Romney's Funds Performance at Bain

During Republican Presidential candidate Mitt Romney’s 15-year tenure with Bain Capital, the private equity firm invested $1.91 billion and realized $6.75 billion in proceeds, a multiple of 3.5x, peHUB has learned.

These results are more impressive than those previously reported by the Wall Street Journal. That story, partly based on data from 2000, said Bain invested $1.1 billion and produced gains of $2.5 billion, for a multiple of 2.27x.

The new information obtained by peHUB is from a presentation Bain made to investors in 2011 and based on data from September 2010. A source with a copy of the presentation allowed peHUB to view the document. Another source with direct knowledge of Bain’s funds confirmed the accuracy of the numbers. Both sources asked to remain anonymous.

UPDATE: Some PE sources say it isn’t fair to credit Romney with the success of two Bain funds raised in 1998 because they were likely invested after he left in February 1999 to run the Salt Lake City Olympics. Excluding those two funds results in an even bigger return for the funds invested under Romney. Bain raised five funds totaling just over $1 billion from 1984 to 1995. Those funds invested a combined $909.1 million in 115 companies and realized gains of $4.17 billion, a return of 4.59x, according to the Bain presentation.

The Bain presentation shows that the private equity firm invested in roughly 150 companies from 1984 to 1999 through seven funds, including a co-investment fund. The gross profit of $4.8 billion from those investments doesn’t include carried interest and annual management fees – typically 20% and 2%, respectively – paid to Bain’s general partners. But even when you factor those in, “these returns are outstanding,” says one private equity executive who asked not to be named.

A spokesperson for Bain said the firm had no comment for this story.

The particulars for each of the seven funds are as follows. All of the data are from the Bain presentation viewed by peHUB, except as noted. The multiples listed include unrealized gains.

Bain Capital I
Vintage: 1984
Size: $37 million (invested $38 million as of September 2010)
Gross profit: $211.1 million
Multiple: 5.5x
Net IRR: 60.8%

Now a private equity firm, Bain’s first fund was actually a late stage venture fund, according to a private equity database managed by Thomson Reuters (publisher of peHUB). Fund I invested in 21 companies, according to a Bain private placement memo from 2000. Notable deals include Sports Authority, Burlington Industries and Staples, according to Thomson Reuters. Of the firm’s early pools, Bain Capital Fund I produced the most flops. Several of the companies it backed are “defunct,” including Far West Federal Bank, a Portland savings and loan that was seized by federal regulators in 1991, Thomson Reuters reports.

Even with the flops, Fund I did very well. The internal rate of return (IRR) for Bain’s debut fund was more than 11 times greater than the average and median IRR for U.S. venture funds started in 1984 (based on a sample size of 58 venture funds), according to the Thomson Reuters’ PE database. The average IRR for vintage 1984 VC funds was 5.36% and the median was 5.03%, as of March 31.

Bain Capital Fund II (aka Tyler Capital Fund)
Vintage: 1987
Size: $106 million (invested $113.5 million as of September 2010)
Gross profit: $836.3 million
Multiple: 7.4x
Net IRR: 37.6%

Bain’s second fund, which focused on buyouts, made 37 investments. Notable deals for fund II include Duane Reade and Gartner, according to Thomson Reuters. Two companies, Handbag Holdings and PPM Holdings, are defunct, Thomson Reuters reports.

With a net IRR of 37.6%, fund II easily outperformed typical U.S. buyout funds of the same vintage. Based on a sample of 24 U.S.-based buyout funds raised in 1987, the average IRR was 8.48% and the median IRR was 9.2%, according to Thomson Reuters.