When private equity flirts with politics

In many countries, the lines between the private equity world and politics are often blurry.

Private equity and politics have an intimate relationship, as professionals have crossed over from the public to private sector and vice versa in several instances.

Specifically, there are several linkages between heads of state and various private equity roles.

One latest example is Pedro Pablo Kuczynski, who joined emerging markets firm The Rohatyn Group (TRG) in 2007 as senior advisor, and in early June was elected president of Peru following its general elections.

“While this is the first time that a former employee has been elected to such a high level of public office, we have had partners go back-and-forth and a number of our employees have experience at intergovernmental organisations,” TRG chief executive and investment officer Nick Rohatyn told Private Equity International.

“The context that experience provides is especially important in the emerging markets in private equity because you need good judgment about [investments] you are looking at and who you are dealing with.”

This type of connection between running for public office or heading a government agency and operating in the private equity industry exists throughout the world:

• In the US, Bain Capital co-founder Mitt Romney ran for president in 2008 but lost the Republican nomination to John McCain. He came back for the 2012 elections, but this time was defeated by Barack Obama in the general elections. His second presidential campaign brought unwanted attention to the private equity industry; he received scrutiny and criticism based on reports that his firm Bain Capital invested in companies that specialised in moving jobs overseas. Following his second defeat, Romney stayed mostly low-key and has been working as an executive partner group chairman for his son’s private capital firm Solamere Capital.

Timothy Geithner, who was US Secretary of Treasury during much of the global financial crisis, joined Warburg Pincus in 2013 to become its president. In his new role, Geithner has a broad mandate, overseeing overall firm strategy and management, investment and portfolio management, organisational and funding structure and investor relations.

• On the African continent, Okechukwu Enyinna Enelamah, founder and chief executive of African Capital Alliance, a $1 billion private equity firm focused on investing in Nigeria and West Africa, was asked by Nigeria’s president Muhammadu Buhari to join his cabinet last October as the finance minister. Although he didn’t get that position, he was appointed ministry of industry and trade.

Lionel Zinsou, former chief executive of French firm PAI Partners, served as Benin’s prime minister between June 2015 and April 2016 and announced in December his plans to run for president of Benin. Since losing the general presidential election in March, garnering 35 percent of the votes versus his opponent Patrice Talon, he returned to PAI as a member of the supervisory board. 

The next to make the jump could very well be President Barack Obama, who in mid-June told Bloomberg News he would consider pursuing a career in venture capital once he finishes his second term and leaves the White House.