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$2.15mm as a principal. Maybe see that in 10 years.
That seems pretty low vs other numbers I’ve heard
Relative to fund size. Mine isn't big.
VP (ignore title) $4m DAW MF ($15bn+) expected to see dollars next year
Nice, what's your total YoE and how much of it do you expect to see next year?
2 years, expect to see about 5-10% (hopefully) end of this year and another 25-30% next year
So is this $4mm over the entire lifecycle of the fund, or per year?
$4m or so DAW (MF), when you see it depends on a lot of things
.
The latter.
Could you please elaborate on the factors impacting when you see it?
Sure man.
Conceptually, it boils down to one thing. Funds take 10 years to invest, create value, and divest. Here is how American carry works often:
Say you have a $1B fund. The firm makes 2% as management fees to keep the lights on (pay base+bonus). Then you get 20% of all returns assuming the capital you have invested stays above the 8% gIRR hurdle rate. This 20% is the carry. So a $1B fund, assume you 2x it, then you have $2B. Pay back your LPs, now you have $1B. These are your returns. 80% goes to your LPs and the firm gets 20%. So $200m. If you have 100bps of carry in that fund you get your $2m.
But when do you get it?
In the beginning of the fund you have to buy companies and invest the fund. So you buy a company and invest $250m. You sell it 5y later and make a 2x. You now do the above carry calc I did on that specific investment’s cash flows and the carry generated from it. ($250m * 2 - $250m return of LP capital) * 20% * 100bps. So you get $500K. Makes sense, since this is a fourth of the fund you have invested and you have now made 25% of the $2m we talked about above. As you can see, you get paid when there are realizations, because that’s when there is money to split up.
Supplemental considerations:
Some firms do not pay carry out to you on investments made before you got your grant
Some firms have vesting schedules for carry, so you only get paid on your vested bps which chase your total granted bps
There are other considerations too - this stuff can be very firm by firm so that’s why a said it depends on a lot of things
Hope that’s helpful
What is this stupid “DAW” term that people are all of a sudden throwing around on this site. Is the allocation $4mm, and if so is that based on a fund 2x? There’s no “dollars at work,” your allocation is entirely theoretical until it’s paid out so there is nothing “at work.”
It’s literally how the industry talks about it but OK I’m sure you know better being in real estate and all
It’s standard industry nomenclature but agree it’s a little silly / nonsensical.
Heck I was even downvoted by someone when I said my assumption was based on a conservative 1.5x...god knows how many funds underwrite to 2x+ and then don't get there.
I think the issue people are having is that when firms quote carry grants, the industry standard assumes a 2x gross MOIC. So for comparability purposes, if you’re going to quote $ values, 2x is the best way to do so (whether you think that’s actually achievable or not is a different question). The other option is to quote bps but that’s harder to compare across fund sizes.
I think most folks quoting dollars at work are assuming a base case of 2x, but others correct me if I’m wrong
Hahahha real estate
When did PE went from this rainmaker/making millions of $ in foreseeable future/ultra prestigious career path to "potentially maybe will receive 4 million but the payout is only set in 10 FREAKING years".
Jeeez. In 10 years I'd potentially aleready be close to senior partner level making low 7 figures with much less risk + insanely better lifestyle over the next 10 years.
Wth happened to PE?!?!
This is an insanely off base comment and assume you have never worked in PE.
Been doing this for a while. People take different paths. At one point in my career I received offers to join much bigger firms which certainly would have made me very very wealthy but I opted to focus on my family and work/life balance. I'm in a T2 city so potentially earning a couple mill in the next decade isn't too bad of a trade for me :)
The base comp in PE will be in line with partners in consulting, then partners will get the massive payouts from carry. The key thing is that PE is a very, very long term game but once you survive to the carry rocketship there is no end in sight.
$4m DAW is what a VP has, I.e. someone who is max 30. It scales a lot as you go up from there. Partners have $30m+ DAW. If you do 2x that is. You realize if you do 3x it’s $60m. On top of yearly compensation. Taxed at 15%.
2nd year VP at a shop where the last several funds have all been $500 MM - $1 Bn. ~$4 MM DAW at the moment.
Across funds or just current? Very good if that’s a single fund and solid if it’s across 2-3.
Thanks - across 2 funds. There's still some unallocated carry available in the others but they are mostly harvested.
I have $300K DAW at a small fund. $500M AUM but very lean 3 person investment team. Feels worth it given I’m 1.5 yrs out of college.
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