Washington DC-based Private Equity Council (PEC), a lobbying group launched in 2007 with 11 mega-firm backers, has decided its political mission will be furthered with the addition of more members.
The PEC’s founding members agreed two months ago to open membership to many other US private equity firms in an effort to better portray the asset class to lawmakers as a diverse collection of business builders and entrepreneurs.
Doug Lowenstein, president of the PEC, said in an interview that the association members had put off the decision to expand membership in part because of the need to focus resources on lobbying against key congressional initiatives. While Lowenstein says the private equity industry is not “in the clear” on the regulatory front, he argues that a lull in legislative momentum spells “the best opportunity to be visible” on Capitol Hill.
If the PEC succeeds in growing its membership, the US may finally gain a broad-based private equity advocacy body similar to the British Venture Capital Association (BVCA) and the European Private Equity & Venture Capital Association (EVCA). The PEC is currently approaching buyout and growth-capital general partner groups about membership, but not other industry participants like limited partners and service providers.
For decades, the National Venture Capital Association (NVCA) has been representing US venture capital interests on Capitol Hill, but the NVCA does not allow buyout firms among its members. There are no national trade association for private equity firms in the US other than the NVCA and the PEC.
The PEC launched with the backing of Apollo Global Management, Bain Capital, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts, Madison Dearborn Partners, Silver Lake Partners, Texas Pacific Group and Thomas H. Lee Partners. The founders deliberately limited membership initially to this circle of the very largest private equity firms.
Permira, Apax Partners and Providence Equity Partners have since joined as members. All three have operations in the US.
The founding of the PEC was largely in response to the growing momentum in Washington toward raising the tax rate on carried interest and other regulatory initiatives viewed as harmful to the growth and profitability of the private equity business. The GPs who created the PEC hoped to combat private equity’s negative image through a campaign of education and engagement with lawmakers and their voters.
Lowenstein was selected to lead the PEC because of his successful track record advocating for the US video game industry, which despite becoming a hugely successful sector within the US economy increasingly drew fire from lawmakers who said that certain violent and explicit games would require greater regulation of the industry.
In deciding to throw open its membership, the PEC is acknowledging that its profile as a collection of the most powerful private equity firms often presents obstacles in a Congress that today is in no mood to be seen as doing favours for Wall Street titans. One person close to the group said an expanded membership that included, for example, women-owned and ethnic minority-owned private equity firms would allow the PEC to more compellingly argue that private equity makes an impact on the US economy that is both broad and positive.
Lowenstein says the largest private equity firms that are the PEC's fouunding members remain “fabulous messengers, but there is strength in numbers, particularly in politics. There is enormous additional strength that comes from diversity”.
The 11 founding members of the PEC have paid dues to the body based on a percentage of their respective assets under management. That dues-paying formula will become more flexible under expanded membership. This year's official dues rate for a firm with between zero and $8 billion in assets under management is $25,000.
A partner at a US middle-market private equity firm said he had recently been approached about joining the PEC. He said the trade body had made clear to him that the middle-market private equity story today stood a better chance at gaining a receptive policymaker audience than did what is too often perceived to be the priorities only of mega-fund managers.