CalPERS criticizes PE industry on tax breaks

The remarks, from one of the world's biggest private equity investors, are the latest in a string of attacks on the industry over the relatively low 15% tax levied on carried interest. Opponents of tax reform argue that it would discourage the risk-taking required in committing capital and developing companies. The issue has risen to prominence as prospective Republican presidential candidate Mitt Romney has defended his record at Bain Capital.

"There are legitimate issues about the negative impacts that come along with the many beneficial contributions that private equity makes,'' Dear said, according to The Wall Street Journal. "They should engage on the issues and not say everything is fantastic."

Dear expects a shakeout in the industry as less successful firms struggle to raise money for new vehicles. The GP-LP power balance has already shifted, allowing the likes of pension funds to negotiate lower fees and more favorable terms.

Several pension funds, including CalPERS, are lobbying the US Securities and Exchange Commission to fully implement reforms set out in the Dodd-Frank Act, despite fierce opposite from the financial services industry. A total of 14 pension funds and plan sponsors, representing more than $1.6 trillion in assets under management, wrote to SEC Chairman Mary Shapiro, saying they "stand ready to assist the commission to combat efforts to weaken or roll back the important investor protection provisions of Dodd-Frank."

Separately, research published this week by the London Business School and the University of Oxford shows that private equity in the US has outperformed public equities in the past three decades - and fund managers have taken half of those excess profits.

US buyout firms beat Standard & Poor's 500 index by 5.44 percentage points from 1980 to 2008. Between 1980 and 2004, the buyout firms distributed $194.2 billion in returns - profits that exceed a comparable investment in the S&P 500 - and retained $189.9 billion from fees and profit sharing schemes. The calculations are based on 85% of US buyout funds.

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• Topics
• Regulation
• Performance
• North America
• LPs
• regulation
• USA
• tax
• California Public Employees' Retirement System (CalPERS)
• LPs
• Performance