On 08/21/2012 03:21 PM, dadiOH wrote:
Tim Daneliuk wrote:
On 08/21/2012 01:40 PM, dadiOH wrote:
Tim Daneliuk wrote:
On 08/21/2012 07:49 AM, Han wrote:
snip
Two for instances.
Romney has amassed over 100 million in an IRA. Supposedly IRAs are
limited to something like $6000/year in contributions. Not sure
when the IRA system was started, but let's say for argument's sake
45 years ago. That would mean (if I am correct) that Romney's
45x$6000 or $270,000 had a phenomenal yield. But then, he could
have transferred more than $6000/year?
This is trivial to explain: He used a self-directed IRA - probably
set up by Bain - wherein his contributions were invested in Bain
deals. This is common among investment banks wherein the employees
want to share in the risk/reward. If the deals were successful (as
we know they were) there was probably huge returns associated with
these contributions,
Bain is private but it must have investors. One wonders if those
investors realized gains as large as Romney's.
Um ... you need to examine how Private Equity firms work.
I know how they work. I just wondered if the investors % returns aproached
those of Romney.
____________
In general, they ought to be similar, at least up to a point. People
that invest this way are all investing approximately the same kinds
of deals. However, Romney, like any principal in a partnership, stood to do
better in a couple ways in all probability:
- Bain likely got significant fees for doing the various buyout deals.
20% of the total deal value is not uncommon. As a partner, he'd have
gotten a piece of that fee.
- Using various (legal) mechanisms, Romney's end from these deals would
be treated as "compensation" and probably more of it would be able to be
tax deferred than the other investors' for whom the money was a profit
on an investment and thereby taxed immediately.
- As a partner/employee at Bain, he probably had access to deals that their
smaller investors would not. That is, he could get into syndicates that
others would not be able to .
None of this is remarkable or unethical so long as no fraud was involved.
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Tim Daneliuk
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