PE industry feeling blue in election

If sister publication Private Equity International‘s US presidential election exit poll were an indication of the outcome nationally, Democratic nominee Hillary Clinton would be the clear winner.

PEI conducted an online poll of general partners, limited partners and service providers on Election Day, and 77 percent of respondents picked the former secretary of state, versus 15 percent who cast their vote for the Republican nominee, Donald Trump.

Of the third-party candidates, Libertarian Party’s Gary Johnson garnered 3 percent of PEI readers’ votes, while Jill Stein of the Green Party had no supporters.

Perhaps these results aren’t too shocking, considering Clinton came in second in a May PEI poll – behind the Republican governor of Ohio, John Kasich – on who would be the best president for the private equity industry.

The previous poll came during the primary season, when voters had a choice not just between Trump and Clinton but among several candidates. Unfortunately for his supporters, Kasich dropped out of the presidential race on 4 May, three days after PEI‘s poll results were revealed.

In this week’s poll, readers were invited to comment anonymously on their choices. As one would expect from an emotionally charged presidential campaign, PEI received colourful responses.

One secondaries fund investor siding with Clinton doubted the liberal stripes she has worn in the primary and general elections. “The only qualified candidate. Seems more like a liberal Republican (at least prior to the primaries), which hopefully will remain the case,” the respondent wrote.

One private equity advisor who also supported Clinton in the poll said: “The Republican candidate is lacking integrity, leadership skills and decent proposals to govern.”

A limited partner on the same side of the divide voiced: “Trump is unpredictable, inexperienced and sends the wrong message globally. Too much risk.”

The Trump supporters didn’t lack in conviction for their choice, either.

One general partner simply wrote “drain the swamp”, referring to the political catchphrase meaning doing away with perceived corruption and cronyism that Trump has used in his campaign.

“Plenty of investment opportunities in aftermath of election,” one GP wrote. “Also, I have morals so cannot vote for Clinton.”

Still others chose not to pick either of the two major candidates, with one respondent calling them “both completely unacceptable” and voiced support for Johnson, a former New Mexico governor, and Bill Weld, the Libertarian vice president nominee and a former Massachusetts governor.

“Johnson & Weld [were] both successful 2-term governors, as Republicans, of ‘blue’ states,” the respondent noted.

One of the direct impacts on private equity by the presidential candidates’ policies is the perennial topic of carried-interest tax. PEI previously reported that Clinton had criticised private equity and hedge fund managers for paying “lower tax rates than nurses or the truckers” and proposed to tax carried interest as ordinary income, or 39.6 percent, the top income tax rate, instead of the current 23.8 percent.

Trump offered a less direct plan: he has proposed taxing carried interest as ordinary income but also wants to lower the highest tax rate on ordinary income to 25 percent from the near-40 percent figure. This would effectively increase the tax on carried interest by 1.2 percent, while lowering the tax on management fees, which is treated as ordinary income, to 25 percent.