On the Record: Steve Judge of the PEGCC

PEI: Has it been awkward having to defend the industry because of attacks on Bain Capital?

The focus on one firm has not prohibited us from organising and vocalising a strong defence of the industry. Our job is to represent the perspective of the industry and advocate on its behalf. We knew for some time that there would be attacks within the context of the presidential campaign, and that is why we have launched a campaign to educate people and provide the facts.

There are over 15,000 US-based portfolio companies owned by private equity firms, and we can’t speak to the specifics of each of these companies. But the industry, across the board, does a terrific job of strengthening portfolio companies for the long-term. It is not problematic telling our story.

PEI: How do you communicate some of the more nuanced characteristics of the investment model?

It is not a simple, ten-second response, and that does become difficult. But there are a couple of things that people do understand. In many cases, the companies in which private equity is investing are troubled. They’re already shedding jobs, and one of the things that we’re trying to do is to save that company and save the jobs that are there. Many times, people understand that you have to make some tough choices; but the end result is that jobs grow faster at private equity-owned companies in new facilities than they do in the economy as a whole.

PEI: How do you convey that to elected officials?

We often meet with members of Congress, US Senators, and other policymakers to first explain what private equity is, how it works, and how important it is to the US economy. Private equity invested $144 billion in the US last year alone. And that’s a huge amount of money, a huge amount of capital investment, across every state and every congressional district in the country.

This is reinforced by introducing elected officials to an example of private equity investment in their home district. We have found that members of Congress are eager to understand the connection between private equity and jobs in their hometown districts, and sometimes are unaware that major local employers are owned by private equity.

There is a greater interest today from public policymakers in learning about private equity than ever before, which is why we are viewing this as an opportunity to tell our story.

PEI: Does that message seem to have been heard by Democrats who have criticised the attacks? 

Many of those are really spontaneous responses on the part of people – Democrats, politically active Democrats – who have some experience with private equity; they’ve been mayors, they’ve been governors, or they are currently mayors and governors. They’ve seen the growth in their cities or states from private equity investments, and they’ve seen the benefits to the pension plans and other entities they observe every day.

PEI: Do you think that has contributed to successfully combating Congressional efforts to change carry’s tax treatment up to now?

Carry is always at the front of our minds. It has been from the beginning, and it will be until it is resolved through comprehensive tax reform or other tax legislation … I don’t think it’s likely to have any action this year; but we’re vigilant, and we continue to be active in talking about carried interest and why it’s appropriately treated as a capital gain.