Comp Breakdown for MF PE Partner?
Assume partner at publicly traded MF PE shop (BX, APO, KKR, OAK). Also assume been at same shop since associate level.
Cash comp: $1-2m?
Board Seats: maybe 4-5 seats, $50k each?
Carry: carry in a bunch of funds I'm sure. Let's say 2 $15bn funds, 75 bps each (maybe 50bps in one and 100bps in another) so basically call it 75bps across $30bn. 1.5-2x return is $10-20m per fund so $20-40m for both, so call it $2.75-6m a year for 7 years. That figure is annualized and obviously won't be paid out like this; carry will be paid out towards end of fund. I'm also confused by this because $20-40m in carry seems a bit low for a partner at a big fund, considering how the giant PE comp report says partners have $50-60m in carry dollars at work.
Co-Invest: if this partner had $10-15m in carry from their principal days, and it actually paid out, and they put all of this towards co-invest + lever up (do big MFs allow leverage? If they do, maybe you lever up 2-3x?), assuming 1.5-2x return that's ~ $2-6m a year for 7 years. Again, this is an annualized figure so same thing for carry also applies here
RSUs: I have no idea. Since these shops are publicly traded, half the carry walks out the door, so I would assume a lot of that or a good amount is made back from RSUs.
Total: $5m on the low end ($1.75m of which is straight cash, the rest is illiquid), and $14m on the high end ($2.5m of which is liquid, rest is illiquid until funds pays out obviously). But this is kind of a dumb and irrelevant number because carry/co-invest, the bulk of the comp, isn't paid out every year. For example, if this is during like a fund's second year, obviously there won't be any carry/co-invest checks, so the partner will take home cash comp/board seat comp, unless there's overlapping from older funds. This kind of makes sense I guess because I've heard some partners at APO are pulling down $20m (that Athene got fired I think), and $5m seems in-line with MDs at BBs. Thoughts?
So I know you put a lot of work into this and were thoughtful with your inputs etc. but this is just an incredibly useless exercise. If you're a partner at any legitimate private equity firm you'll be doing fine.
I’d say PE partner at MF with $250bn AUM, assume fund does 3x MOIC that’s $100bn in carry. Partner gets 1.5% of that, made $1.5bn... and that’s just from the carry. Then fund is making 2% mgmt fee on $250bn, another $5bn a year, partner gets 10bps of that, $5mm a year to partner across a 20 year career = $100mm. Total comp so far $1.6bn. Now let’s assume partner also got gp stock. 1m shares at $11 a share, had 5x increased, that’s another $55mm. Stock had a 4% dividend yield a dosa those 20 years, so 4% on avg of $11m and $55mm times 20 years = another $26mm. He had three daughters, they each got athletic scholarships to ug. Middle daughter became a pro golfer. Made $66mm in prize money and $38mm in endorsements. Not fair to allocate all of that to her dad, but he paid for her golf lessons out of his cash PE comp, so 20% of that earnings is another $21mm.... oldest daughter married the grandson of a Greek shipping magnate... similar math, but handy capped for a divorce, just to be conservative — want to be realistic here. Son in laws net worth is $1.5bn, daughter gets $750mm in divorce, 20% allocable to dads museum board connections setting up the initial blind date.... that’s another $150mm... what are we upto so far?
I mean and that doesn’t even include compounding...
What do you guys think? Agree with my math?