Headlines and bottom lines

At some point this summer you may have noticed The New York Times ' 'Bottom Line Nation' series. Your PR advisor may even have sent you a link.

To recap: in a series of articles by a group of investigative reporters (the paper's regular private equity specialists not among them) the NYT looks at private equity's involvement with politics, the provision of vital public services and the day-to-day life of the average American consumer. While the series is lesson to all of us in natty design, it contains nothing revelatory. In the words of the American Investment Council, referencing the article on government lobbying: “Like the earlier pieces, this story relies on anecdote and innuendo, not evidence, to cast private equity in a negative light.”

While the articles merited the attention of the AIC – it engaged with the journalists ahead of time and responded to them publicly after publication – they did not get much of a reaction from the rest of the industry, says James Maloney, vice-president public affairs at the organisation. “Most industry professionals and financial media have shrugged off the series because they don't agree with how private equity was presented. If we felt it was gathering momentum, we'd be concerned, but it isn't.”

This is far from the first time the private equity industry has been portrayed in a less than flattering light in the mainstream media and we don't need to recount previous episodes here. It's worth noting, however, that previous attacks on private equity have related to individual assets, such as the NYT' s 2009 coverage of the Simmons Bedding Company entering bankruptcy . This time the paper has sought to go after the industry as a whole, throwing credit and real estate strategies into the mix.

While it wasn't received with much credence, the series did raise a question in the PEI offices: is the private equity industry too complacent in the face of what could be a groundswell of public opprobrium? The banking industry has absorbed much of Main Street's anger, but could private equity be next?

“Reputational risk matters, but only when it starts to curtail your ability to raise or deploy capital,” a senior external affairs manager from a large firm tells PEI .

To some extent this has already happened. Political hostility to private equity and hedge funds in Europe led ultimately to the implementation of the Alternative Investment Fund Managers Directive, regulating who can raise money from whom within the EU. Ironically, the directive has not really hampered the activity of those firms who can afford the compliance costs; it has, however, precluded EU investors from accessing some of the best managers from outside the bloc.

It is not beyond the realms of possibility to think that, if the industry's image suffered extreme damage, it could be barred from investing in certain sensitive sectors; healthcare would be an obvious candidate. This, however, has yet to happen.

Sophisticated firms realise the industry's reputation is not to be taken for granted. The increasing influence of industry lobby groups – such as the AIC or Invest Europe, the more widespread engagement of public relations advisers and a more serious approach to environment, social and governance issues are all testament to this.

A major public relations disaster could well derail the smooth growth of the private equity industry. These articles are not that disaster.