Steve Economopoulos for The Patriot-News

Is it time to take your money off the sidelines?

Are you an “ investor” or are you a “ saver”? If the thought of having your money at the mercy of the volatile stock and bond markets makes you cringe or keeps you up at night, you are most likely the latter.

However, if you believe in the value of making quality investments with your hard- earned money and believe that over time it might benefit you or your family, then you might be an investor and wondering, “ Is this the time to buy?”

Greed or fear?

Buy now? This can be a bewildering question for many people.

It is important to keep in mind that the short-term direction of the market is governed by greed and fear. Worries about Europe, government policy and the potential for a “double- dip” recession have kept fear prevalent, as evidenced by large daily swings in mar­ket values.

Although fear has been winning the battle lately, greed will come back into play, and people will not want to miss being invest­ed when this occurs.

Greed can return for any number of reasons. For example, some improving economic news coupled with the potential for a few unexpected positive an­nouncements could cause a turnaround. Moreover, the manufacturing and service sectors have continued to expand, recent holiday sales were strong and consumer confidence has improved.

These indicators might be just what’s needed to motivate investors to put large amounts of sidelined cash back into the market.

Faith can be detrimental

Hope is a feeling that something will eventually happen just because you believe it will, and faith is a belief in something even after common sense has told you not to believe in it. While these feelings are prevalent around the holi­days and can lead to great personal accomplishments, they are usually detrimen­tal when it comes to invest­ing. Buying an investment that goes bad and hoping that it will recover gener­ally does not work.

With many heartwarm­ing stories of faith and hope that make us feel good around the holiday season, keep in mind that having these emotions involved in your invest­ment decisions can lead to frustration and a lack of success. If this describes you, consider teaming with the services of a personal portfolio manager.

During today’s uncertain times, a good portfolio manager can be invalu­able in helping you capture opportunities from asset classes that you might not consider investing in on your own.

Volatility is high

This headline has been a favorite in recent news, but what does it mean to the in­vestor? Indecision regarding the direction of the mar­kets, economy and political picture is more prevalent now than at any time inmy investment career. In the late 1990s, it was hard to find a client who did not expect returns in excess of 15 per­cent. Now 5 percent would be satisfactory to these same people.

When expectations are low and fear and volatility are high, it often indicates a good long-term buying opportunity. As you might have heard, some believe it’s good to get greedy when others are fearful.

If you agree, start putting your investment wish list together and determine when and how you will get your portfolio invested.

Why buy today?

Companies have report­ed record earnings while consumers have increased their savings over the last few years. Consumer spending represents about 70 percent of our economy, according to J. P. Morgan’s “4Q Guide to the Markets.” With retail sales improv­ing and potential further growth in sales from pent­up consumer demand, we might be seeing early signs of more strength to come.

This type of environ­ment once again lends itself to a potential time to buy investments that match your goals. With tax time soon upon us, it is also a great time to review your holdings and how they should be weighted based on your risk as an investor.

Consider taking a stand in 2012. Ask yourself what asset amount you can com­mit to certain sectors that might represent a good investment over the next 12 months.

If you can accept fluc­tuations on the part of your capital, this might be your time to create a diversi­fiedmix and build a solid portfolio designed tomeet your goals while potentially maximizing the return you receive on your investments. And as an investor, I believe you will look back on this time and be glad you did.

Steve Economopoulos, CFP, ChFC, Managing Principal, PIM Port­folio Manager in Harrisburg at 717-545-5870. The accuracy and completeness of this article are not guaranteed. The opinions expressed are those of the author and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. Investment products and services are offered through Wells Fargo Advisors Financial Network LLC, and Member SIPC. Econ Wealth Management is a separate entity from WFAFN. Investments in securities and insurance products are not FDIC- insured and not bank guaranteed and might lose value.

Article source: http://blog.pennlive.com/business/2012/01/wealth_matters.html

The Candidate: Barack Obama

The Play: Proposing a “Buffett rule” to increase taxes on the wealthy

The Strategy: President Obama never mentioned Republican presidential candidate Mitt Romney by name in his State of the Union address Tuesday night, but his message was meant to set up a sharp contrast with him.

Mr. Obama’s central theme was that he would fight for the middle class. To drive home the point, he sat Debbie Bosanek, the personal assistant to billionaire investor Warren Buffett, in the House gallery with first lady Michelle Obama. Ms. Bosanek was a human prop for Mr. Obama’s “Buffett …

Article source: http://online.wsj.com/article/SB10001424052970203363504577187060052236868.html?mod=googlenews_wsj

KATY, Texas, Jan. 27, 2012 /PRNewswire via COMTEX/ –
Two pro sports women’s associations are teaming up to form a credit union with an educational wealth empowerment program for pro athletes and their families.

“We’re sick and tired of seeing pro players and wives go broke, divorce, and suffer after playing pro sports,” says Gena Pitts, Founder of the Professional Sports Wives Association (PSWA), a not-for-profit association that provides resources to peers in over 16 Pro Sports leagues through their multi-media and sports talk show on WAFS, Biz 1190 AM from Atlanta, Georgia.

Seeing the staggering percentage of those that fall victims of their own success, Leagues of Their Own Inc. and PSWA are teaming up to form a credit union with an educational wealth empowerment program for pro athletes and their families.

“Our mission of chartering a Federal Credit Union is to implement education focused on ‘total wealth family leadership and legacy planning’ that redefines what we are doing in our own lives and in the larger community. We believe that a family’s human capital is just as important as financial capital,” says Stacey August, founder of Leagues of Their Own Inc. and mother of Prince Fielder, 2011 major league all-star MVP and newly signed Detroit Tigers 1st baseman.

“The sudden success of the athlete marks a turning point in the athlete’s life that can sometimes be overwhelming. It is through research and personal experience that we understand the complex issues of our community and are here to transform it with the implementation of systems that focus on all aspects of one’s wealth, to include the human capital as well as the financial capital for a more balanced life. Our programs are two-fold offering wealth empowerment coaching and financial literacy programs,” continues August.

Pitts added, “Until now, there has been a void to provide professional athletes and their families with a practical, viable educational training program to learn how to preserve and protect athletes’ wealth in an industry where nearly eighty-five percent of pro athletes are divorced and a quarter of a million dollars in debt when they retire.”

Leagues of Their Own Inc. (LOTO) is a not-for-profit wealth empowerment and financial literacy institute. Because of the interest and demand, LOTO and PSWA are on the fast track to getting their Industry Credit Union Charter.

SOURCE Professional Sports Wives Association

Copyright (C) 2012 PR Newswire. All rights reserved

Article source: http://www.marketwatch.com/story/leagues-of-their-own-inc-announces-partnership-with-professional-sports-wives-association-to-form-credit-union-2012-01-27

Former Massachusetts Governor Mitt Romney had perhaps his best debate last night in Jacksonville. He was, for the most part, forceful and in command. He damaged his main rival, Newt Gingrich, on answers ranging from immigration to Gingrich’s investment portfolio. And Romney was particularly strong at turning the tables on the attacks on his wealth, saying this:

And I know that there may be some who try to make a deal of that [Romney’s wealth and investments], as you have publicly. But look, I think it’s important for people to make sure that we don’t castigate individuals who have been successful and try and, by innuendo, suggest there’s something wrong with being successful and having investments and having a return on those investments. Speaker, you’ve indicated that somehow I don’t earn that money. I have earned the money that I have. I didn’t inherit it. I take risks. I make investments. Those investments lead to jobs being created in America. I’m proud of being successful. I’m proud of being in the free enterprise system that creates jobs for other people. I’m not going to run from that. I’m proud of the taxes I pay. My taxes, plus my charitable contributions, this year, 2011, will be about 40 percent. So, look, let’s put behind this idea of attacking me because of my investments or my money, and let’s get Republicans to say, you know what? What you’ve accomplished in your life shouldn’t be seen as a detriment, it should be seen as an asset to help America.

This answer reframes the issue of Romney’s success, away from a defensive, apologetic stance to a confident, assertive one. It also helped that Romney was right on the substance. It is quite important to push back against the mindset that assumes success and excellence are things for which one ought to apologize. I understand that many modern-day liberals believe people who are wealthy are by definition of a suspect class (unless, say, their wealth comes via Hollywood). The task of the rest of us is to shatter that myth, which is not only wrong but can also be pernicious. Governor Romney, I think, did a very good job explaining why achievement in business is, in fact, impressive (it’s often the result of hard work, persistence, creativity and drive) and an asset to America. This is a theme Romney needs to continue to build on. Rather than accept the premise of the attack, he decided to shred it.

The best answer of the night in terms of political philosophy, however, belongs to former Pennsylvania Senator Rick Santorum (who was excellent in the debate from beginning to end). When the candidates were asked by a Jacksonville resident what role religious beliefs would play in decisions they might make as president, Santorum said this:

Faith is a very, very important part of my life, but it’s a very, very important part of this country. The foundational documents of our country — everybody talks about the Constitution, very, very important. But the Constitution is the “how” of America. It’s the operator’s manual. The “why” of America, who we are as a people, is in the Declaration of Independence, “We hold these truths to be self-evident that all men are created equal and endowed by their creator with certain unalienable rights.” The Constitution is there to do one thing: protect God-given rights. That’s what makes America different than every other country in the world. No other country in the world has its rights — rights based in God-given rights, not government-given rights. And so when you say, well, faith has nothing to do with it, faith has everything to do with it. If rights come… (applause) if our president believes that rights come to us from the state, everything government gives you, it can take away. The role of the government is to protect rights that cannot be taken away. And so the answer to that question is, I believe in faith and reason and approaching the problems of this country but understand where those rights come from, who we are as Americans and the foundational principles by which we have changed the world.

This is a wonderful articulation of America’s founding principle and a nice corrective to those conservatives who tend to focus only on the Constitution at the expense of the document (the Declaration of Independence) that dealt a crushing philosophical blow to tyranny and despotism.

In our time, it’s common for people to argue that religion is a source of political intolerance, and of course it can be. But it can also be a source of political tolerance precisely because it provides a firm grounding for human rights and a belief in human dignity. What Rick Santorum did last night was give voice to what Lincoln called our “ancient faith.”

There have been a lot of complaints made about the number of debates we’ve had in the GOP primary, and it’s certainly true that not all of them have been edifying affairs. But last night was an encouraging one for those of us who care about conservatism, if only because on several occasions we saw candidates for president dilate on important political principles.

Article source: http://www.commentarymagazine.com/2012/01/27/a-good-night-for-conservative-principles/

Judith Berzof Associate editor – Business First

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There’s a wealth of business books on how companies can become successful, but several Louisville minority-owned businesses already know what to do.

They are walking the walk and talking the talk.

Leaders of Nimbus Inc. and EnovaPremier LLC explained their business philosophy in conjunction with a survey for the list of minority-owned businesses in the Jan. 27 Diversity Works special section of Business First.

EnovaPremier, which has 27 local employees and makes tire and wheel assemblies for Toyota Motor Corp. (NYSE: TM), General Motors Corp. 
 

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(NYSE: GM), and Hyundai, relies on four core values referred to as RIDE, according to Byron Meyer, chief operating officer.

It is grounded in: Responsiveness, Integrity, Diversity and Excellence.

The philosophy has served the company well, as it recently won the Agave Cornerstone Award for minority-owned and certified suppliers for companies with sales greater than $50 million from the Tri-State Minority Supplier Development Council.

Nimbus Inc., another Agave winner in the supplier category for sales of less than $1 million, got a big break from Toyota several years ago.

President Stacey Wade met leaders of Toyota’s supplier diversity purchasing department at a council event. “That one handshake in 2008 has been a game-changer for us in many ways,” according to Wade.

Nimbus has six employees and does communications and marketing

Wade’s business philosophy of viewing client relationships as true partnerships likely helped Nimbus capitalize on that handshake. It comes down to saying it like it us.

As Wade puts it, rather than taking the traditional agency approach of “nodding our heads in unison and saying ‘yes’ to whatever our clients say, Nimbus isn’t afraid to speak up and offer alternatives if we believe it’s the right direction. “

Judith Berzof oversees special publications of Business First.

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Article source: http://www.bizjournals.com/louisville/blog/2012/01/minority-owned-businesses-offer-tips.html

Bribe yourself to lose weight; it’s a plan that may just work for you! I’ve been reading some articles about creative weight loss ideas and was surprised to find that studies have shown that those people who bribe themselves to lose weight actually achieve great success. But this isn’t the only type of bribing that works… bribing a colleague seems to help drop the weight too — a bunch, with an average 97 percent success rate!

Pay It Forward

These sound like great ideas to me. I really like the bribing yourself idea. Here is my personal suggestion: get a couple glass jars (may I suggest a Mason jar) and label each one “WEALTH for HEALTH.” One jar stays in your kitchen at home, the other in a place at work where you will see it numerous times during the day. Why not find a colleague who is willing to do the same, compete with them and see whose jar fills up first?

Now here comes the part I love: Schedule a daily walk, preferably during your lunch hour, and pay yourself for each walk that you take. I think it would be perfectly fine to walk with your competing colleague too, but maybe you can earn an extra buck if you walk alone during break time also. Remember it is a competition, but the real goal for everyone is to lose weight and become healthier.

If you avoided the elevator at work and took the stairs instead — pay yourself. Rode your bicycle to work or used it to run errands and left the car in the garage? Pay yourself! You get the idea: more physical activity means more cash in your “Wealth for Health” jars.

Do the same for healthy snacking and your daily meals. When you avoid that candy jar at work and reach for a crunchy apple or some delicious raw almonds instead, pay yourself! When you prepare a healthy meal at home instead of ordering fast food, pay yourself. Maybe even write yourself a check for the amount of money you would have spent on the unhealthy fast food; or make up an I.O.U. note and drop it in the jar.

Don’t total up the bribe money for an entire month. After a month passes, open the jar and pour out the contents, adding up every single dollar. The contents will allow you to see that your efforts are truly worth something… at so many levels! Each dollar represents attempts you’ve made to become healthier and happier. It’s surely something to celebrate. And I know that you will strive for a few dollars more the following month.

After three months, purchase something that you will appreciate and deserve. An amazing pair of walking shoes perhaps, or maybe a new outfit — a smaller size than what you would have wore three months ago, I just know it. And if you are really feeling generous, buy a small gift for the competing colleague. After all, they did keep you motivated, right?

Employers Do It

Now I wonder: can companies bribe their employees to lose weight and focus on healthier habits? I checked some sites on the Internet and found that many employers offer cash incentives for those employees who lose weight and keep it off. There are also cash prizes awarded in contests held for the best healthy recipes and exercise tips. Okay, I love this idea too! Incentives not only bribe the employees to get started towards healthier behavior, but they keep them going.

I would assume that all of this would help keep health costs lower; in fact, paying yourself or the employees of a company to change unhealthy behaviors could put a big dent in health care expenses. I’m wondering how many companies out there now offer financial incentives for participating in wellness programs? We must realize that paying small amounts of money — now — could push people into healthier habits in the future, creating savings in health care and a healthier Michigan.

“Wealth for health” — It’s a great concept, don’t you think? I do!

Does your company offer financial incentives to become healthier? Have you ever bribed yourself?

Photo by KrissZPhotography

Related posts:

1. Is Personal Wealth Really Necessary for Better Health?
2. Insurance Exchanges Aim to Lower Costs of Health Coverage For Small Businesses, Individuals
3. Improve Your Health: Feel Great in Eight Short Weeks
4. Health insurance 101: Rising costs spur changes in health plan designs
5. Health insurance 101: Costs influence plan designs

Tagged as:
motivation,
weight loss

Article source: http://www.ahealthiermichigan.org/2012/01/27/wealth-for-health-why-bribes-may-be-a-great-way-to-improve-health-lower-costs/

On Friday, the President added a new line to his regular “fair share” repertoire on tax burdens and wealth distribution. “We do not begrudge wealth in this country. We aspire to financial success,” he said in a Michigan speech on college tuition, as he has countless times before. “But we also understand that we’re not successful just by ourselves. We’re successful because somebody started the University of Michigan. We’re successful because somebody made an investment in all the federal research labs that created the Internet. We’re successful because we have an outstanding military. That costs money. We’re successful because somebody built roads and bridges and laid broadband lines. And these things didn’t just happen on their own,” he said before returning to his pro-forma lines: “And if we all understand that we’ve got to pay for this stuff, it makes sense for those of us who’ve done best to do our fair share.”

That middle part’s new. And it’s an almost exact replica of the living room chat gone viral that launched Elizabeth Warren’s Senate campaign in Massachusetts, right down to the examples of roads and defense:

There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.”

It says something about Warren’s populist knack for framing Democratic priorities that Obama’s cribbing her lines. And though she’s described as a grandmother from Oklahoma by her admirers and a Harvard elitist by her detractors, it’s possible this skill comes neither from her folksy roots nor the cloisters of Cambridge–after all, Obama’s no stranger to a humble upbringing or the Harvard Yard. As David Bernstein writes in the Boston Pheonix, Warren actually found her public voice through a ridiculed guest gig on Dr. Phil’s daytime talk show and by authoring several pop personal finance books.

At the time, she says, not all of her colleagues in the hallowed halls of academia were quite so impressed with her new direction. Many looked down their noses at her TV exploits. Some economists (Megan McArdle of the Atlantic, for one) publicly disputed her key arguments. Her name even vanished from the New York Times for five years, last appearing a month before her first Dr. Phil appearance, and not showing up again until Congress appointed her to a bank-bailout oversight commission in December 2008, according to an archive search.

And you don’t have to be a Harvard fellow to find something mockable in her work from the time, which combines motivational-style cheerleading, tough-love lectures, and checklist-oriented advice.

One can imagine the professorial eyes rolling as Warren walks Dr. Phil subjects “Wendy and Matt” through a “financial fire drill,” or promises “Dawn and Trent” that they can be debt-free in two years. And few people within the ivied walls produce books with lines like: “Are you ready to start on your path to a lifetime of riches?”

Nobody’s laughing now.

Update: And yet here Warren displays an almost Romney-esque level of tin-earedness on personal wealth. In an interview on whether investing by members of Congress should be restricted, she dropped this head-spinner: “I realize there are some wealthy individuals – I’m not one of them, but some wealthy individuals who have a lot of stock portfolios.” It’s not really clear whether “I’m not one of them” refers to being wealthy or having a lot of stocks, but Warren undoubtedly checks both boxes: her six-figure income put her in the top %1 of earners last year, she owns $3 million+ in investments and lives in a $1-$5 million home. So, uh, yeah, she is “one of them.”

Article source: http://swampland.time.com/2012/01/27/obama-elizabeth-warren-and-dr-phil/

Barbara Colella

Cynthia Scott

Denise Jarrett

Barbara Colella, Cynthia Scott and Denise Jarrett have joined the sales team at the Ridgewood office of Prominent Properties Sotheby’s International Realty, the company recently announced. Each agent, said a company spokesperson, brings a “wealth of experience and success” in the real estate industry.

A veteran of the industry, Colella owned two successful Florida-based real estate companies, which she combined and sold to a leading competitor. She markets homes from $300,000 to $30,000,000 with Prominent Properties Sotheby’s International Realty. A resident of Saddle River, she is very active in her community.

Scott joined the company in 2010 and has consistently been in the top one percent of New Jersey Realtors, according to a company spokesperson. Licensed in New Jersey and New York, she markets homes from $300,000 to $3,000,000. She is a member of the Real Source Board of Realtors, New Jersey Association of Realtors, New Jersey Multiple Listing Service, Orange County Association of Realtors, New York State Association and the Greater Hudson Valley Multiple Listing Service.

Jarrett, said a company spokesperson, is known for her integrity, discretion and hard work, treating each client with the utmost respect and professionalism. She markets homes from $300,000 to $30,000,000. A native of London and current resident of Bergen County, she is active in several local charities and schools. Professionally, she strives to create genuine and trusting relationships with clients.

Prominent Properties Sotheby’s International Realty is located at 55 N. Maple Ave. in Ridgewood. For more information about the firm, call 201-639-5555.

Article source: http://www.northjersey.com/realestate/broker_agent_news/138182049_Prominent_Properties_adds_three.html

South Bend, IN, January 27, 2012 –(PR.com)– Blackjack authority Ace Ten has made a list of the most earning blackjack players of 2011 and the man on top of the list was Don Johnson. Johnson won a huge amount of money, over $15.1 million, from three different Atlantic City casinos last summer.

The world’s leading black site added that Johnson won an extra $2 million last month, when he decided to pay one of the three casinos, Tropicana Casino, another visit. He showed once again that he was not just an amateur that got lucky. He put his grand total at $171 million and he put the casino in misery again.

Johnson said in a reaction that his goal was to bring down all Atlantic Casinos and show people that the Atlantic City Assassin was no man to mess with. He said he was certain he’d be back sometime soon, so he recommended everyone to keep an eye on blackjack news. Johnson appeared to be very confident, but that’s quite normal when you win over $17 million in a year playing blackjack.

Johnson’s winning adventure started in December 2010, when he beat Tropicana Casino, Borgata Casino and Tropicana Casino for a grand total of $15.1 million. Including the $2 million he won in October 2011 the grand total is $17.1 million.

Meanwhile, Johnson’s success has made people start a discussion on whether high stakes blackjack is actually a good thing for casinos. Since all Atlantic Casinos offer high stakes blackjack, their short term risk of losing money is higher than that of normal casinos.

All casinos make use of a long term strategy, i.e. the house odds are better but not that much better. If you play a few games, you might win them all. If you play thousands of games it’s highly unlikely you will win more than the casino. In high stakes games, this is a bit more dangerous though.

Because the volume of games is lower, it’s harder for casinos to get to play a very high number of hands and thus they can’t make sure they win. Many people believe the casinos are taking a huge risk, so players like Johnson have a good chance to win money if they hit a lucky streak.

Blackjack experts at Ace Ten think it’s not a problem though; the casinos should have enough reserves to cover the losses. And if they do, it’s just a matter of time. In the long run enough games will be played and statistics should be on their side, unless someone has truly managed to beat the system.

About Ace Ten
Ace Ten – the blackjack authority – is a website made by blackjack experts. It’s an authority website purely focusing on Blackjack. The offering consists of a wealth of information and resources about the game of online blackjack. Our main objective is to provide comprehensive coverage, -including articles, discussions, tips, strategies, and interactive resources— that will increase players’ knowledge and enjoyment of the game, as well as their skill and their potential to win consistently.

###

Article source: http://www.pr.com/press-release/386506

Mitt Romney’s campaign for the
Republican presidential nomination may be costing his private-
equity backers a lot more than they bargained for.

Attacks by opponents portraying Bain Capital LLC, Romney
and other buyout managers as corporate looters who enrich
themselves at the expense of ordinary workers have put a
spotlight on the industry that will affect negotiations about
future investments, according to officials and trustees at
public pensions. As firms struggle to raise funds, pensions may
be more reluctant to commit money and may ask for more details
on job creation and push for lower fees, these officials said.

“Private-equity managers’ wealth and tax rates are on
display at a time when pensions are getting squeezed,” said
Joseph Alejandro, treasurer of the New York City Patrolmen’s
Benevolent Association. “Public investors should raise
questions about whether the business is overly generous for
managers. I hope the renewed attention on the industry will lead
to discussions on fees and greater controls like claw-backs.”

The debate is affecting private-equity managers, including
Romney’s former firm, Boston-based Bain Capital, as they’re
competing for a shrinking pool of investor dollars. Fundraising
slowed in the third quarter to the weakest pace since before the
global financial crisis and stayed near that level in the final
three months of the year, according to London-based researcher
Preqin Ltd.

Political Attacks

U.S. public and private pensions provide 42 percent of the
capital for all private-equity investments, according to the
Private Equity Growth Capital Council in Washington. Public
pensions are sensitive to protracted debates about managers’
compensation and whether buyouts create value and jobs, because
they must answer to ordinary workers, said one official, who
asked not to be named because he wasn’t authorized to speak on
the topic.

“The political attacks against Romney and Bain will
definitely come up when firms pitch us their new funds,” said
William Atwood, executive director of the Illinois State Board
of Investment, which oversees $10.4 billion in pension funds.
“You’d be crazy not to bring it up.”

The pension board had $621.3 million, or 6 percent of its
assets, in private equity as of Dec. 31, according to its
website.

Private-equity firms typically charge about 1.5 percent of
assets to cover their expenses, and 20 percent of the profits
from investments as compensation, or carried interest.

Institutional Investor Push

Pensions, endowments and sovereign-wealth funds, which
comprise the majority of so-called limited partners in buyout
funds, have pressed for better payouts and data from global
private-equity managers in the wake of the financial crisis.
Some of the biggest investors formed the Toronto-based
Institutional Limited Partners Association, which introduced
guidelines in 2009 addressing fees, governance and communication
with clients. Blackstone Group LP (BX), KKR Co. and TPG Capital are
among firms that have signed on.

In addition to the fees, which eat into returns for
pensioners, private-equity managers have also come under fire
for paying a lower tax rate on much of their income than
ordinary wage earners. Carried interest is taxed at the lower,
15 percent rate for capital gains, rather than the 35 percent
top rate that applies to regular income.

The profits and their tax treatment helped make buyout
pioneers such as Stephen Schwarzman, co-founder of Blackstone
and a supporter of Romney’s campaign, some of the richest
Americans. Schwarzman, ranked the 66th-richest American by
Forbes, held a fundraiser for Romney at his Park Avenue
apartment on Dec. 14. He has opposed raising the tax on carried
interest and endorsed a flat tax as part of comprehensive reform
of the U.S. tax code.

Pension Assets

U.S. pensions account for about 27 percent of assets at one
of Blackstone’s largest funds, compared with 30 percent and 31
percent for comparable funds at Washington-based Carlyle Group
LP and New York’s KKR (KKR), according to Preqin estimates based on
the investors it tracks. Their influence was on display last
year, when Blackstone lost out on a deal to manage hedge-fund
investments for New York City’s public pensions after the firm’s
chief strategist suggested retiree benefits were too generous.

Buyout funds globally are seeking to raise about $165
billion, more than in 2006 at the height of the fundraising
boom. KKR, Warburg Pincus LLC and Providence Equity Partners LLC
are garnering commitments.

Carlyle Group, which is preparing an initial public
offering, and Silver Lake Management LLC are set to begin
marketing funds, according to people familiar with the plans.

Focus on Wealthy

Institutional investors stung by the financial crisis have
been slow to commit to new buyout funds, which raised almost
$214 billion in the second quarter of 2007, at the peak of the
leveraged-buyout boom. Industrywide, firms raised $52.4 billion
for 108 funds during the fourth quarter.

The Federal Reserve’s decision to keep interest rates low
through 2014 may help private-equity firms by driving investors
into higher-yielding assets and pushing down borrowing costs for
leveraged buyouts.

Bain, which late last year started gauging investor
interest for a new buyout fund, relied on pensions for about 9
percent of client assets in a recent fund, reflecting a focus on
wealthy individuals since Romney served as the firm’s chief
marketer, according to a person who worked with Romney at the
time.

When Romney set out to raise Bain’s first fund in 1984, he
steered clear of pension funds, pursuing ultra-high net worth
individuals who contributed about $37 million to form the fund,
the person said. KKR’s co-founders, by contrast, received early
capital from Oregon’s and Washington’s pensions, with the latter
contributing $12 million to KKR’s first fund in 1982.

‘Headline Risk’

The success of Bain’s first fund, which generated a 61
percent average annual return, according to Bain marketing
documents from 2004 obtained by Bloomberg News, helped attract
other investors who wanted to share in the profits and allowed
Bain to charge a premium for its investment services. The firm
collects 30 percent of the profits it earns on its investments,
the highest in the industry. Pensions historically have been
less willing to pay Bain the higher performance fees.

With Romney keeping the spotlight on Bain, public plans may
be reticent to invest now because of the controversy, said
Heather L. Slavkin, senior legal and policy adviser for the
office of investment at AFL-CIO, the nation’s largest union
federation.

“Trustees are concerned about headline risk and there’s a
headline on Bain every day,” said Slavkin, whose office
advocates for the security of $480 billion of union-sponsored
pensions. “Nobody wants their decisions under a microscope and
trustees are no different. They don’t want to see their
decisions questioned publicly.”

Carried Interest Tax

Alex Stanton, a spokesman for Bain Capital, declined to
comment.

Under pressure from rivals, Romney, whose wealth is
estimated at between $190 million and $250 million by his
campaign, this month disclosed tax returns showing he paid a
13.9 percent tax rate in 2010 on income of $21.6 million.

Representative Sander Levin of Michigan, the top Democrat
on the House Ways and Means Committee, said on Jan. 18 that he
plans to reintroduce legislation that would tax carried interest
at ordinary income rates.

Schwarzman, who said four months ago that he pays an
effective personal income tax rate of 53 percent, has been less
forthcoming. Blackstone, the world’s biggest private-equity
firm, is reducing its voting rights in BankUnited Inc (BKU). by
converting some shares so that Schwarzman doesn’t have to
disclose his financial information to the U.S. Federal Reserve,
a person familiar with the plans said earlier this month.

Peter Rose, a spokesman for Blackstone, declined to
comment.

Industry Responds

To mitigate the damage to private equity’s image, the
industry’s lobbying group is starting a campaign to showcase its
members’ contributions to the American economy, using
testimonials of people who say private equity has helped their
businesses grow. David Rubenstein, Carlyle’s co-founder, said
Romney shouldn’t be criticized for the taxes he pays lawfully.

Still, said Atwood at the Illinois pension, the industry
has little choice but to wait for an end of the attacks.

“We all know that private-equity managers make a lot of
money and we know how they do their business, but when it’s on
the front page it causes us to think twice when making
investment decisions,” Atwood said. “Private equity is more
lucrative when it’s kept quiet.”

To contact the reporters on this story:
Cristina Alesci in New York at
calesci2@bloomberg.net;
Devin Banerjee in New York at
dbanerjee2@bloomberg.net

To contact the editor responsible for this story:
Christian Baumgaertel at
cbaumgaertel@bloomberg.net

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Article source: http://www.bloomberg.com/news/2012-01-27/romney-seen-costing-private-equity-as-pensions-warn-of-backlash.html