New Mountain GP highlights need to influence public perception

Improved explanation of private equity's benefits could combat assaults by unions, many of whose members' pension funds profit from the asset class, Michael Flaherman told the PEI Investor Relations and Communications Forum in New York today.

Private equity needs to do a better job of explaining itself if it is to counteract campaigns by groups such as the US’ Service Employees International Union, Michael Flaherman, managing director of New York private equity firm New Mountain Capital, told the PEI Investor Relations and Communications Forum in New York today.

“Personally I think the SEIU is on to something in terms of their agenda in exploiting the fact that the general public and union members in particular, they don’t know anything about private equity and they’ve never heard of KKR,” said Flaherman, former chairman of the board's investment committee of the California Public Employees Retirement System. He was discussing a viral video recently released by the SEIU featuring Lewis Black, when he added: “I think, collectively, we need to do a better job of explaining to the world who we are and what we do and why it matters.”

The SEIU, which represents 1.5 million public service workers, nurses, hospital staff, nursing home care providers, building services and security guards in North America, has been protesting the buyout industry for well over a year, targeting The Carlyle Group and Kohlberg Kravis Roberts. The union last month stormed a speech being made by Carlyle co-founder David Rubenstein in protest over the firm’s acquisition of nursing home company, Manor Care.

“Private equity does ultimately go to pay pension benefits and the benefits are actually very disproportionately for union members. That’s somewhat of a severe cognitive dissonance of these kinds of campaigns against private equity,” said Flaherman, noting the private equity industry could be doing to make that linkage more clear to union members.

Large public pension funds could play a significant part in communicating the benefits of private equity to pensioners, with many willing to step up and “engage in a constructive way”, said Flaherman. “[Pensions] worry about getting such pressure and such momentum away from private equity that it would constrain their ability to invest.”