For endowment cios looking to focus on finding alpha and reducing beta these next few months, we've got some bad news. The presidential election is about to make your job a little tougher. It's only primary season, but former Massachusetts Governor Mitt Romney's background at Bain Capital and private equity in general is coming under attack, as fellow Republicans and Democrats alike fan the flames (notably, former Speaker of the House Newt Gingrich.) How much longer do you think it will take the mainstream press to dig into Bain's investor base, and realize that many endowments and foundations profited from what Gingrich is labeling "vulture capital?"
According to a decidedly unscientific but straightforward poll on our site, www.foundationendowment.com, 75% of our readers think the vulture capital barbs are an unfair characterization of private equity (of course 25% apparently root for Newt, as they said it was fair). So that leaves open the question of what you can do to defend yourselves. Will the press, students, alumni or investment committee start going into a tizzy over this?
Normally, you could point to the returns as a defense, citing Gordon Gekko logic, but PE's been bottom-feeding lately (though your investments in Bain during Romney's tenure no doubt fared well). So where does that leave you? May we suggest the following: Book a cruise around the world and come back after the November election when the hoopla dies down. Check out all the emerging and frontier markets you always wanted to invest in. Though not without its own risks, ask yourself: what's scarier now--the Straits of Hormuz or peeved anti-private equity pirates?