President Obama’s efforts to change rules on carried interest are misguided, said Steve Klinsky, founder and chief executive of New Mountain Capital, in a wide-ranging video interview with Reuters Insider and sister magazine Buyouts.
Carried interest, said Klinsky, is “something very different from salary, something very different from bonus. You take a business, you spend years building value, and if you do in fact sell it at capital gain, you get charged at capital gains rates. That’s what carried interest means.” He said “hopefully people will look at it more fairly and level-headedly.”
Reflecting on the financial crisis, he said private equity got ensnared in the rage at Wall Street, even though private equity itself had little to do with the crisis itself. “We got caught up in that spirit of revenge,” he said.
He also said the recent increase in private equity deal-making stems from the increased availability of leverage. “Lenders are lending very actively again,” he said. “I think there are a number of companies that are coming up for sale and a number of funds that are still well-funded to try and buy them, so it’s a busy and active time in the market.”