We didn't either, until Fortune's Dan Primack did some splainin' this morning in his "Term Sheet" email newsletter. It seems Romney, in yet another one of his many roles, this time as Imperial High Potentate of the private equity firm Bain Capital, was hanging around the shop one day in 1996 when he and the Bain boys decided to engage in some of their typical hijinks. Just for a crazy mix-em-up, one of them said, why don't we go to the "stock market" and buy us some "stocks," as the rabble call them.
And so that's what those pranksters did. They bought some stocks and became a gosh darn hedge fund. They raised some money, named it Brookside Capital, slapped it on the rump and started buyin' stuff. They figured they could make a ton of money using their private-equity know-how in the public markets, because of synergies or Six Sigma or something.
All anybody knows is that it worked -- maybe because Mitt Romney knows business, that's why. The thing is still around and hasn't caused any black holes in anybody's money that we know of, though it did lose 17 percent before fees during the crisis, according to Bloomberg, which almost makes it sound like not much "hedging" was going on at old Brookside.
Which is not Romney's fault! Romney was Brookside's "sole owner" until he quit Bain to save the Olympics in 1999, Primack writes. And if you squint really closely at Romney's financial disclosure form, you can see he seems to have between $500,000 and $1 million still in a Brookside account -- just a little Wawas money, as they say.
So what? Who cares if Romney ran a hedge fund, you'll ask as you adjust your monocle and send your manservant to fetch another drink.
Well, the little-reported fact of Romney's hedge-fund past might only add to the image of Romney as a man of Wall Street rather than Main Street, an image cemented by rivals from Newt Gingrich to President Obama, who have beaten Romney soundly about the head and shoulders with his past in private equity. Some people find Romney's close association with Wall Street a feature, rather than a bug, of course. And those people generally have campaign money to blow, and they have been blowing it all over Romney.
But hedge funds, fairly or not, might be even less popular among the great unwashed than private-equity funds, if only because more people have actually heard of hedge funds. They may not know much about them, but they generally think they're bad. And not entirely without reason: Hedge funds tend to charge ridiculous fees for typically lackluster returns. Author Simon Lack, in his book, "The Hedge Fund Mirage," claims that hedge-fund managers earned $379 billion in fees between 1998 and 2010, while their investors earned only $70 billion in profits. By his measure, returns averaged little more than 2 percent per year. Those investors would have been better off just buying Treasury bonds the whole time.
Less squishily, Romney's hedge-fund past might be relevant in the future, when he his King of America, Primack notes:
Considering that a President Romney would be asked to appoint regulators who oversee hedge funds, or to sign/veto new hedge fund-related regulations, it's worth remembering that he used to own one.