A Lonely Voice Defending Private Equity

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20TH CENTURY FOX / Everett Collection

Over the last few weeks, the private equity industry has taken a verbal beating. Rivals of Republican frontrunner Mitt Romney have attacked his tenure leading Bain Capital, one of the industry’s most successful firms, portraying him as a ruthless, Gordon Gekko-style predator who left a trail of bankrupt companies and lost jobs in his wake. So far, few members of the notoriously secretive private equity community have come to Romney’s defense — but on Tuesday, one did.

Speaking to The New York Times, Paul S. Levy, who runs JLL Partners, which manages $4 billion for pension funds and university endowments, made the case that private equity firms aren’t the vultures they’re made out to be. Levy  joins former Obama official and private equity veteran Steve Rattner as one of the few figures to mount a defense of the industry’s brand of capitalism.

(MORE: Former Obama Official Defends Romney’s Bain Capital Record)

“There’s a tinge of McCarthyism here,” Levy told The Times. “I think it’s a pretty honorable industry, and I don’t know why people aren’t stepping up and defending the careers that define their lives. That’s a sad thing. What do they fear it will cost them?”

Levy’s defense of the industry hangs on two main arguments. First, despite what you may have heard, the goal of private equity is build successful businesses, not pick clean the bones of dying companies. That said, layoffs are sometimes inevitable, he said, mirroring a point Romney has made on the campaign trail.

We want to build businesses. Nobody wants to fire people. We want to retain all of the value-added, high-quality people that work at these companies. But it’s like any other endeavor. If there are more people there to make the shoes than needed, you can’t keep the people. It’s not about wanting to get rid of people. It’s about wanting to make the company operate on a size and scale that’s commensurate with its opportunities and its revenues such that it can make profits and then build the business. It’s as simple as that.

(MORE: Mitt Romney: Successful CEO or ‘Predatory Corporate Mugger’?)

Levy’s second point is that private equity firms actually benefit the public at large by delivering investment returns to pension funds, university endowments and other institutional investors.

I work for you. Look, I’m investing the money for Colorado teachers, Colorado firemen. New Jersey civil servants, Montana, Missouri, New York State teachers, Oregon, Washington; that’s who the investors are, and I don’t think that’s really gotten through very clearly.

So why aren’t more of private equity’s leading figures, like Blackstone Group’s Stephen Schwarzman or Kohlberg Kravis Roberts’s Henry Kravis, mounting a defense of their industry? For one thing, private equity firms have traditionally been extremely secretive — even by the standards of press-shy financial firms. And with anti-Wall Street sentiment remaining high throughout the country, it’s not surprising that many in the industry are “keeping their heads down,” as Levy told the paper. But given the likelihood that Romney will be the Republican presidential nominee, the debate over private equity is not going to subside any time soon. Time will tell whether more of Romney’s erstwhile private-equity colleagues will keep mum, or speak up to defend their industry.