How quickly can I expect to get carry at a ~$1bn HF?
I’m starting at a relatively small hedge fund that manages about $1bn.
There isn’t a lot of hierarchy in the fund, and the team is small, so I’m wondering if it might be to negotiate some carry on the fund within 1-3 years.
Probably need to provide a bit more detail to give a good answer - 1) where do you sit in the hierarchy and what's your experience level going in? 2) is the role expected to be "partner-track" or not? 3) roughly how many investment professionals are on the team? Other factors that may also play into it include how recent the fund launched and what are their growth / expansion plans
1/3) there’s founder, then there are 3 people one level below that, and then there’s me, along with 3 others. Not sure about founders track. I am industry experienced, but no prior HF experience. People above me have carry.
My gut feeling is that it'll likely be a few years until you can negotiate carry - $1b is definitely beyond "startup fund" size, which is usually the only scenario for which a junior analyst would get carry early on. With 4 people above you and another 3 at your level there has to be a bit of time for you to prove your longevity / have the others leave, because they're not going to double the size of carry participants after just 1-2 years
What’s your background? What will your tasks be? How is the team structured? What does the fund do? How have returns been? What’s the personality of the founder?
way more info needed to answer this question
Without getting too specific for anonymity, here are the answers
1) domain expertise background in the industry we cover 2) founder, 3 ppl below, 4 ppl below that 3) no idea on returns 4) seems generous, but limited interactions thus far
You don't know what they're returns have been? Yikes...
FYI, no one in the HF world calls it "carry". It might be a % of the bonus pool, or equity in the GP. But "carry" is a PE thing, and they're not exactly the same.
Also, a $1bn HF is not small.. I would argue it's at the very least "medium" in terms of AUM.
Finally, to your question: You don't say what role you are joining for, but unless you can prove to be a serious money-maker, I'd say the chances are low. Giving equity in the GP is more common when you join a start-up HF with $100mio AUM where the risk of failure is high and the founder has no other way of attracting nor paying for talent. A $1bn fund on the other hand is a firmly-established business, and most new hires are strictly "employees", not partners. Big exception is if you become critical to the success of the fund.. that would obviously give you some leverage.
Thanks. Noted on the use of the word carry, which was a term used in VC (I’ve worked in VC previously).
FWIW, we use the term "carry" at both my prior fund and current fund to refer to % allocation of the incentive fee pool, and have heard it used similarly by peers at other funds (probably a function of the funds' background). Yes, carry is technically a PE concept and the mechanics are different but people get it and I wouldn't worry about using the term
Not until you get promoted. That could be another 5 years given the fund's team structure and size. That can be faster if people above you turn over (and you step in to fill that role) and slower if they are there indefinitely for the long term.
Edit: Also, you took a job at a fund not knowing their performance?
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