I know the numbers vary depending on firm and individual performance, but what is the comp ceiling for IB compared to PE? Assuming a normal employee and not a founder/owner of a firm.
For context, currently contemplating whether I should gun for career banker or exit to PE. Comp is one of many considerations.
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It doesn’t / shouldn’t matter. There’s such a wide range that giving you averages wouldn’t be helpful at all.
I get that-- that's why I am more interested in understanding the ceiling in each career path (I guess that means the typical BB/EB MD vs MF Partner?). Not saying I'll achieve partner/MD, but having some idea of comp at the top is good to have while making career decisions now.
I would recommend you think about it differently. Comp is good to understand, but after a certain level (which both of these are above), comp shouldn’t be really considered (or at least with any meaningful weight) in deciding a career path. The jobs are different, the responsibilities are different, etc. Focus on learning about the industries, what it takes to continue becoming more senior, what you enjoy, etc. Because the comp itself is going to be high enough in either path.
IB
Bulge Bracket
Newly Minted MD / Average Performer - 1-2mm per year
Sub Group Head - 2-3mm per year
Group Head - 3mm to 10mm per year
Head of IB - 7 to 15mm per year
Brand Name Middle Market
Newly Minted MD - 1 to 1.5mm per year
Established Revenue Producing MD and Regular a group Head - 2 to 5mm per year
Rainmaker / Top Group Head - 7 to 25mm per year. (There are probably 50 people people at these firms in total and 7-10 at the top end)
Brand Name Independent Advisory Firms
MD Lite - 700 to 1.3mm
Revenue Producing Partner - 3mm to 10mm
Rainmaker (say 50 across the top firms) - 10mm to 40mm
Founder - 50mm+
I have less visibility in PE but a partner in a MF should have cash comp of 2-3mm per year plus c7.5mm-10mm per annum of carry (assuming annualized and it’s usually back ended) assuming a 2x performance. Probably not to dissimilar for the top UMM firms. Lower by 40-50% for the better infra PE or MM firms. Much lower for pension funds etc
very helpful, thanks! I was expecting materially different levels of comp, but seems pretty even. Do you mind sharing thoughts on what it takes to achieve success (and enjoy) your job as a MD relative to the PE partner's job? Day-to-day stuff, personality types that thrive, skills need, pains that you have to deal with, etc.
At the junior level, the buyside seems more interesting for various reasons. At the same time, a lot of people on here have jumped over and then realized that the grass was in fact not greener on the other side. My hunch is people are just basing these career decisions on the somewhat brutal analyst experience...so basically, what does it look like as an MD?
Wow, average MF partner at 7.5mm-10mm per annum of carry?! Color me surprised
Were you expecting higher or lower amounts?
lower. was expecting those #s to be true for apollo/h&f/thoma (funds that knock it out of the park returns wise), but wouldn't expect the middle-of-the-pack partner at, say, carlyle or bain to make that. but could be completely wrong
I was going through TPG's compensation philosophy and executive compensation the other day and learned that the most senior partners( i.e jonathan coslet, david trujillo, sisitsky) got paid in the 30-80 mililion dollar range just last year. These numbers are for people that have been there 15-20+ years though and so arent representative of the avg partner. But considering these numbers, 7.5-10m for an average partner at these places doesnt seem unrealistic at all
How much of that is from co-invest as well?
Were those senior partners founding members or just joined early on?
damn sisitsky clearing 80 mil and still cant fix his fucked up front teeth..
Can someone confirm the PE partner #s? Ballpark, obviously going to fluctuate based on performance
Just depends on how this person is quoting carry. You can check the Hedrick Struggles report for the ballpark figures by fund or firm size. The cash part seems about right, the carry is dependent on methodology (is this per year in new carry invested? per fund launch? Expected payouts per year?).
Goes to show how hard it is to earn 8 figures in IBD. Only 120-150 bankers across all firms…
There’s probably a higher aggregate number of lawyers on the big law side who earn 8 figures relative to IBD.
Wonder how many megafund partners across all funds.
seems like there are a few more than that, but overall there are only ~25k people that hit the eight figure mark each year. If IB creates 4-10% of those people it still seems like it is a good career.
i agree. if you're only looking at wachtell + kirkland + davis polk (top 3 firms by PPP), that's already 740+ equity partners generating on average ~$7-8mm per year. with a significant portion making more than the avg.
In retrospect, those numbers feel a bit light - if I went granular, I’d say about 100 at the independents. I think 50 is right at the MMs. Probably about 30-40 at Goldman, 10 at JP, BofA, MS, Citi, 5 at JEF ans CS and a couple at the other larger firms (note this is IBD not all of banking). Probably 250 in total in the US, 50 in London, 25 in Asia and 10-15 in Continental Europe.
there are 50 rainmakers per MM/EB across all offices? seems like a lot
OP is saying 50 rainmakers total across all those firms
The figures for IB are flat-out wrong here for a BB - materially too high. That is an EB, like a TOP EB at best. You can look at most public filings and see average IB MDs I think are making ~$1.5M? That number is pretty widely accepted from my understanding. As I read this again, it's fair to say all of your numbers are wayyyyyyyyy too high for IB. Dream on brotha, this is the post-08 era ha. If you're JUST referring to the best groups at the best BBs - yeah this might be right and for coverage, not products - but banks like DB/UBS/CS are not paying these amounts.
why does coverage pay more than product - is it because at the senior level it's only sourcing deals and not merger model monkey execution-mode only
Dude, I directly manage comp for 10+ MDs and I know how much I have to pay for retention. I also have visibility into my firm’s comp more broadly. Probably interviewed 50+ MDs in the past few years so have a sense for where the rest of the street pays. The 1.5mm average for a BB is probably not miles away but that number includes the MD in ops making 650k and the many MDs in PWM at 1mm.
can you provide some broad figures (# or %) on the distribution of MDs on the scale of non-performing, average, sub group head, group head, rainmaker, head of IB/region
do you know how much REPE MF pays?
Note these are US numbers and obviously numbers at commercial banks, European and Japanese firms are not as good.
In London, the bottom end is pretty similar but you will see fewer outliers at the top since bulge brackets dominate and places like Laz / Roths are more even on pay and overall profitability is not the same at present
Also of late where PE partners have made real money is on corporate liquidity events (IPOs, sales) and on a relative basis the tax advantages are huge.
It’s likely that there won’t be as many of these liquidity events over time and it’s never the same working for a public company and who knows how long the tax treatment for carry will remain
See below for the allocation of the carry pool of my firm's latest vintage fund ($10-20bn).
Note that my shop is not publicly listed, hence carry i) not being shared with public investors and ii) no incremental earnings through RSUs etc.
Also worth noting that yes we get 20% carry across the board (subject to hurdle), no LP has any discounted fees.
Partner (recently promoted): 1-2%; Partner (tenured): 3-4%; handful of upper mgmt (CEO, CIO etc) get meaningfully more..
We were fortunate enough to deliver performance meaningfully above that, but for sake of argument and comparability 2.0x Gross MOI on $15bn = $30bn Proceeds = $15bn Gains = $3bn Carry, so the average partner gets $90m over the lifetime of this particular fund at medicore performance.
Achieving a 3x MOI obviously doubles the investment gain to 2x, hence also doubling the carry pool and each individual's compensation.
If you would compare those figures to banking MDs, you should do so at like-for-like effective tax rate. A banking MD has to earn $8.3m gross to make $5m net, while a PE Partner only needs $6.3m gross earnings to land at $5m net given its taxed at 20% CGT vs. 40% income (ballpark).
We have a linear 5-year vesting, so reasonable to spread the total fund carry over 5 years as well to estimate annual comp, although this obviously differs materially from actual cash proceeds. Most people in the industry got pretty sweet payouts in 2019-2021, and are unlikely to see any (or very few) liquidity events over the next 12-18 months.
I have no visibility on cash comp at Partner level, but ~$2m sounds about right in context of Principal cash comp and the fact that the primary change in incremental comp at more senior levels comes through carry. Note that this also excludes GP income / management fee, on which I don't have any visibility either.
What’s your guys’ principal comp? Would note partner comp can go up a lot as they get distributions from the gp mgmt fee profits
Principal cash comp I believe starts at $550k+ (based on senior associates at $500k+).
Principals don't get a fixed bps per Fund, but rather an allocation that goes up every year during the fund's lifetime.
Assuming a 4-year deployment and the $15bn Fund @ 2.0x Gross MOI example above, that would correspond to around 30bps on average.
If the entire fund got deployed in 2 years it would be lower (but then obviously would get new carry entitlement on the following fund quicker), if there was no deployment Year 1/2 and 50/50 in Year 3/4 it would be higher but push out the new fund's deployment and carry allocation.
+1 very helpful
in contrast to OP, does anyone know how much carry a newly promoted partner at an established, publicly traded company (Apollo / BX / Carlyle) usually receives? can't be as high as 1-2%, right?
This is very helpful. How does the full Carry Pool look like? Ie how many partners, how much is left for senior mgmt and how much goes to lower seniority folks?
Ballpark it's ~30-40% for the handful of top guys, 40-50% for "normal" partners, 10-15% for mid-level investment professionals, and some reserve for new joiners etc.
Not going to be more specific than that as obviously very sensitive information and don't want people to be able to derive the precise fund.
I know of a couple firms where their investment partners get none / minimal base + bonus. Longer partnership tracks where they already have carried interest hitting from VP / principal years. Comp was > $1.5m as a principal as well.
Very insightful, thanks. Just to confirm, how many YoE (in PE) would that Principal reference have in your view?
.
I would also consider the post that details how an Apollo MD berated and made the LevFin MD feel like a boy getting spanked
This only happens in extremely hot financing markets where cheap capital is easy to obtain and any PE fund can just walk across the street to jefferies or something offering them a fully underwritten 7.75x package…
Are carry proceeds paid as a single check after ~7/8 years?
No, you get paid out as the investments are sold
Does that lead people to get bigger checks in certain years than others if say in harvest year 1 you sell an asset that yielded significantly larger returns than another asset sold in harvest year 2?
this is not even a comparison, PE ceiling is much higher
How would this compare between a LMM PE firm (~400M AUM, ~200M fund size) and a BB IB coverage group at a place like JPM/Citi/BofA? Would the IB ceiling be higher in this case?
200M fund returning 2x gives you a carry pool of 40M. Even if you get 20% allocation (which is probably a founder), that's 8M spread across say 3-5 years which caps you at ~3M-4M per year in total comp (base + bonus + carry). A rainmaker or group/sector head at a BB can easily make more than those numbers. Feel like it's fairly common for them to jump to a boutique to max comp even more.
I'm not in PE yet btw, so this is just a thought.
You are thinking about this the wrong way.
Generally speaking, IB is a great way to make a really nice living with low risk. You are going to have to work very hard and the travel can kill you, but it is a low risk way to make millions.
PE is highly variable. If do very well you can make generational wealth. If your returns aren't good you will be out of a job.
You’re also thinking about this the wrong way. As an MD, you need to bring in clients to make those millions. That is literally as volatile as PE returns.
No it isn't. Any reasonably smart person who is willing to work had can land those clients. It is just an easily repeatable process. Some are better at it than others but the success rate is very high.
PE is really hard. Making the kind of returns you need is hard. And the n is very small. A little bad luck and it can go the wrong way.
The risk level in the two is not close. That is my experience over 30 years in the business.
ITT: college students debating whether NFL QB or MLB shortstop is better career by comparing Patrick Mahomes and Derek Jeter
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