Do MF Asset-Based Finance teams get carry?

Based on the most helpful WSO content, carry structures in asset-based finance (ABF) teams at megafunds (MFs) like BX, Apollo, KKR, and Ares can vary significantly depending on the type of vehicle and strategy. Here's a breakdown:

1. Carry in Perpetual or Insurance-Funded Vehicles:

   • These vehicles often generate returns through incentive/origination spreads rather than traditional GP carry with a hurdle. As a result, there may not be a classic carry pool to allocate.
   • Compensation in these setups is more likely to include cash compensation and an "incentive comp" bucket tied to metrics like net investment income (NII) rather than traditional carry.

2. Carry for Associates:

   • At the Associate level, carry is generally uncommon across the industry, especially in strategies tied to perpetual or insurance-funded vehicles. Firms are hesitant to allocate carry to junior professionals due to the legal and administrative complexities, as well as the uncertainty of long-term retention.
   • Carry typically starts at higher levels, such as Senior Associate or Principal, depending on the firm's structure and the specific fund or vehicle.

3. Closed-End ABF Funds vs. Perpetual Vehicles:

   • In closed-end ABF funds, there is a clearer carry structure tied to fund performance, making it more likely for carry to be allocated at higher levels (e.g., Senior Associate or Principal).
   • For perpetual vehicles or those feeding insurance balance sheets, the focus shifts to cash comp and incentive comp tied to ongoing performance metrics, with less emphasis on traditional carry.

4. Flat Team Structures (Associate → Principal):

   • In flat structures, economics typically kick in at the Principal level or equivalent. This is where professionals may start seeing meaningful participation in profit interests or carry-like incentives, depending on the firm's compensation philosophy.

In summary, associates in MF ABF teams are unlikely to receive carry, especially in perpetual or insurance-funded vehicles. Compensation is more likely to be cash-based with performance-linked incentives, and carry or profit interest generally starts at more senior levels or in closed-end fund structures.

Sources: Carried interest for Associates / Senior Associates?, Data: Average Private Equity Compensation and Carry from Associate to Managing Partner, Reflections from year 4 as an equity analyst