Co-Investing vs Buyout
Interested in learning more about co-investing vs buyout as a potential exit opp. Are there any benefits to joining a co-investing focused fund / team?
Jan 24, 2023Jan 24, 2023
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Comments (10)
Will leave the floor open to people who have actually worked in it, but my understanding is it's a significantly easier lifestyle v. being a GP. You basically get sent deals by GPs and do 2-3 week DD sprints on them but don't really have to worry about sourcing, most of the annoying stuff around closing, and portfolio company ops.
I imagine it also pays quite a bit less, management fees on coinvest funds tend to be <1%.
People do co-invest for what's in theory better WLB. I will say that there are some co-invest firms out there that are pretty sweaty with heavy deal flow and you'll still end up working 8am-midnight pretty regularly during the week. Your weekends will typically be your own unless you have work from the week that you need to catch up on.
Pay is highly geographically dependent and you should be able to look up on Glassdoor what someone like Hamilton Lane pays. Management fees are usually 1% or less and carry is 10% or less.
Most juniors I've met in co-invest roles fall into two camps:
1) They joined straight out of college and thought they were joining a PE firm. They all want to leave as quickly as they can to do direct investing.
2) They did 1-2 years in banking and either on-cycle didn't go well for them or they're looking for better WLB.
Life as a mid-level co-investor isn't too dissimilar from PE. You're a deal quarterback and responsible for everything that the junior team does.
Life as a senior also seems pretty similar to PE. You made a bunch of money and once the carry starts rolling in, you're very comfortable. You also are always talking to LPs and fundraising.
In general, people who are career co-investors are deal junkies. You better love doing DD because that's almost all you do.
Great comment. Item #1 is a big thing for young people to be aware of. PE/HF/VC and anything else "buy side" has such a halo that firms on the periphery will make this their calling card for recruiting. They know young people are very sensitive to the path they're on and the circle/rung of professional society they're in. So they'll abuse these industry labels to talk someone into a job whose only benefit is the superficial connection to the arena that the candidate wants to play in.
I've seen many types of firms abuse this, and co-investment firms (including some of the big pensions) are one of many examples. So just be careful is all, ask pointed questions about what you'll be doing.
Can somebody give any idea of VP+ comp at co-invest funds like Alpinvest, HarbourVest, etc? Looking for an idea of what total cash and carry looks like.
VP/director base is in the $150-250 range, depending on years of experience, geography, how cheap the place is, and how much cash bonus there might be. Carry is generally 0.25-0.5% of whatever funds get raised while you're there. This can come in large chunks if the firm focuses mostly on managing large, commingled funds, or it can come in lots of small pieces if the firm tends to have lots of separately managed accounts.
I was presented with a co invest associate / senior associate role and the base was $150-200k range. I would imagine it is much higher at the VP level
This seems a bit low, no? Believe all in for As1 at firms like AlpInvest, HarbourVest, Ardian is ~$250 and climbs to $300+ at Sr. As. At that associate comp level, wouldn't VP+ be much higher unless they're leaning heavily towards bonus or not raising VP comp much? I'm less sure about carry, but know a lot of these firms are raising a new fund across multiple strategies each year. Carry could be pretty large if they're getting carry in each fund, even if the carry fee is only 10-12% instead of 20%.
The main benefit I would highlight is that in a Co-investment team you will see A LOT of deals. It can be preferable to a role in a mid-market fund where you work on the same deal for 9 months. Depends what you like! Sprinting on three different investment memos? Or updating the same presentation for the 47th time? Hint: both can be painful…
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