Comp Negotiation

Based on the most helpful WSO content, here’s how you should approach this:

1. Carry Negotiation:

   • Focus on "carry dollars at work" rather than just the percentage of the carry pool. For example, 1% of a $300mm fund with a 20% carry pool and a 2x ROIC would translate to $600k in carry dollars over the fund's life. This is a more tangible metric to evaluate your compensation.
   • Given the small size of the fund, you may have leverage to negotiate a higher percentage of the carry pool (e.g., 2-3%) since there are fewer mouths to feed and you're taking on more risk by joining early.

2. Targeting a Dollar Amount:

   • It’s reasonable to back into a target dollar amount for carry based on your expectations of fund performance and your desired compensation. For instance, if you want $1mm in carry dollars over the fund's life, you can calculate the percentage you need based on the fund size and expected returns.

3. Salary + Bonus:

   • It’s reasonable to expect your salary and bonus to stay flat or even increase slightly, given the risk of joining a smaller, newer fund. Many WSO threads emphasize the importance of maintaining strong cash compensation, especially early in your career, as carry payouts are uncertain and can take years to materialize.

4. Other Considerations:

   • Vesting Schedule: Ensure the carry vests over a reasonable period (e.g., 4-5 years) and includes protections for termination without cause or a change in control at the firm.
   • Co-Invest Opportunities: If possible, negotiate the ability to co-invest alongside the GP, as this can provide additional upside.
   • Future Fund Upside: If the firm raises additional funds, clarify whether you’ll participate in carry for those funds as well.

5. Leverage Your Position:

   • As a Principal with over 10 years of experience and a strong background in asset-backed opportunities, you bring significant value to a new fund. Use this to push for favorable terms, especially since you’re joining at an early stage and taking on more risk.

For more insights, you can explore similar discussions on WSO, such as this thread: https://www.wallstreetoasis.com/forum/private-equity/confused-about-car…</a">Confused about carry at PE Fund.

Sources: Confused about carry at PE Fund, Carried interest for Associates / Senior Associates?, Vice President Fund Carry/Equity, Private Credit Endgame, Private Credit or CB