Pushing policy (Editor's letter)

At the Infrastructure Investor: New York conference late last month, keynote speaker Ed Rendell, the outspoken governor of Pennsylvania, pleaded with the primarily general partner attendees to help defeat a proposed “Office of Public Benefit” currently written into new US transportation legislation. He said it would have a “chilling effect” on private investment in highways – just the sort of deals that many in the burgeoning infrastructure asset class were hoping to see.

It was just one of many occasions over the past 12 months when GPs have found it necessary to directly lobby lawmakers and policymakers. This is not a task GPs are used to undertaking – they typically would rather keep their heads down, do deals and mind their portfolio companies.

But these turbulent times have thrown unprecedented obstacles in the way of private investment firms in the form of deleterious regulatory proposals. To name a few:
• The SEC’s proposed ban on contact between US public pensions and placement agents
• Proposed legislation that would require most private fund managers to register with the SEC
• Proposed European Union legislation affecting alternative investment fund managers
• FDIC rules governing non-bank ownership of bank

On the last matter, it is unknown to what extent the public howls of protest and threats from prominent GPs, including distressed investor Wilbur Ross, guided the thinking of the FDIC, which relented and issued rules governing US bank investments that were less onerous for private equity firms that originally proposed. But the apparent success of these firms at altering proposed regulation should give energy to those engaged in the battle against other forms of reglation.

The many regulatory threats point to the importance of trade and lobbying associations in private equity.
But the momentum behind many of these proposals is such that traditional lobbying may not be enough. GPs need to present their own local lawmakers and representatives with evidence that negative legislation will negatively affect jobs, tax revenues and competetiveness close to home. Many lawmakers are entirely unaware of the ways private investment firms are influential in their jurisdictions. Remaining silent on the subject is not a dignity GPs can afford.

As ever, PEM will continue to follow the issues about which GPs individually need to speak out.

Enjoy the issue,
David Snow
Executive Editor
David.s@peimedia.com