Political Ads Don't Tell Full Story on Private Equity Top, Obama for America; bottom, Romney for President An Obama ad, top left and right, featured steelworkers who lost their jobs years after Bain Capital took over GST Steel. In contrast, a Romney ad showed employees of Steel Dynamics discussing how Bain Capital's investment helped them achieve the American dream. In an advertisement released this month by President Obama's campaign, Mitt Romney and the private equity firm he co-founded, Bain Capital, are painted as vampires. They sucked the lifeblood out of GST Steel in the 1990s, which pushed it into bankruptcy, destroying jobs and eliminating pensions. In a quick counterattack, the Romney campaign released an ad that highlighted the robust job growth at another Bain investment, the manufacturing company Steel Dynamics. The ad featured employees who said the investment had helped them achieve the American dream. So, which version of private equity is true? The answer, of course, is both. The business of private equity firms is buying and selling companies, all done with the goal of earning big returns for themselves and their investors. Sometimes that means jobs are created; sometimes it means jobs are lost. In fact, job creation was actually never part of the industry's mission statement, just a nice happenstance if it occurred. The world of private equity is a nuanced, complicated business that will never be fully captured in anybody's ads this political season. Yet, despite the debate swirling around it, private equity plays a central role in the economy. Each day when millions of Americans eat at Burger King, stay at a Hilton hotel, or visit an HCA-owned hospital, whether they know it or not, they are intersecting with private equity. The industry has exploded in scale and scope in recent years with some $3 trillion in global assets. The 2,600 private equity firms in the United States are invested in 15,300 companies and employ about 8 million people, according to the Private Equity Growth Capital Council, the industry's lobbying arm. Some of the largest private equity firms - the Blackstone Group, the Carlyle Group, and Kohlberg Kravis Roberts & Company - oversee global empires that rival some of the mightiest public corporations. Yet more than three decades after private equity burst onto the scene in the merger mania of the 1980s, the industry remains as mysterious and controversial as ever. "The industry has done a terrible job of explaining what it does, and now it has this bright spotlight being shown on it that no one really ever anticipated," said Colin C. Blaydon, director of the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth. It is said that private equity is a business of other people's money. Most private equity firms raise money from outside investors that they then combine with large amounts of money borrowed by the companies they are acquiring. Sometimes they install new management and wring out excess costs, which can include slashing jobs. Other times they invest in new plants and create new jobs. After a few years, they either sell the company or take it public again, ideally at a profit. Buyout firms make their money through three different avenues: They charge their investors an annual management fee; they earn a share of any profits; and they can take lucrative advisory and other fees from the companies they acquire. Those fat fees have caused many of private equity's detractors to say the industry has minted millionaires and even a handful of billionaires at the expense of ordinary Americans. In their eyes, private equity is still the "Barbarians at the Gate," a book about the late 1980s buyout of RJR Nabisco, and its preferred modus operandi is "stripping and flipping." That robber baron image was not helped a few years ago when the Blackstone Group co-founder Stephen A. Schwarzman gave himself a multimillion-dollar birthday party that included a performance by Rod Stewart. Still, the titans of the industry argue that they save and create jobs by sometimes acquiring troubled companies that might have gone under if not for the new money and fresh ideas private equity injected into them. As for the notion that the buyout titans are enriching only themselves, they are quick to point out that their biggest investors are public pension funds that are seeking high returns to pay benefits down the road to state and municipal retirees. On the question of whether private equity has created more jobs than it has eliminated, one of the most-quoted academic studies comes out basically a wash. A study by researchers from Harvard, the University of Chicago and elsewhere of private-equity-owned companies from 1980 to 2005 concluded that private equity did not add more jobs than other companies, but it did not shed significantly more jobs either. David Kocieniewski contributed reporting.