Employee co-invest into the fund: fee/carry-free, but vests
Hey all, quick one π
My PE firm offered me the chance to co-invest into our own fund on GP terms β no management fee, no carry. Nice perk, obviously.
The catch: it works kind of like vesting. If I leave the firm, the unvested portion of my investment flips to normal LP terms, meaning I'd effectively pay fees + carry on that part. Vested portion keeps the GP terms.
Anyone dealt with this / seen it before? Two questions:
- Would you say this is normal / market standard?
- How's it structured at your shop β does your co-invest (or GP commitment) come with any leaver / vesting mechanics, or is it just fee-free full stop?
Trying to gauge how common the "co-invest terms vest with tenure" thing actually is. Cheers
Iβve not seen the fee flip before so definitely wouldnβt say itβs market. At our shop, we make a commitment on a fee free basis and if we leave, the amount of capital called stays in on a fee free basis but you wonβt receive further capital calls post departure.
Whatβs the leverage on it (and is it non-recourse)? Without that I wouldnβt consider co-invest an obviously nice perk, even without the fee flipβ¦
People forget how great the S&P500 is without fees and without locking up your capital for a decadeβ¦
Agree, I know we debated on other threads, but Iβve only seen fee-free carry for employees (with no strings).
Agree that leverage / loans add another wrinkle, same with departure.
Also depends on framing. Above poster is a βI donβt get toβ continue co-invest if I leave; Iβve more often seen βdo I have toβ continue if I leave, given it can often be a material post-tax commit and may stack alongside another commit at your new job. Plus, your firm will have to find other colleagues to backfill your commitment (given GP commit is locked).
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