Didn't get paid a bonus as a PE Associate...
To preface:
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This is a longish post under a burner account. If you don’t want to read it the TL;DR is that I work at a small PE shop as a first year(and now 2nd year) associate and didn’t get a bonus this year. Don’t think its personal performance or fund performance based(will get that info) and want some advice.
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I’m familiar with the buy-side, other career options in finance, and that my path and my choices are up to me so I’m not asking for a “fix my life” type of answer(and don't need to be bashed for doing so) just looking for advice for some of the monkeys who have maybe been down this path before.
Anyways here’s my situation:
I work at a small (sub 200MM)PE fund in a major market. We’re industry focused and my background is a unique mix of banking and industry work(about a year in each). I moved over to his firm a little more than year ago and have had a great experience so far. It’s a small group of partners and associates, all good guys, we’ve done a deal or two, hours are pretty decent(60 or so a week, fairly flexible), not a 2 year and out firm, and I have a lot of responsibility and essentially do all the busy work on the deals we do (no mid level guys, just associates and partners). Feedback has all been great, I actively work to bring the investor mindset to the table, work to source deals, take on additional projects, etc etc. I’m by no means a gift from god, but I’m hustling and learning as much as possible.
Now with that being said, our year just finished up and it looks like no one at the junior level got paid a bonus this year. Our base salary is a little higher than the industry average(125k base) but with no bonus the comp is still low especially in a major market. There are no other significant perks monetary to mention(no carry, co-invest, etc).
On my contract it stated that bonus was discretionary and while I should have asked for more clarity around that when I signed, I did not(I’m a young guy, but lesson learned).
So that’s my situation, I know my performance has been good and I also know the firm is growing and also doing well. We returned some money to investors this past year and are on track to have some good exits this upcoming year. Based on the fund economics, I have a really hard time understanding how they couldn’t scrape together something small or at least disclose what was going on. It’s also not like we’re a lifestyle fund or anything like that, I’ve had some long days, last minute fire drills, cancelled a vacation, stuff that I completely accept accompanies a PE lifestyle, but in my opinion warrants a PE comp package. All in all, I think that even with the size of our fund, I would have liked to hit 150k or so my first year, so essentially a 20% bonus. I don’t think that this is unreasonable, but correct me if I’m wrong.
I’m planning on scheduling a sit down with the partners in the coming weeks to discuss “goals” for the upcoming year so I’ll be sure to get an idea of what the situation is.
My questions to the forum are:
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What would you do in this situation? Is it time to start looking for other jobs? I don’t necessarily feel married to staying in PE long term and I know a lateral would be hard not only because lateraling is difficult in general, but also because my lack of a true IBD background will make it even tougher. I’ve had some tempting industry offers floating around for a while now.
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Is it worth bringing up compensation in my meeting? I know that bringing up comp is generally a no-no, but I feel as though I have to say something because there’s no way I’ll be productive the next year if I don’t know what my progression looks like.
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Anything else worth asking for? If they can’t bring up cash comp by a significant amount should I just try to half ass my work and put in 40 hours a week? Take a ton of vacation?
I know in the long run the five figure difference won’t make a huge deal, but I’m feeling a little low morale right now and kind of want to be petty.
I’m sure will clear up a bit once I have a chat with them, but wanted some outside opinions as well. Thanks for reading.
Run.
Maybe ask why you didn't get a bonus and if they give a BS answer then press them on it. I'd make a fuss about it because what else do you have to lose? They can't direct work away from you since there aren't many other people there and if they don't try to fix the situation you're not gonna work hard. The only downside is maybe they look at you differently but you weren't gonna stay for the long run anyway given what just happened. $200mm aum isn't really much to pay the bills but $125K all in comp in a big city is not really enough imo. Cost of doing business
Agree with this. This is pretty outrageous, and I'm offended for you.
Have you had an annual review yet? It's possible you'll get told/paid your bonus around your annual review and perhaps you weren't around long enough to get a bonus in your first year (like if you started in Dec and bonuses are paid in Jan/Feb). Other than that I agree with @HarvardOrBust
This was my question. Most places don't pay bonuses until the annual review in my experience.
most people I know get paid in Jan / Feb. my fund does reviews in late Jan so the partners can see the year's P&L before deciding on bonuses (it matters less for associate since the bonus range is pretty tight, but the guys are generous when they can)
This is a tough one and I agree your compensation is way below market... This doesn't sound like a bonus at YE review issue but just so you have it covered, maybe you can ask your peers on this?
yeah there could be weird stuff going on around your annual year-end. For example, my firm (not PE but regardless) does performance year-end close in June and bonus doesn't get communicated/paid until Nov. I know they have historically not paid a 'stub' bonus to those who were not on for prior ending June period for that year. That is a horseshit policy imo, but it definitely exists out there so you may be in a similar situation.
Get out and find a better shop ASAP
If noone got a bonus - I think it's fair to ask about timing "hey myself and a few other associates were wondering about bonus timing - would this have come at year end if they're being granted or do they come later?".
I wouldn't make a fuss if they're not being paid. I'd keep your head down and just just recruiting for a new fund. If noone is going to get paid, that's a bigger issue than fighting to prove your worth for a particular bonus. They're not likely to make an exception for just you; if they do, expectations for you will go way up next year. And I don't agree that its impossible to fire you; it will be much easier to find a new job if you're actively employed. In this case, I'd view your time there as a PE resume stamp and get the hell out.
I would look hard at the other offers you mentioned. Also can you calculate roughly the fee revenue your shop brought in and guess-a-mate where it went?
Did you come straight from undergrad? You mentioned you don't have an IBD background. I don't think 125 is totally unreasonable if you're fresh.
Also, is the fund a cold-calling/sourcing model? If so, did you hit your benchmarks? Did you source anything?
I understand that most of the above have advised you to either 1) ask about it, or 2) run (look for other opportunities).
I think it is a safer bet to keep your head low and just work for now. Safer approach and see what happens.
Broscience advice
pity you. the average American doesn't make 55k a year and you're upset that you didn't get that in a single check
You won't get very far in business or professional life in general if you have this kind of attitude.
OP there has been some pretty good advice already but my motto generally is 'see something, say something'. Bring it up politely to someone with whom you have a good relationship. Or not, but bring it up.
Also look for other opportunities.
He worked with the expectation of the bonus, he should get one if he did his job.
Whether it's a check for 100$ or $100,000 you still get paid for the services rendered at the agreed upon rate, that's capitalism.
My buddy works at a similar PE firm that is similar in size and similar in investment strategy. When you initially got the offer and got a $125k salary how fucking stoked were you? I'm guessing you were through the roof and extremely happy. That is Upper MM/MF level base salary, although I know those guys make up with it with bonus. Do you think you could have gotten a $125k salary somewhere else? My buddy also works similar hours to you and earned a bit less. Much lower base, nice bonus.
The only thing I could guess is that there were multiple funds at your PE firm, and since you mentioned they returned some money to investors, that once they liquidated that fund, that no one got a bonus and that only the partner track/carry people received their carry as added income, thus no one getting bonus and you getting screwed a bit. If you are 2 years out of school and only did 1 year of IB $125k at 60 hours seems low, but not insultingly "please leave our firm" low.
Hope you get a bonus, but talk with them for next year. Sounds like a good spot to be at nevertheless.
Great advice there. Do not ever ever ever half ass your work in a company. Even if you think you have another offer elsewhere and it's almost in the bag, key is "almost". Unless you signed somewhere else don't fuck up. One year is low, and everyone will keep asking you why you stayed only one year. If God forbid in your next fund you get fired after a year people will really start questioning the 2+1+1 - can the kid not hold a job for more than a year?
My advice is ask and tell them that you are disapointed that you did not have a bonus, ask them if there are issues with your performance and reasons why they might be unhappy with you. If it's all juniors who got shagged - I wouldn't sweat it so much. 25K is peanuts. Also take everything into perspective especially with what GridironCEO said and his comparison point.
This is an excellent response. I agree with everything Disjoint states and would just echo that although you didn't receive a bonus, it sounds like you had a really good experience at your firm and you are still advancing yourself within the industry. $125k+ salary in a major market is still decent enough to save a little. It's tough and somewhat hypocritical of me to say, but at this early stage of your career I would focus on developing your career more than the actual $$$ you receive. I can definitely understand how you would be upset, disappointed,etc., but I think it would look somewhat bad if you left after only 1 year after previously spending 2 years at a place (3 jobs in 4 years is a lot). To reiterate Disjoint's point, I would recommend speaking to them about your performance and why you didn't receive a bonus (whether it was performance or fund related) - this shows initiative and that you care about your performance and the fund.
I know from a friend doing office deals in a REPE $1B firm in LA he was getting paid $80 or $85 base with a 10-25% bonus. I believe he was there for about 18 months before moving up to a larger firm. Hope that helps
Honestly, I know it sucks to get less than expected, but I have seen and heard of worse pay in PE at the Associate level, particularly for sub-$500mm funds (which tend to be all over the map with comp). I would ask about it politely, referencing your offer letter that made mention of a bonus. That said, I would NOT throw a big fit, make threats to leave or stop working hard, etc. If there is no path upward at this firm for you then I would ride it out a little longer and then start recruiting for a new gig. After 1.5 years there or so you should start getting looks for lateral or sr. associate roles if you reach out to headhunters.
Definitely bring it up to your bosses and make sure they know you are surprised, want to know what happened, not exactly happy about it. But leave it at that and get back to the grind while starting to look for your next move.
1) Unionize with your fellow associates 2) Seize the means of production 3) Send the higher-ups to the gulag
Hi All,
Wow I'm blown away by the quality (and quantity) of the responses. Really appreciate everyone chiming in and giving their thoughts.
There are too many responses for me to individualize so I'll just give a general response.
As much as I'm a little bummed, I completely agree that its makes 0 sense to throw a fit or a tantrum over such a small amount of money. I have had a good experience, I have gotten to work in PE, and I've appreciated the opportunity tremendously. 125k isn't the best, but I honestly don't feel like I need a ton more for day to day living, I live in a nice place, max out my savings, and feel like I live a luxurious life for someone in their mid 20s, with that being said, part of my life goal is also to obviously build wealth and thats where some for of bonus or additional comp would come in. One year with no bonus isn't a huge deal, but I don't want to go down the path of not saying anything and then having the same thing happen next year.
If I were working in industry, I'd have equity, RSUs, etc so my rationale is that for PE, which can't offer those things, the extra comp needs to come in the form of cash.
I have been at the firm for around a year, so I don't think it would makes sense that I "missed" the bonus window due to the amount of time I've been at the firm. They would have at least given me a stub bonus. I do think that the bonus discussion might come later in the month/next month as someone mentioned and I'm planning on following up with the partners to schedule some time to discuss.
Strategically plan for your discussion... The whole point is to ask what happened with bonus / comp. If you ask this in the wrong way, you can offend them (especially if your assumption on bonuses is wrong... maybe that takes place in Q1 as others mentioned? not uncommon at all.)
How do you not know when bonuses are paid? Someone at your shop must know when bonuses are discussed & paid out.
Sure you don't want to sound like a dick but why would you offend them by asking? If the partners ever got a $0 bonus they would be pissed as hell
Just wondering how did you get a FT job without an IBD background? I don't have any IBD experience either and now at a PE firm. Thx!
Agreed with many of the points made here, that is to confront in a polite manner, and not to hide about it.
OP - what's the latest on this? We're all curious
I work in corporate m&a so might not be related but I dont get bonuses til Feb/March. I'm tied into company performance so need to wait for year end results. In your case...might be waiting to finalize fund performance numbers before they bring up the subject? Idk...be patient
Have you thought of theft of company property to supplement your income?
W
Haven't logged on this account in a while as its a burner account, but wanted to update for the good of the forum.
About a month after my post, I got my base bumped up to 135k but still no bonus. Still not huge money, but it was enough to keep me interested. I also got a strong performance review and the team was overall very impressed with me.
Since then we've had a couple of portco exits that I had limited involvemnet in(we invested prior to me joining the firm), but the partners still decided to pay me a significant bonus. With that my all in comp was ~200k or so.
The process wasn't as formal as a typical PE firm, but I ended up in apprioxmately the same place. I'm planning to stick around until my two year mark and see if I can negotiate something more traditional moving forward.
And everyone lived happily ever after.
As others mentioned, be aware of what common practice is in your firm (i.e. wait until YE review?).
Edit: just read your good news, congrats! Looks like they're a bit more informal in their comp - ignore below (or read for reference if you start considering new jobs).
To your other questions:
What I find strange about this forum post is that you've signed an employment agreement. Bonus tends to be stipulated in your contract, if it wasn't, you willingly agreed to their terms. If it is time to renegotiate your contract because you are unsatisfied, don't be afraid to have that discussion. It's business just like anything else, just be sure to defend why they should be paying you more for the "same service".
Hope that helps with some perspectives...just personal opinion anyhow.
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