Welsh Carson’s Carson: Carried Interest Tax Changes ‘Will Probably Happen’

I braved the pouring rain this morning to attend the Columbia Business School PE and VC conference–then heard some predictions that may or may not be all wet.

Russell Carson, Welsh Carson’s co-founder, got my attention when he said he expected the Carlyle Group to go public “in the next year.” Carlyle, the politically connected buyout shop, has long been an IPO candidate, since arch rivals Blackstone, KKR and Fortress Group are all public.

Carson then kept up the entertaining pace when he talked about the movement to raise taxes on carried interest. Taxation, he said, is a small issue facing the industry. “At some point this will probably happen,” he said. “This just means that people like me will pay a higher tax rate.”

However, he doesn’t think fees will go up. As an example, he talked about Welsh Carson’s first fund, which raised just $33 million in 1979. It charged a management fee of 2%. This eventually came down to 1.5%, Carson said.

Carson also spoke about healthcare, which will likely account for 20% of the GNP over the next five years, he said. Why is this so relevant? New York-based Welsh Carson, a New York buyout shop, is a major player in healthcare (Welsh Carson also invests in information/business services). Last year, Welsh Carson sold Concentra to Humana for $790 million and US Oncology to McKesson Corp. for $2.16 billion. It also picked up Smile Brands, a provider of dental support services, as well as a majority stake in Springstone, a hospital administrator.

The future of the healthcare reform bill is unknown since the courts could overturn it, Carson said. The Republican party could also return to the White House in 2012 and overturn it as well, he said.

Still, Carson thinks that there are some good aspects of the Obama reform package. “We should have universal coverage,” he said. “That was a very good part. But who will pay for it?”

The bill, he said, makes no changes to the healthcare delivery system. The U.S. also spends far more than it needs to on healthcare, Carson said. Still, he thinks there is much opportunity to invest in healthcare IT.

Afterward, I asked Carson about HCA, the hospital operator that is expected to go public early next month. HCA is owned by PE firm’s Bain, KKR and BAML Capital Partners. The offering is expected to be biggest PE-backed IPO ever.

Carson wouldn’t comment on the IPO or the high amount of debt ($28.2 billion) held by HCA. “HCA is a terrific company,” he said. “It’s the best collection of assets. It’ll do fine.”