Carried interest for Associates / Senior Associates?
What is the typical carried interest % that people at the Associate / Senior Associate / AVP level get?
Trying to negotiate for my upcoming performance appraisal. Thank you.
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I think the general consensus is that if you're at any established fund (~$1B+ AUM) you're probably not getting much. Definitely not at the Associate level and at the Senior Associate level, I think a range ~0.1% - 0.5% would be fair. It would really be more of a gesture by the firm at that point rather and at that size of fund, it's likely it would take time for you to ever see any monetary gain from that money.
At smaller funds, I think it's definitely on the table to ask for carry as a Senior Associate. I think the general idea is that the fund is unproven and the cash comp won't be as high, so they should make up for it by giving away some carry. At the Associate level, I still haven't seen many firms give carry. Who knows if you're going to work out as an Associate and it's honestly not even worth the hassle/legal to grant carry and have someone leave after a short period of time.
If you get hired as a Senior Associate or promoted into the role after ~2 years, I think you could reasonable get anywhere from ~0.2% - 2%.
I put ~ in front of everything because it's super tough to nail down a range and depends on a lot of things, fund size, your experience, partner preference, etc. If you came in as a fairly Senior Associate, let's say ~4 years of PE experience, and fit the niche of the fund well, you might be able to push for a 1%+ stake with the argument that you're a mid-level PE professional and you're looking to move into a VP role in a year. You could also be much more junior, a senior associate in Title, but only with ~2 years of PE experience and no experience leading a deal. At that point, the fund might want to vet you a little more before committing to any carry stake, beyond some token carry.
In general, if you do get carry I would focus on the vesting schedule/payout terms of how the carry works. Just because you have equity doesn't mean you'd get to keep it in the event that you leave and depending on how the carry is structured and the hurdles that fund has to hit before distributing, it might be a long time before you ever see any of that money (if ever). Unless you see a 5-10 year path at the fund, the carry might be a phantom incentive.
Some comments get to the main point that carry grants at the junior level are highly variable across the industry. There is some consistency when you segment by fund size but even then I think it will depend on the firm culture, number of employees and life cycle (i.e., is it the first fund of the fifth). If you join earlier in the firms life cycle, you are taking on more risk and there are fewer mouths to feed so more likely you can get an allocation. The point that is missed here but probably referenced elsewhere on this site is that you should really be focused on carry dollars at work as opposed to a percentage. Sure 0.1% of the carry pool in a fund does not seem like a lot but for a billion dollar fund your carry dollars at work would be $200K ($1bn * 20% * 0.1%). Not life altering but you should get more dollars at play as you progress and as the firm raises additional funds. Focus on carry dollars at work because it is a comparable metric whereas percentage points are not created equal.
The reason why it is more common for junior folks to get carry at smaller funds is typically because the cash comp is lower. I'll give you my own situation as a data point but it may not be representative. I am a senior associate and for the fund we are closing on I will have $2mm of carry dollars at work (calculated using the same formula as above). You can divide that by 5 or 10 to amortize the dollars over the fund life. I prefer to think about it over 5 years since, depending on the fund structure (deal based or fund based), you can reasonably expect the first carry check to be distributed by then. Plus, if the firm is successful, you start raising a new fund 2-3 years after closing the last one, depending on how quickly you put money to work. So add between $200k and $400k to your annual comp. My cash comp however, is in the $250-$300k range, below comp for UMM and MF. The carry allocation gets your overall compensation more in line with (or above) other industry participants. Personally, I prefer the carry allocation to the cash comp for a few reasons, namely tax efficiency, motivation and alignment, but I've heard others argue for the cash comp. Ultimately that depends on personal risk tolerance and conviction in the funds ex-ante performance.