Wednesday, July 13, 2011

Carlyle's Rubenstein Sees Rising Health Care Costs and Major Profits

Carlyle Group co-founder David Rubenstein spoke at the Milken Global Institute on the most attractive U.S. investment at the moment:

I'll mention one.  There are others, but one you should think about is health care.  In the late 1970's the GDP of the United States devoted to health care was roughly 3%.  It's now approaching 20%.  And as the baby boomers begin to retire, and they are the wealthiest generation in our country, they will spare no expense on their artificial hips, artificial knees, their plastic surgery, their assisted living, what ever is necessary.  And so a larger and larger percent of our GDP will go into health care.  And I think investments in various parts of health care industry will do quite well in the next five or ten years.

In response to Maria Bartiromo's follow up on the impact of health reform:

I think it's going to deploy more and more federal resources into health care, that ultimately will probably not have the effect of reducing costs.  I don't think that's really going to happen.  It's going to increase costs, increase the share of GDP going into health care.
Leon Black of Apollo Management hedged on his future plans, at least what to avoid.  Black cited:

Our business is a very complicated business... High tech is a problem for an industry that makes its returns on leverage.
Combining Rubenstein and Black, I expect lots of levered health care deals.  That's where PEU boys make their money.

Update 7-14-11:  Carlyle's investment in British dental practices dealt with antitrust concerns by agreeing to sell affected local area operations.