Nice oped by Steve Rattner on the relevance of Bain Capital’s track record to the presidential campaign.  The key takeaway is one I’ve consistently stressed as well:

The language in one prospectus seeking Bain Capital investors was clear: “The objective of the Fund is to achieve an annual rate of return on invested capital in excess of the returns generated” by other investments. Any job creation was accidental.

This is not an indictment of Bain in particular or PE in general.  But when they invested in companies, if profit maximization for Bain’s investors implied layoffs or shut downs, then that’s what they’d do.  And visa versa—if they saw a chance to build up a company and gain market share, they’d go after it.  But even then, labor is always a cost in PE calculations, one to be avoided unless profits would otherwise be left on the table.    

In that regard, a key linkage here, one not stressed in the oped, is the non-correlation between profitability and job growth.  It falls right out of the above discussion, but there are people listening to this debate who may reasonably think, “OK, PE firms maximize profits, not jobs…but don’t jobs follow profits?”

Alas, all too rarely in recent years has higher profitability linked to job growth.  Obviously, both are cyclical so they loosely correlate, but the fact is that profit growth was strong in the 2000s when job growth was anemic and in this current expansion, corporate profitability has more than recovered from its swoon in the Great Recession while jobs are only slowly climbing back.