PE trade-group rebrand cues membership drive, `political-risk insurance’

  • Newly branded American Investment Council targeting mid-market
  • Membership “an insurance policy against political risk,” says Mike Sommers
  • Collaboration with ACG, ILPA on the horizon

The Private Equity Growth Capital Council gave itself a facelift in May, changing its name to the American Investment Council and simplifying its mission statement as part of a broader effort to reel in new members and strengthen the private equity industry’s voice in the legislature.

“There was broad recognition among our members, and our board in particular, that we really needed to think about what the association was and how we could change the association to meet the changing needs of private equity,” President and Chief Executive Mike Sommers told Buyouts. “It wasn’t, to me, just about an awkward sounding name.”

Sommers joined the AIC earlier this year after serving as chief of staff to retired Speaker of the House John Boehner. The leadership shift occurred as AIC, which lobbies on behalf of 37 PE firms, prepared for a 2016 election cycle in which the industry would likely be treated as a “whipping boy,” Sommers said.

‘Insurance against political risk’

“From our perspective, this association is built to be an insurance policy against political risk,” he said. “There are many firms out there who are benefiting from the great work the American Investment Council does and will continue to do.”

To Sommers and others, the rebranding and membership drive represent a continuing effort to expand membership beyond the large asset-management firms that launched the organization in 2007.

“Our mission change is reflective of the evolution of our industry post-financial crisis,” said AIC Chairman Ken Mehlman of Kohlberg Kravis Roberts & Co. “Our firms are more flexible in how we invest and in how we work to build better companies.”

In the council’s early history, membership had been limited to firms with at least $8 billion under management. By 2011, however, the AIC had lowered the bar, for firms with $1 billion or more.

Change in scope

The scope and tenor of its charter members’ strategies also shifted over time. Many now invest in real estate, hedge and credit-related strategies, in addition to traditional buyouts. Meanwhile, PE teams at firms like TPG and Madison Dearborn now operate down-market from the large take-privates that characterized the pre-crisis deal environment.

To that end, the council’s new membership drive represents a revival of an earlier strategy rather than a full-blown pivot.

The successful induction of new members could foster greater collaboration with groups like the Association for Corporate Growth, which organized an industry task force to comment on legislative and regulatory issues concerning private equity.

AIC and ACG recently collaborated on a recent House of Representatives bill designed to eliminate certain federal disclosure requirements both industry groups consider duplicative or outdated.

The bill’s sponsors, Rep. Robert Hurt (R.-Virginia) and Rep. Juan Vargas (D.-Calif.), introduced the Investment Advisers Modernization Act in mid-May. Sommers said he hopes to get the bill through the House this year.

ACG will likely continue to work with the newly rebranded AIC on “areas of common interest,” such as the Hurt-Vargas bill, ACG’s CEO, Gary LaBranche, told Buyouts. “I don’t foresee that will change.”

Other collaborations

In addition to ACG, Sommers said the newly branded council plans to continue working with the Institutional Limited Partners Association.

While the interests of GPs and LPs often run counter to each other, recent criticism of industry practices regarding fees and expenses has been directed at both.

According to Sommers, the council will coordinate with ILPA on “messaging” related to how PE returns benefit public pensions, many of which face funding challenges.

“There’s criticism and we understand the criticism,” Sommers said, adding that pensions will continue to need the asset class to meet their return expectations.

“It is still the No. 1 asset class. And if private equity’s not filling that, who is? Who is going to get those returns? Because they’re not going to get them from anywhere else.”

Even so, the AIC and other industry groups face significant challenges moving forward. The three remaining presidential candidates oppose the current tax treatment of carried interest, and the deductibility of interest payments is also attracting attention.

“As Donald Trump says all the time, he’s going to cut great deals. We’re going to make sure, no matter who the president of the United States is, that we’re going to have the right people in the room to make the case for PE,” Sommers said.

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Photo of Mike Sommers courtesy of the American Investment Council.