WASHINGTON — A top official of Oaktree Capital Management, owner of Turtle Bay Resort on O'ahu's North Shore, says he is concerned proposed tax increases on managers of private equity and hedge funds would encourage them to keep their operations shielded from public scrutiny.

John B. Frank, managing principal of the company, told the Senate Finance Committee this week, that if the proposal were adopted, it would discourage the current trend of companies like Oaktree from going public, which makes their financial operations more transparent.

The Senate committee was looking at the issue of taxing "carried interest," part of the pay that fund managers receive when a private equity firm goes public by selling shares of stock.

A manger receives two types of income — a fee of 2 percent on capital they manage and a so-called carried interest of about 20 percent of future profits of the investment partnership.

Under current law, carried interest is taxed at the capital gains rate of 15 percent instead of the ordinary income rate of up to 35 percent.

Frank said Tuesday that a few months ago, the primary concerns about private equity and hedge funds were that their private operation shielded them from public scrutiny and ordinary investors have no access to the companies.

"If this legislation were to go forward, it would discourage public offerings of firms like Oaktree, the industry would continue to operate largely out of the public eye and the average investor would lose the ability to participate," said Frank, whose company manages about $47 billion.

Oaktree, an international investment company based in Los Angeles, owns Kuilima Resort Co. and has been seeking to either sell Turtle Bay Resort or team up with a developer to build hotels and condominiums on the resort's 858 acres.

Frank said the proposed change, which would be applicable to private equity firms that went public, was a surprise when introduced in mid-June and caused Oaktree's unit price to drop almost 10 percent overnight. More stringent House versions of the legislation caused another 5 percent drop, he said.

"As a result, our outside investors — pension funds, mutual funds and other investment funds — have lost close to 15 percent of their investment," Frank said.

Reach Dennis Camire at dcamire@gns.gannett.com.