Private Insurance Carry?
How do major private equity backed insurance companies (e.g. Athene, Global Atlantic, etc…) give senior investment professionals carry?
I’ve just started working in the investments arm of a similar company doing private credit, and the senior guys do great, just not sure how we can pay them so well given that we can’t do a traditional carry structure.
Any insight would be appreciated.
Major private equity-backed insurance companies like Athene and Global Atlantic typically don't use a traditional carry structure for senior investment professionals. Instead, they rely on alternative compensation mechanisms tailored to the insurance business model. Here's how it generally works:
Sticky Capital Base: Insurance companies, especially life insurers, have long-duration liabilities, which allow them to invest in relatively illiquid assets. This creates a stable and predictable capital base, enabling them to generate consistent returns.
Performance-Based Bonuses: Instead of traditional carry, compensation is often structured as performance-based bonuses. These bonuses are tied to the performance of the investment portfolio or specific strategies managed by the professionals.
Profit Sharing or Equity-Like Incentives: Some firms may offer profit-sharing arrangements or equity-like incentives that align the interests of senior professionals with the company's long-term success. These incentives are designed to mimic the alignment provided by carry in traditional private equity.
Partnerships with PE Firms: Many of these insurance companies are backed by private equity firms, which may provide additional compensation structures or incentives tied to the overall performance of the PE-backed entity.
Regulatory and Cultural Constraints: Insurance companies are generally more conservative due to regulatory requirements and their cultural approach to risk. This conservatism influences how compensation is structured, focusing on stability and long-term alignment rather than the high-risk, high-reward nature of traditional carry.
In summary, while traditional carry structures are not feasible in these settings, senior investment professionals are compensated through a mix of performance-based bonuses, profit-sharing, and equity-like incentives, all designed to align with the unique characteristics of the insurance business model.
Sources: Overview of Infrastructure Private Equity, Confused about carry at PE Fund, PERE comp table, Undergraduate Opportunities - Credit Funds, PE & Insurers
Don’t have direct experience that I can weigh in with here, but this is the exact reason that senior leadership left barings a little while ago (no carry because of insurance ownership)
Was going to say the same thing as Spicy Bagel but he beat me to it. Only thing I’d add is that some of the insurers will still raise third-party capital. Typically a chunk of this goes to the insurer parent but some will go to the team.
I think maybe just higher cash comp? When you say seniors do great - how much do you think they make?
Just left a VP role investing insurance capital. Base was $220K, 60% bonus max, 10% in RSU with 1 year cliff. 401k match of 1:1 for up to 5%. Hours were Mon-Thurs 8 am - 6 pm and until 3 pm on Friday. Weekend work was rare. It was a career seat but I left for reasons outside of my control
Pretty sure you can get more comp for similar hours elsewhere too.
Like where?
Qui ut assumenda in repellendus fugiat reiciendis doloremque. Maiores dolores provident et voluptas quis delectus fugiat. Ipsum ipsum nemo et quos ipsa laudantium.
Voluptas aut et eos et id aut ipsam. Sed facere explicabo voluptatem rerum aut. Perferendis maxime cupiditate cumque est et assumenda iste.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...