The Homeowner/Carried Interest Analogy
Gerry Langeler, a managing director of OVP Venture Partners, has garnered attention this week for a NYT op-ed and CNBC appearance arguing against proposed changes to carried interest tax law. The heart of his argument is the following analogy: “We in the industry invest a small percentage of the total dollars in our partnerships, like the house purchase, with our limited partners investing the rest. Our investments are locked up for prolonged periods of time, often five to 10 years before we see any return. There is a real, material risk of loss of capital. In fact, many venture funds in the bubble lost money, including partners’ capital. Like the house situation, our downside loss potential is ‘fixed’ by what we invested, while our upside is unbounded.” In short: GP=Homeowner and LP=Bank. I emailed – and tweeted – my primary objection to this comparison: Since when have mortgage lenders paid homeowners an annual fee?
