New York (HedgeCo.Net) – Wednesday evening, all eyes will be on President Barack Obama and Governor Mitt Romney, as they face off in one of the most contested presidential races in memory. The topic of the first debate will be domestic issues and at the top of that list is the economy and taxes.
On the eve of the first debate, the New York times published an article that once again brought the focus onto Mitt Romney and his hedge fund wealth. The article details the complex offshore holdings owned by Bain Capital, and states that “the inevitable result is that elite investors like Mr. Romney are able to increase their fortunes in ways unavailable to most taxpayers.”
“The sophisticated tax strategies of Bain and other private equity firms begin with the basic architecture of their funds. Though headquartered in Boston, Bain and its credit affiliate, Sankaty Advisors, have set up at least 137 entities in the Caymans, using local lawyers and others who provide an islands address for paperwork purposes.”
Where much of the focus of the NYT article is tax avoidance, some argue that there are other reasons why a hedge fund would want to create an offshore entity.
“Hedge fund managers have a responsibility to provide liquidity and investment strategies to both on and offshore investors.” said Brett Langbert, President of HedgeCo Networks, “Typically people think that the investors are looking for tax advantage whereas quite often the investor is looking to access different fund structures that can materially increase their return on investment.”
Mr. Langbert continued, “A lot of US funds set up offshore vehicles so that they can attract investors from around the world that are not eligible to invest in US onshore entities.”