When you join a fund later in its life cycle (eg year 3), how does the carry vesting work? Does the fund as a whole vest and you effectively start at a higher vesting percentage and grow with the rest after, or do you start vesting from zero? Thanks all
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Starts from zero but you typically fully vest into deals when assets are sold so you will be closer to that mark
We have 80% vesting over 4 years and 20% held back for exit. My prior firm was straight line 6 years.
Thanks but the question is where you start on vesting when you join a fund late. Any insight?
Not OP. Different variation of the question - do you still get participation in investments that were made prior to you coming on, or only in those investments closed going forward?
As with everything, varies by fund. I’ve always had it in just the deals that happened after I joined
Agreed depends on the firm. At my current firm, I basically came in at the current mark for existing investments in the current fund. For example, assume the fund was marked at 1.5x when I joined and finished at 2.0x - then I'd get carry on that 0.5x (2.0x - 1.5x).
At my firm (US large cap), new joiners do not get any carry in existing investments which closed before joining date in any active fund.
New joiners receive carry entitlement on all new investments closed post joining, all of which are on their own vesting schedules (5Yr linear vesting, with vesting dates being the closing anniversaries of each individual deal).
The firm has the option to cap vesting at 80% if leavers join competitor funds, even if a deal was fully vested already (not sure whether / how often this applied in practice, we very rarely have leavers anyways).
Agreed w/ everyone here that says it really depends on the fund, which I know isn't helpful but that's the truth. Not sure if there's anything that's "market."
Somewhat relatedly, has anyone encountered a 2 year cliff on vesting? I'm speaking to a fund that has deal-by-deal carry but the vesting schedule is 2 year cliff, 20% vest each year for the next 4 years, and then last 20% in year 10. Seems significantly worse than market from what I can tell
20% in year 10? How does that make any sense. So if a company is sold within 4 years, you don't get the last piece of carry until 6 years later?
Correct. Retention tool, however punitive
Vesting accelerates at exit anyway
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