Family Office Question
I'm hoping someone can provide some color on a few questions I had on family offices. I'm fully aware that all family offices are different, so there will be great variability.
I'm currently in the process of transitioning roles, moving from a traditional PE firm to a single family office. They have a flexible mandate from buyout, growth equity, venture, etc. At the VP level, do you guys know how carry works at family office? I'm curious to know how that looks like since it's not like a normal fund.
For those that have joined a family office from traditional PE, how was the transition like?
For those that have left a family office to join (or rejoin) a traditional PE shop, what triggered the move? likes/dislikes?
I am in a new family office in the PE wing and I get carry on a deal by deal basis that vests over 2 years. Carry has a 1x return of capital provision and I believe it is “profit interest units”. Definitely lmm and smaller check sizes but the quick vesting is nice. Other family offices I interact with have longer carry schedules with IRR hurdles. Happy to answer any questions as it’s hard to find info.
OP here. Thanks for the response. The two year vesting is nice.
Do you guys employ a traditional PE shop strategy, buy and flip over a 3-5 year hold period? I'm curious in scenarios where the strategy is more of a 10+ years buy and hold. I would imagine some level of dividend recaps taking place for distribution to the family office to provide deal team members sort of "carry" compensation since the actual carry will take a long time to kick in. Let me know if that makes sense.
So we have a hybrid model, some stuff is opportunistic/ distressed and that’s a shorter hold, we also have some investments that are the traditional 3-5 year hold. Then we also have long term investments, most in this category are either ones that have had a dividend recap or have a ton of free cash flow and have hit or nearing the initial return of capital. In the case of the long term holds once the fund hits 1x via distributions carry is pari passu so you get your pro rata share of the economics which is nice since the next real liquidity event is unknown.
You may have heard the saying by now: if you’ve seen one family office, you’ve seen one.
There are no rules. What will usually get you communicating on the same plane with a family office is that you explain to them what’s typical for your peers. In your case, someone at your level with appropriate adjustments for whatever . . e.g. if they have a better lifestyle then you adjust as appropriate.
Take a common sense approach over a formulaic one because there really is no formula. They’ll probably appreciate you defending your ask with logic (“I could get X at several PE shops, this work is similar, but you guys are giving me a preferable mandate [or whatever they’re giving you that you appreciate] so I can take a lesser carry and happy to work with you to figure out what makes sense”).
Just started at my new role so still learning, but I am almost certain that my fund does not offer carry at any level; I know that I do not have it as a junior. Carry/coinvestments have been relatively sensitive topics thus far (due to obvious funding reasons). However, my office has a good culture with a focus on employee retention, so I am curious to see how compensation shakes out over time.
Is your comp in line with market? They may compensate for carry with cash instead. Some of these family offices with very long hold periods will either just do cash comp, or do some "phantom" carry model where they mark performance internally and pay based on that, rather than doing a dividend recap just to pay their own employees.
If you like the culture and investments, I wouldn't fret over carry right now. Get some experience and if a few years down the line the comp is seriously under market for you, it's not hard to lateral.
Appreciate the advice and yes, I agree. Culture has been great so far and enjoy the space/investments, so no reason to look elsewhere. From what I've heard, cash bonuses are their substitute.
To my knowledge, my comp is relatively in-line with market for the role, geography, and AUM. I have a unique (based on recruiter feedback) structured bonus model based on acquisitions, plus potential discretionary cash bonuses.
Curious what your cash comp was, if you don’t mind disclosing
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