Separately, a trust established in the name of Romney’s wife, Ann, has about $6 million of its $40 million in assets, or 15 percent, in hedge funds.
Since releasing this and other personal and family trust tax returns this week, Romney has come under scrutiny for earning about $21 million in each of the past two years, and yet paying effective tax rates of 13.9 percent and 15.4 percent. Most of Romney’s income is from investments, like Bain’s leveraged buyout funds, hedge funds and stocks. They are taxed at a 15 percent long-term capital gains rate, much lower than the top tax rate of 35 percent that would apply to a millionaire’s salary or ordinary income.
The funds Romney was best known for at Bain are involved in buyouts - buying companies and overhauling them, with a goal of reselling them at a profit. Hedge funds, by contrast, typically trade in and out of stocks and bonds. Both are elite and often secretive investments generally reserved for the wealthy, or for institutions such as pensions.
“He’s making millions and millions of dollars a year from all these investments’’ said Joshua Dorner, an official with the Center for American Progress Action Fund, a Washington group that has been critical of Romney’s low tax rate. He said the rate Romney pays on these gains “is a special loophole enjoyed only by private equity and hedge fund managers.’’
Some of the largest sources of Romney’s current income, according to the tax returns, are hedge funds managed by Bain, Goldman Sachs, and other firms.
Romney’s investments, including those in hedge funds, are in blind trusts, meaning he does not control them directly. The investment decisions are made by his trust lawyer at the Boston law firm Ropes & Gray, Brad Malt.
Andrea Saul, a spokeswoman for the Romney campaign, said in an e-mail, “Governor and Mrs. Romney’s assets are managed on a blind basis. They do not control the investment of these assets. The assets are under the control and overall management of a trustee.’’
