Life after the White House turns private

The past three US vice presidents have all left public life to join private equity firms – now, even those who didn’t win a presidential election are cashing in on the trend. By Paul Fruchbom.

The President of the United States is generally considered the most powerful person in the world, a distinction that carries with it certain perks even after the commander-in-chief leaves public office. Out in the private sector, for example, the former President is generally afforded a sizable Secret Service security detail, complimentary mailing privileges, free office space and funds for his own Presidential Library.

The Vice President, by contrast, is typically not even considered (current administration excluded, of course). And though the VP often receives some benefits after leaving the White House, his take-home pay on the lecture circuit isn’t quite as generous as that of his former boss. So, naturally, he joins a private equity firm.

George HW Bush, second-in-command to Ronald Reagan before becoming “leader of the free world” himself, served as a senior advisor to The Carlyle Group in the 1990s. Bush’s successor as vice president, Dan Quayle, left behind the vicious snarling of the White House press corps for the relative peace of Cerberus Capital Management, the ubiquitous alternative investment group named after the three-headed dog that guards the gates of hell.

Cheney: could appeal to PE firms

And Al Gore stepped out of Bill Clinton’s shadow and the aftermath of the 2000 election to become vice chairman of Los Angeles-based financial firm Metropolitan West Financial, where he is reportedly helping to source private-equity investments in biotechnology and information technology. (As yet another example of the convergence of alternative asset classes, Gore also recently became the chairman of a newly formed hedge fund, Generation Asset Management, which invests in companies that “consider the long-term economic, social and environmental implications of their actions.”)

For private equity general partners, the appeal of having such a highly placed political figure on their payroll is clear: access to Washington lawmakers, smoother entry into foreign markets and an influential glad-hander to trade war stories about budget deficits with state pension fund managers. For limited partners, however, the potential benefits are much less obvious – in all likelihood, the statesman in question will spend more time shaking the LPs’ hand than actually working on the firm’s private equity investments.

Nevertheless, the trend seems to be reaching its zenith. In recent months, two people who simply ran for vice president are following in the footsteps of those they couldn’t follow on Election Day. Last month, John Edwards, the running mate to former Democratic presidential candidate John Kerry, joined New York-based alternative investment firm Fortress Investment Group as an advisor. Limited partners, however, are unlikely to realise significant value from Edward’s appointment – political pundits predict that Edwards may potentially seek the Democratic nomination for president in 2008.

LPs are likely to get more bang for their buck with Nat Goldhaber, a vice presidential candidate with the fringe Natural Law party in 2000. Goldhaber is a co-founder of Oakland, California-based venture capital firm Claremont Creek Ventures, which closed a $125 million (€106 million) debut fund earlier this month that included the backing of influential private equity investor Harvard Management. The motivation to back Goldhaber and his team is no doubt influenced more by the firm’s investment strategy than its political stature – Goldhaber’s ticket garnered less than one-tenth of a percent of the popular vote in 2000.

Whether or not the trend will continue when current vice president Dick Cheney leaves office in three years is unclear. But Cheney, former chief executive officer of Halliburton, not only has the type of political stature that (some) private equity firms find appealing, but also the hands-on operating expertise so prized in today’s marketplace.

Limited partners could do a lot worse.