Looking at the data for VP's in their comp report there is a huge discrepancy in pay across all seniorities based on whether the fund is classified by AUM or the most recent fund. Carry values are based on only the most recent fund across the board (not including prior vested funds), why is there such a large difference in pay between these categories?
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forevermonkey, shame nobody has responded. Maybe one of these topics will help:
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Hope that helps.
I feel bad but I'm gonna bump myself.
Are you asking why a $1B AUM group pays less than a shop with $1B latest fund size? Basically, because private equity economics compound and scale really fucking well.
If your last fund is $1B (or whatever), you probably have a couple funds before that - maybe $350M Fund I -> $500M Fund II -> $800M Fund III -> $1B Fund IV or somethibg like that. You’re still collecting management fees from at least some of the assets in previous funds, maybe like $2B+ total AUM, so you can pay higher cash comp, and carry in the most recent fund is based on $1B.
If your AUM is $1B, that might be more like $300M Fund I (50% unrealized) -> $400M Fund II (75% unrealized) -> $650M Fund III (100% unrealized). You can only pay salaries from the management fees on $1B (not $2B+ like the other fund), and everyone’s carry is based on a $650M (not $1B)
That makes sense, the heidrick report puts them in equivalent categories (ie 1 bil find size and 3-5 bil aum), what im saying I see in the heidrick report is that when measure by aum at every level and every seniority reported carry is much higher when it dosent seem like there's a reason for it to be. I just checked rhe 2021 report again and it says it's most recent fund for both, so I still don't get why there's such a huge discrepancy at seemingly equivalent funds.
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