money. If Team Obama is concerned about ‘greed,’ they should not blame private equity. They should blame the pension funds. What they demand is a far cry from conscious capitalism.”

So, what really is Bain’s reputation? Is it a gang of corporate buccaneers who plundered their ill-gotten gains by outsourcing, euthanizing feeble portfolio companies, and giving cancer to the spouses of those whom they fired? If so, union bosses, government retirees, liberal foundations, and elite universities — including the Obamas’ — thrive on the wages of Bain’s economic Darwinism.

If, however, these institutions relish the yields that Bain Capital generates by supporting start-ups and rescuing distressed companies, 80 percent of which have prospered, then this money is honest — and Team Obama isn’t.

New York commentator Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution, and Peace at Stanford University. New York financier Brett A. Shisler contributed research for this piece. 

Deroy Murdock is a Manhattan-based Fox News contributor and a contributing editor of National Review Online, and a senior fellow with the London Center for Policy Research.

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