Looking for some benchmarks on Carry allocation as a 2nd Yr associate. New fund in LMM space in Germany - 200-250m fund size.
Think it will be anywhere between 50-150 bps.
Thanks for sharing in advance.
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ASO1 in LMM PE in the USA (fundless), no carry.
Salary/bonus?
110K/40K, with coinvest
how would carry even work at a fundless sponsor? it'd have to be on a deal by deal basis right
Yes
I had 50 bps at a similarly sized fund (slightly smaller) as an ASO.
50 bps at a similarly sized fund
Joined as a 2nd year associate at a new fund (similar size in the states) and had no carry, but received levered coinvest rights.
As a VP (4th year of cumulative PE experience) = 2% carry
What was fund size?
~$100-200M debut fund. Second fund closed at $200-400M, and third fund will target $400-600M
50bps would be pretty typical, but I would say <50% of funds allocate carry to associates.
sr. associate. 50bps around same size, although we are deal-by-deal carry which is nice.. checks get paid out on every exit and there is no waiting 5-7 years for the first one to hit.
That is indeed nice. I will get my allocation in the next few weeks - we will see what it will be.
It has made me appreciate the fundless sponsor / deal-by-deal capital model. While it's nerve wracking to sign up a deal with limited capital and fact that we have to do a lot of investor calls during regular diligence, the benefit vs. a fund is pretty great.
Keep in mind the benchmarks you get here are likely from longer-established funds that can afford to pay higher cash comp. New funds will typically be lighter on cash and higher on carry... similar to how startups are often more aggressive with granting equity.
The difference between 50 and 150 bps for you will depend heavily on when you joined -- are you the first non-partner hire, or are you employee #14 after they've basically already closed the fund? If you're closer to the former I would argue strongly for >100 bps given the added risk you are taking on + they don't have that many other mouths to feed yet. If closer to the latter, 50-75 seems about right.
Yes that is understood. 1 VP and 2 Associates were highered all at the same time - fund is still in Fundraising.
Which is why I expect a bit more, because I took an "entrepreneurial" risk. Cash comp is somewhat market in Germany.
70k fix, 50k Bonus (can go up to 70k when exceeding goals) +15k retention bonus p.a. = 135k (all Euro) - not the best, not the worst.
Any chance you can share more details about the fund?
I switched while ago in Germany from a LMM fund to a MM fund. Received 100bps carry. At LMM (same size as your fund) they offered me 200 - 250 bps, but turned down due to difficult track record.
I think 50-150 bps is realistic, would push for the higher end. It's a first time fund? Thus track record is not given and therefore the risk is higher. (excl. experience of partners at old shops)
Thanks - what was fund size?
That is helpful - seems like 50-150 bps is the range we are playing in. It is de facto a first time fund, yes.
To clarify, is 50-150bps market in terms of a percentage of total profit or of GP profit? Currently negotiating my carry and they are offering 200bps of the GP profit only (so 40bps of total profit)
A GP share is more valuable I would say - this means you will participate in all funds profits. no?
What I am talking about is the following:
200m Fund - 2x MOIC performance --> call it 40m Carry Pool and then 50-150 bps of it. Means 200k - 600k ish.
Update:
Got 200 bps on the carry - 1% vesting day 1, 1% vesting linear over 5 years.
Sounds like you’re confusing a few different topics.
The “total profit” belongs to all investors - GP and LPs. Traditionally split 80/20 between LP/GP after an 8-12% hurdle, but can vary. The fund manager (the firm that employs you) has no claim on the the LP profits, so any carry you get comes out of the GP carry pool, hence pretty much always being quoted as a % of the 20%, not the 100%.
However, “GP Profit” is actually a slightly different concept - it includes the 20% GP carry, but also the [2%] management fees, less operating expenses (your salary, rent, insurance, etc). If management fees > OpEx, the fund manager runs at a slight profit as well, so owning a GP stake is more attractive than just a carry allocation. It’s also hard equity instead of just a profits interest (like carry)
Agree with you, also non-allocated Carry typically flows through the GP Vehicle.
I do not hold GP shares, just 2% Carry, good enough for now.
$200M AUM, first fund. $150k cash, no carry, but rarely work more than 55 hours a week and typically nothing (outside of live deals) between 4pm Fri-7pm Sun
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