Private equity investors – both VC and LBO pros – keep warning that they will pass on additional tax costs to their limited partners, via increases in management fees and carried interest percentages:
“Hey Rep. Levin: The federal government will get more revenue, but the Michigan State Treasury and State U will get less. And we’ll stay exactly the same. Take that!”
What a load of empty bluster. At the same time that LPs are receiving this de facto threat, they also are being warned to expect a continued VC drought (at least for the bottom nine deciles) and lower LBO returns (across the board). In other words: “Pay us more for worse performance.”
Maybe that will wash at certain funds-of-funds – which would just pass the costs on to their own investors – but not at top-down pension funds or endowments that have general investment committees with final say.
If you’re a GP who wants to make threats, stick with the one about moving offshore. At least that’s doable.