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Comment by Independent 1000(Bob) on January 24, 2012 at 10:34pm

RAHN: Merchants of misinformation

Critics of Romney’s Cayman Islands funds probably have money there, too

By Richard W. Rahn

The Washington Times

Monday, January 23, 2012

Last week,

ABC News ran a story that led with the statement, "Mitt Romney has millions of dollars of his personal wealth in investment funds set up in the Cayman Islands, a notorious Caribbean tax haven." What the reporters failed to mention was that ABC, a unit of the Disney Corp., also has millions of dollars in Cayman-registered funds. Probably most employees at ABC, including the reporters who wrote the story, have some of their money in Cayman-registered funds, as probably do many of you reading this column, even though you don’t know it.

This is how the real world works. Most large- and midsize companies, unions, universities and other nonprofit organizations, including environmental organizations and state and local governments, have pension plans for their employees. Most often, the plan administrators allocate the funds among corporate stocks, bonds and various types of hedge funds and venture capital. They typically hire expert firms to manage pieces of the portfolio. Some specialize in growth stocks, utilities and government and corporate bonds, and some specialize in funding high-risk ventures, such as new companies or companies that are in trouble and need "turnaround" experts.

The fund administrators properly diversify the risk of the pension monies and maximize the return by allocating portions of the funds to the various types of fund managers.

Mr. Romney’s Bain Capital is an example of the type of firm that specializes in new companies and troubled companies. Those are high-risk businesses and take great expertise. If they succeed, the firms are well-compensated, but if they fail too often, they will go out of business. Anyone who has any interest in a pension, university endowment or reserve funds of both for-profit and nonprofit organizations benefits by having skilled and successful investment managers.

I have a friend who runs a very successful investment management company - in the $20 billion range. He and his colleagues have been able to produce much-higher-than-average returns for all of those who are directly or indirectly invested with them, which include many different types of pension funds, university endowments, corporate funds, etc. My friend determined that more than 100 million people are beneficiaries in some form of the funds his firm manages. When my friend’s firm delivers a higher return, it means individuals will get higher pensions (or have to contribute less), or the cost of school tuition is reduced for their children if a university’s endowment performs well, and companies that have invested their reserves will have more money to hire new workers, giving everyone greater job opportunities.

Bain Capital is larger than my friend’s firm, so it reasonably can be assumed that more than 100 million people also have benefited in some form from the highly successful and hard work of

Mr. Romneyand his colleagues. In fact, if one p