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Carry allocation for junior partners at megafund (MF) or upper middle market (UMM) private equity firms can vary significantly depending on the firm's structure, fund size, and performance. Based on the most helpful WSO content:
Carry Pool Distribution: Typically, the firm/partners receive 60-80% of the carry pool, with the remaining 20-40% allocated to team members. Junior partners would fall within this team allocation.
Junior Partner Carry Points: While exact carry points for junior partners aren't explicitly detailed, it's important to note that carry at this level is often a small percentage of the overall pool. For context, strong partners at MFs with significant fund sizes (e.g., $3 billion funds) might receive 5% of the carry pool. Junior partners would likely receive a smaller fraction of this, especially in their early years.
Firm-Specific Variability: The allocation is highly firm-specific and depends on factors like fund performance, the firm's generosity, and the individual's contributions. Some firms may reward junior partners more generously if they demonstrate strong performance or take on significant responsibilities.
In summary, junior partners at MFs or UMMs typically receive a modest share of the carry pool, with the exact amount depending on the firm's structure and policies.
Sources: MM pe vs MF, Is it dumb to exit to LMM PE rather than starting in bigger (MF/UMM) opportunities first?, PERE: What's your carry?, No country for old I-bankers (starting a mid-career thread for finance professionals), Confused about carry at PE Fund
About 15-20m USD on a 2x MOIC DAW basis sounds right, there is a ton of variance on this number depending on the firm though
Source is my fund's arrangements plus triangulation on DAW carry based on what I heard from other friends
So if latest fund is $10B, junior partners would get 100bps?
To calculate annualized NPV - assuming fund invested over 5 years, that would be $4m per year. Assuming time to exit of another 5 years and 15% discount rate on the carry, that would work out to around $2m in annualized NPV? Along with say $2m of cash pay, that means around $4m equivalent cash pay for junior partners at MF PE these days?
Quite generous assumptions here: cash pay is usually lower for junior partners, vesting schedule is longer than 5 years usually but also tied to deployment pace, 2.0x is unrealistic performance target for most funds at this scale, 10 year total fund life is too low with funds dragging on for longer, etc. Hard to model but think more like 2-3m cash equivalent sounds about right. Disclaimer, this is shaped by my experience at my fund where I know ballpark carry allocation and how carry works. Carry terms are extremely bespoke and complex.
On a NPV basis, this actually does not seem all that great lol. For all the toil and sacrifice it takes to make it to partner, I personally feel like that is nowhere close to worth it
That is just for junior partners however (35-40 year old), it gets exponentially better as you get more senior. Exponentially tougher as well. Also not like you actually need to deliver any alpha or are marked to market, so quite cushy from this perspective. Agree on the whole that unless you see yourself working until you die in that space it isn't super worth it long term given how back weighted the economics (and liquidity) are.
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