Hundreds of pages of Bain Capital documents published by the web site Gawker Thursday reveal investment details on a number of funds in which Mitt Romney has stashed vast portions of his wealth.
The documents are not specific to Romney but they provide more evidence that large slices of his fortune have little to do with buying companies and turning them around, the experience he touts from his time as chief executive of Boston-based Bain. In many cases, his investments are in funds that hold complex securities and produce profits whether companies succeed or fail, and whether the economy thrives or not.
For instance, in his Individual Retirement Account, Romney held between $1 million and $5 million worth of a Bain hedge fund called Absolute Return Capital Partners in 2011, according to a tax filing. (Absolute return funds seek to always produce a gain for investors regardless of how the markets perform.) In this case the fund uses an array of sophisticated investments, including shorting stocks, to profit when they fall in value, as well as betting on the direction of interest rates and foreign currencies.
Romney earned more than $100,000 on the investment in 2011 alone.
The Globe has previously reported that about one-third of Romney’s IRA is in hedge funds, mainly those run by Bain Capital. His IRA is valued at between $20 million and $101 million.
Romney has faced criticism from political rivals for shielding or deferring massive amounts of money from taxes by keeping it in his IRA and in offshore vehicles like the Cayman Islands branches of various Bain Capital funds.
The candidate has refused to release tax returns for years before 2010. But he recently said he had paid at least a 13 percent tax rate, a far lower rate than most Americans pay.
Romney spokeswoman Michele Davis said in a statement, “As we have said many times before, Governor and Mrs. Romney’s assets are managed on a blind basis. They do not control the investment of these assets, the investment decisions are made by a trustee.”
Meanwhile, Bain said in a statement that, “The unauthorized disclosure of a number of confidential fund financial statements is unfortunate. Our fund financials are routinely prepared by auditors and demonstrate a commitment to transparency with our investors and regulators, and compliance with all laws.”
The documents posted by Gawker are reports that Bain provides to its investors, including Romney. The candidate had a 10-year retirement payout deal through 2009 that continued to give him lucrative stakes in Bain hedge funds, distressed debt funds and the private equity funds the firm became known for when Romney ran it, from 1984 to 1999. (He remained CEO, with legal control of the firm, until 2002 but was in Utah running the Olympics.)
While the Romneys have numerous investments in Bain private equity funds that invest in companies, such as Dunkin’ Brands and Domino’s Pizza, they also have millions in alternative funds. The documents show some of investments by Bain’s Sankaty Advisors, including a big payoff on loans to the Harlem Globetrotters, which produced returns in the mid- to high teens.
A letter to investors in Sankaty Credit Opportunities IV dated Dec. 2, 2010, says the fund reaped double-digit returns over two quarters, faring far better than the stock market’s 2.8 percent decline in the period.
The fund, which is both in Romney’s IRA and in his wife’s trust, invests in distressed debt, or in companies and situations where entities have borrowed heavily but still manage to make their payments. As he runs for president, Romney is trumpeting his ability to improve the economy, but the investor letter describes how he and other Sankaty investors are poised to make money even in bad times.
The letter details how a flurry of new borrowing in 2010 “will fuel a robust distressed cycle over the next 2-4 years, especially if the economic recovery remains relatively weak.”