One of the scarier stories attached to the whole incoming Trump cabinet circus is that Wilbur Ross is inbound as secretary of the Department of Commerce. Alright, maybe not that scary. But it’s definitely intriguing that, with so many private equity big names lining up against the Trump presidential run, the asset class now looks likely to get closer to the White House than at any time since Mitt Romney’s bid for the top slot. Ironically, Mr. Ross himself is a former Democrat who served under Bill Clinton, but this clearly hasn’t proven a barrier for Donald Trump taking him on.
One thing that might set a few private equity nerves jangling, though, is that some anti-Trump platforms are already picking up Wilbur Ross’s relationships and business ties as sticks to beat the Trump cabinet with – notably those within Asia, where WL Ross & Co has been a familiar investor for well over a decade now. The New York Post has highlighted WL Ross & Co’s 2010 partnership with China Investment Corp (CIC), alleging that Mr. Ross raised around US$500 million from the sovereign wealth fund (SWF), which it describes as “a state enterprise”.
The Post doesn’t exactly overexert itself explaining how a value-driven SWF works, and is content to leave as many implications open as possible regarding Mr. Ross’s potential conflicts of interest, nor does it seem especially convinced by his stated intentions to divest himself of such conflicts.
So far, so political, and criticisms of Mr. Ross’s conflicts of interest from WL Ross & Co may be no more justified than those of Mitt Romney’s investment records at Bain Capital were eight or nine years ago. However, there could still be a deeper problem for the asset class in Mr. Ross’s appointment. President-elect Trump and his team owe their elevation to a fractious and volatile anti-establishment public mood that many pundits are already predicting will turn rapidly against the new administration once it fails to keep its (often ludicrous and bizarre) campaign promises. And Mr. Ross is already being stigmatised by The Nation as a profiteer of _“The Great Foreclosure Machine”, and for his association with the Sago Mine disaster of 2006.
If rustbelt companies start to close in on his watch (and how could some not?) Mr. Ross could be the obvious butt of resentment, and the asset class along with him. It may also face difficulties with any new (and potentially vengeful) Democratic administration in years to come. Private equity may yet rue this close association with the new administration.
