Illiquid investments roles in AM
It seems like an increasing number of AM firms are allocating into private markets (private equity, private debt, co-investments, secondaries).
Curious to understand how the structure of compensation for professionals in such roles, particularly if they want to attract experienced people from private equity.
Based on the most helpful WSO content, here's what you need to know about compensation structures in roles involving illiquid investments within Asset Management (AM) firms:
Compensation Components:
Attracting Experienced Talent:
Variability Across Firms:
Examples from WSO Discussions:
For more detailed insights, you might want to explore specific threads and discussions on WSO related to compensation in asset management and private equity roles.
Sources: Compensation Structure at the mid-management level in Corporate Development / Strategy / Finance, What I've Learned About Hedge Fund Structure and Compensation, What I've Learned About Hedge Fund Structure and Compensation, Compensation Structure At Quant VS Fundamental Funds, Compensation Structure At Quant VS Fundamental Funds
There is huge variation. For some, it's just base + bonus. Some firms are running internal FoFs and charge carry (or will charge carry on coinvestments). Generally you will have the opportunity to invest personal capital into whatever you're investing client capital. There can be a fast path to partnership which then means you also get equity compensation and appreciation, plus potentially a dividend. I have heard of one firm that negotiates fee/carry aggressively with the GP and then will split whatever discounts it gets 50/50 between the firm and its clients (a lot of alignment issues there, in my opinion). There are AM firms that are very sophisticated about what they're doing in privates and there are ones that are much less so. If you're looking at a role like this, do a huge amount of homework on who the team is, what the approach is, compensation, alignment, etc
Lots of interesting info here, thanks!
Not surprised to hear that mileage might vary, and for sure a good tip to diligence the firm.
Probably a bottom-up way to find the most aligned is starting from their portfolio investments?
Also, you mention alignment issues, is that because you might end up picking GPs on the basis of the fees instead of merit?
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