Teamsters Invest Heavily in Private Equity
If you’ve been listening to Teamsters President James Hoffa lately, you might think the Teamsters hate private equity.
After all, Hoffa made this blistering criticism of GOP presidential nominee Mitt Romney and his career in private equity at Bain Capital on May 7th: “He represents everything that is wrong with our financial system. He made his money as CEO of Bain Capital by destroying U.S. businesses, sending good-paying American jobs overseas and filling his pockets with millions while putting workers out on the street.”
But it turns out that the Teamsters themselves make plenty of money from private equity through investments made by their regional pension funds, which are independently administered.
In fact the Western Conference of Teamsters Pension Trust has about $1.5 billion invested in private equity funds, according to the head of that pension board’s investment committee, Rome Aloise.
And Aloise, who has been a Teamster since 1967, says he’s not comfortable with broad-brush criticisms of the private equity industry, whether they come from the Obama administration or anybody else. “I’ll be honest with you,” he told CNBC. “I cringe sometimes when I hear them beating up private equity for the sake of beating up private equity.”
But Aloise says he’s making a crucial distinction — the private equity funds his group invests in are what he calls “worker friendly.” The Western Conference picks and chooses investments based on firms that are creating jobs and building new companies, not buying old companies and gutting the workforces, he said. And they have “not one penny” invested in Bain Capital itself, which Aloise calls a “slash, borrow and spend” fund. “We just wouldn’t do it,” he said.
Aloise explained that the Western Conference Teamsters carefully follow the investments of the firms they do invest with: “We make sure they’re vetted pretty extensively” he said. “If somebody were to go and buy Wal-Mart stock for example, we wouldn’t be there for long.” Unions have had a long running dispute with Wal-Mart over how that company treats its workforce.
But he said even by focusing narrowly on the types of investments that adhere to union values, the Teamsters can generate healthy returns. “You can do so-called social investing and make just as much money as these others,” he said.
Aloise cited two private equity funds as examples of “worker friendly” investment vehicles: The Yucaipa Companies, run by billionaire Ron Burkle, and Hamilton Lane, a Philadelphia based investment firm. Yucaipa is closely associated with former Democratic President Bill Clinton, who served as an advisor to the firm after he left the White House.
According to data maintained by Pensions & Investments, another Teamsters pension fund, the Teamsters and Trucking Industry of New England, have $93 million invested in private equity funds as well.
Officials there did not return a call for comment.
-CNBC's Eamon Javers
Follow Eamon Javers on Twitter: @EamonJavers