(Gorilla, 601 
Points) on 7/1/09 at 1:20am
What do these guys do at a private equity fund? How are they compensated and where do they stand in the overall heirarchy at a PE fund?
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This person has not made any friends yet.
We have 5 operating
by GameTheoryWe have 5 operating partners, all of whom were former CEOs (mostly from former portfolio companies). They usually serve as Chairman on any boards they sit on, otherwise they are just board members. Some are more proactive than others - while some serve as merely consultants, others are actively working with management on everything from budgets, to overall strategy and business decisions. They are compensated through the fund as employees and through the portfolio companies as board members. In addition they are offered carry (usually fairly small amounts but one of our more active and tenured OP's has a significant amount) and co-invest opportunities. In terms of their heirarchy, they are regarded as partner-level, our principals answer to them and so do we as associates. They can and do (but not too often) make demands for analysis to be done or generate big ideas that may require work from the investment professionals. Usually, the more active the OP is in the companies, the more likely he is to be Chairman, create work for the investment team, and subsequently contribute more and receive more carry in the fund.
thank you
by patekphilippeExcellent and articulate response - thank you so much.
A couple follow-up questions if you don't mind:
1) Are these guys generally full-time and working hard, or is this more of a gig for folks who are semi-retired? It sounds more like the latter, correct?
2) Is this often something that CEO/top level manager types do in between jobs? i.e. they successfully exit a company, and while waiting around for the next one to run, they become an OP?
3) When you mention they are partner-level in the heirarchy -- are they still a notch below General Partners who make investment decisions? Do they report to GPs? Do they play any role in investment decisions and analysis of new opportunities?
Generally the operating
by GameTheoryGenerally the operating partners are past the prime of their careers and are looking for jobs that allow them the flexibility to work less than full time on an aggregate basis. Even our most involved operating partner works less than 40 hours a week and lives in another city. There have been instances of operating partners temporarily stepping into the role of CEO of portfolio companies, but only for a short time. But I would say it's safe to say that none of the operating partners will ever become full-time CEO's again.
Operating partners are considered partners on par with our managing partners, they do not answer to anyone, really. How involved they are in investment decisions are up to them. If we have an investment that concerns their areas of expertise, we will involve them as much as they feel the need to be involved and they will probably sign off on the decision, while other OP's may be heavily involved from the beginning.