These secondaries funds are getting ridiculously large. Lexington and Blackstone Strategic Partners both closed on $22B in the last year or so. Does anyone know what the comp is like at Ardian and its peers?
The secondaries fee structure creates a profit discount relative to buyout and the fund multiples are lower, but secondaries teams are also generally leaner, which may meaningfully offset the fee structure gap.
Given these dynamics and the eye watering fund sizes, is top end secondaries comp getting comparable to UMM buyout?
Thoughts?
Good luck getting a seat at any of the top Secondaries shops. I've found it impossible and I come from a MF straight from undergrad.
why is it so competitive..?
SEC is the new hot asset class. Why wait >5 years for DPI when a SEC deal can pay out in a few months or even less? You also buy at discounts and immediately mark up to NAV to get infinity IRR. Works like a charm and LPs love it.
Secondaries comp is still ~30% discount on a cash basis at the VP+ levels. WLB is questionable give the need to deploy rapidly; regardless of how light touch commercial diligence may be. You won’t shoot the lights out in carry but the likelihood of impairment is low. There is a talent shortage which creates a clearer path to promotion up to MD. All in all the risk adjusted comp probably mirrors an average MM fund. Direct equity franchises at mega funds will pay significantly more but you might hit a ceiling on the path to MD.
Just one man’s opinion. Talk to headhunters. This applies to established shops. Doing secondaries at a random wealth manager or regional insurance company is presumably different
What head hunters. I been trying and it’s like there are no VP roles
Work at one of the funds mentioned above and will note that associates get same comp as those on direct strategies. It’s likely that cash comp diverges at principal and above, but definitely doesn’t during your aso years.
It’s true that you generate less carry per $ of gain - we charge 12.5% vs. 20% for our direct funds. That being said, we have roughly half the number of IPs as our direct strategy, which is roughly the same size as ours (at least in terms of flagship fund size). The way I was doing the math, the carry should balance out given historical performance of respective vehicles.
In terms of WLB, agreed pressure to deploy has eroded what previously was a pretty great culture. Still better hours than direct peers, but not by too much.
why would sec cash comp have a discount at principal and above? thought cash comp was funded by mgmt fees. even if sec funds charge lower mgmt fees (which i don't think is the case), would think that the larger fund sizes and fewer IPs would balance out, even at the senior levels
Both carry % and TX multiples are lower so your math is a little optimistic. For any individual secondary deal the expected carry payout is probably half of a direct deal. But obviously the resource load post close is way less than half (basically zero)
Is it true that there are some non cash comp components (like a bigger carry component for secondaries VPs) that would balance out total comp?
I recruited FT for a well known Secondaries shop after my summer internship and one of the things they pitched was better WLB.
Absolute BS. I'm working 70+ hours and they're much more difficult (higher stakes, more brain power, etc...) than IB hours.
Like the other poster, I am also at one of the larger Secondaries players. Cash Comp is higher than for our direct colleagues, rn esp due to bonus given the strong run in Secondaries, so that might balance again in the coming years. Carried DAW is also higher.
Both comes down to the team size, e.g. Management Fee: 1-1.25% for Secondaries MF vs 1.5-1.75% for Direct MF and Carried 10-15% for Secondaries vs 20% for Direct. Yet the team sizes of the Secondaries Team are usually about half of the sizes of the direct teams.
Obviously there are some direct shops with super lean teams (like LGP), but in general I wouldn't say that there is a discount on comp anymore at least for the MFs. Also because of talent shortage as already mentioned, look up those team pages: there is almost no lateral movement between these funds and people are staying there since forever, I think that also says quite a lot also on WLB (mine is quite good).
Then risk adjusted looking at volatility in returns and even more important career progression I think it's one of the best spots in finance since a few years.
Where do you work?
I'm getting worked hard.
Hey do you run into Pomona much? Any thoughts on them?
Extremely illiquid product. What’s the appeal unless you benefit from the management fees? Your carry is worth even less than normal PE and illiquidity is and even larger problem
It only makes sense at huge scale. Theres a reason the 10 largest secondary shops make up like 90% of AUM ( forget the exact stat but it’s crazy)
How is illiquidity more of a problem in a more diverse, late stage portfolio of assets??
is this the second largest drawdown fund of all time? can only think of BX's RE fund and brookfield's infra fund as having hit 30
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