(Bloomberg News) Mitt Romney should be a billionaire.
While private-equity peers Stephen Schwarzman, Henry Kravis and David Bonderman have each accrued a 10-figure net worth, the Republican presidential nominee missed out on his industry's most lucrative era, a decade when he managed the Winter Olympics, served as governor of Massachusetts and ran for president. Had he stayed at Bain Capital LLC, he'd be worth more than $1 billion, according to the Bloomberg Billionaires Index.
Romney's $250 million net worth has made him a target of a populist campaign by President Barack Obama, and he was assailed as out of touch again this week by Democrats for comments Romney made about the 47 percent of people who don't pay taxes.
The Republican candidate, while still reaping some profits from Bain as an investor, was far from the center of the action and negotiated his exit from Bain before private-equity firms started going public.
"He was not there running the ship when that party was going on," said Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College's Tuck School of Business. "If he had been still the CEO of Bain Capital during those years, he would have done extraordinarily well because the scale of the deals, the size of the funds and the returns that were achieved in those years were the highest in the industry history."
The candidate also has dispersed his wealth over more than a decade through charitable donations, diversification into less risky investments outside of Bain and estate-planning strategies that have put $100 million in his heirs' hands.
Though Romney's net worth is more than 20 times what it would take to put him in the top 1 percent of U.S. household wealth, he's a relative pauper among founders of buyout firms. Bonderman and James Coulter, who started TPG Capital in 1992, are worth at least $2 billion each. KKR & Co. co-founders Kravis and George Roberts, who established the firm more than three decades ago, are worth at least $4 billion each, according to the Bloomberg Billionaires Index.
Romney's reported wealth also is outpaced by that of a former colleague, Stephen Pagliuca, who worked for Romney at Bain and is still there as a managing director. When he ran for the U.S. Senate in 2009, Pagliuca reported a net worth of about $135 million to about $420 million, plus as much as $360 million more held by his dependent children.
Buyout firms like Bain from 2000-2010 saw their funds, deals and paychecks reach record-setting sizes as they snapped up name-brand companies such as Toys "R" Us Inc. and Dunkin' Brands Group Inc. Schwarzman's Blackstone Group LP led an effort to take the firms public, locking in personal gains for founders. In 2007, KKR's Kravis labeled the era a "golden age" for the industry.
Primary opponents and Obama have criticized Romney for his tenure at Bain, accusing him of profiting from a pattern of outsourcing jobs and shuttering factories. Romney has countered that his Bain experience qualifies him to guide the U.S. economy and create jobs.
Romney's comments that 47 percent of Americans don't pay income taxes and that a similar portion of people see themselves as "victims" dependent on the government were recorded at a private fundraising event in May and distributed by Mother Jones magazine this week. They've reignited debate over how progressive the tax code should be and how those who don't pay taxes view their connection to the government. Romney in the video said he couldn't get votes from people who depend on government or persuade them to "take personal responsibility" for their lives.
Romney's reported net worth may be understated. He has muted or dispersed his wealth by pushing money into trusts set up in the 1990s for his family and charity, by funding a family foundation, donating to charity and diversifying investments. Romney and his wife, Ann, still hold Bain-related assets that have low values and may appreciate as the firm invests and sells assets.
Brad Malt, a partner at the law firm Ropes & Gray LLP in Boston, manages Romney's investments and is the trustee of the family trust. He declined to comment for this story.
Romney, asked in a July 26 CNN interview whether he felt like he'd missed out on becoming a billionaire, said he had no regrets.
"They've done a lot better than I did," he said of his former Bain colleagues. "But I went on and did something which I cared very deeply about" -- running the Winter Olympics, becoming governor of Massachusetts and running for president -- "because I care about the country."
Romney, 65, who co-founded Bain Capital in 1984, was chief executive officer of the company when he left to run the 2002 Olympics in Salt Lake City. He left day-to-day operations of the firm in 1999, reached a retroactive retirement agreement with Bain by 2002, and took office as governor in 2003.
If he had stayed, the candidate probably would have at least a similar stake in the firm -- 12 percent to 13 percent -- as the founders of comparable private-equity firms do today, according to data compiled by Bloomberg.
That means, with Bain Capital valued at about $11 billion, Romney's stake would be worth about $1.32 billion, data compiled by Bloomberg show. Bain's estimated value is based on the assets under management valuation ratio of KKR and TPG, two similarly sized private-equity firms with comparable businesses, according to data compiled by Bloomberg. Those figures don't take into account some profits derived from successful investments.
Charlyn Lusk, a spokeswoman for Bain Capital who works at Stanton Public Relations & Marketing, declined to comment.
When Romney retired as CEO, he entered into an agreement with the Boston-based private-equity firm to retain the right to make passive investments in certain Bain Capital entities until 2009, according to financial disclosures he has filed. The exact terms of how Romney in those years participated as a passive investor and former partner aren't clear, said Dartmouth's Blaydon. In the decade after he left, Bain Capital's assets under management increased more than 16 times to its current $65 billion.
"The big boom really took place in the 2000s," Blaydon said. "Debt was plentiful and so easy to come by, on such easy terms, that it fueled a real boom in large-cap private equity."
Private-equity funds pool money, usually paired with debt, from so-called limited partners such as pensions, endowments and wealthy families and use it to buy companies. They then try to make those companies more efficient and sell them for a profit.
The profits in a typical deal are split between the limited partners, who receive 80 percent, and the fund's managers, who receive the remaining 20 percent. That portion, known as the carried interest, is considered a capital gain under U.S. tax law. The top rate on long-term capital gains, now 15 percent, is lower than levies on ordinary income such as wages.
While much of the Romneys' wealth is invested in Bain entities around the world, it's also diversified into hundreds of stocks, bonds, federal home loans, mutual funds, exchange traded funds, structured notes and other securities that have generated gains and losses, according to tax returns and financial disclosures released by the campaign.
Romney's most recent financial disclosure report, filed on June 1, gives his assets a maximum value of about $254 million, close to the $250 million estimate provided by the campaign. Of those maximum values, less than a quarter is held in assets related to Bain Capital. For example, Romney has as much as $31 million in cash.
Presidential candidates are required to disclose their investments and holdings. They list assets in ranges of values. Non-financial assets such as homes and cars aren't included. The Romneys have homes in Massachusetts, New Hampshire and California.
In addition to two blind trusts and individual retirement accounts, the couple's wealth is dispersed in a family trust outside of their estate, a charitable trust and family foundation.
"He's obviously put a lot of thought and effort into this," Tim Steffen, director of financial planning at Robert W. Baird & Co. in Milwaukee, said of Romney's wealth strategy. "It's also very clear that they are very charitable people."
The Romneys donated about $7 million to charity in 2010 and 2011, according to tax documents released by the campaign. The Romneys have said they tithe to the Church of Jesus Christ of Latter-day Saints. Money they have given to the church is money they don't have to generate investment returns.
The family's foundation, which is required to donate at least 5 percent of its assets each year, held $10 million. The Romneys also put money in a charitable remainder unitrust that they set up in 1996.
"They are taking advantage of the techniques that are out there," Steffen said.
The financial disclosures and tax returns aren't a complete picture of the family's wealth, he said.
"It's a high-level snapshot at a point in time," Steffen said. "There are lots of other layers."