As it says in the title, how common is it to get carry at the VP level on the credit side of a PE fund? I've been talking to a few recruiters and it seems to be a bit all over the place - surprisingly more notable firms haven't offered it while smaller ones have. Curious if it's moreso because I'm looking on the credit side rather than the PE side or if it's just generally all over the map as a VP.
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VP1 here with 10bps of carry (on top of co-invest loan allocation across all funds). Not much but better than nothing.
Relatively common to get a small portion of carry. Of the large credit funds that do not offer "carry" (ex. HPS or Fortress), they will pay you the equivalent of the carry you would expect to receive (based on a normal vesting schedule) as an addition to your cash bonus.
Got it. I've been talking to one that is not offering carry. Is there a good way to figure out the equivalent when negotiating comp? Or is there any flexibility to push for it? It's a somewhat known name so I was a bit surprised when they said it's not on offer. I'm just not really sure how to account for that when evaluating an offer.
So do HPS typically underpay at the VP level given they don't give carry?
No. As I noted they essentially just pay whatever your carry would be at another fund per vesting schedule in cash.
The way it was explained to me was that 10bps of carry on $10bn AUM fund (assuming 15% carry over a 6% hurdle) was worth $100-125k, vesting over eight years.
No idea if that's accurate or market.
$100-125k DAW, vested over eight years? As in $13-16k vested per annum? That seems extremely low. I’ve heard of hairier DL shops where VPs are given carry across multiple funds getting $1mm of carry allocated
Yep. Guess I’m low on carry haha. I’d note that we get additional freebie coinvest loans on top of this, which is probably worth another 120k
Can share that for a VP1 it's around 50bps standard carry - the carry pool is roughly ~0.75% of AUM. So on a $10B AUM fund, annual carry could be ~375k range, vesting over 3 years (vesting varies across shops, but def haven't seen anything in DL longer than 5 years).I've seen VPs grow their carry to 100bps or more over time depending on the relationship they have with Partners and how much of a role they play in each fund (if there are multiple pockets of capital they're investing out of). Every fund has different economics. As far as I know, Partners are allocated a certain amount of carry (500-750 bps, for example), that they can allocate to their VPs. But idk, it doesn't feel like it's that standardized overall.Having said that, some shops (ie Ares) don't even give out carry to VPs anymore - they just make up for it with higher total comp. There are benefits and drawbacks to each. Personally, I think the carry model does a good job of aligning incentives. My sense is that shops that focus on the carry aspect of comp are more long-term minded, versus origination machines that pay purely on production.
Interesting. So when negotiating comp, in the above example, would you tack on ~$375k/yr to the comp offered by a firm not giving carry to try and make it apples to apples? (ex. you'd want $625k/yr in cash comp at a firm that did not offer carry to equal let's say $250k cash and 50bps of carry?)
Do credit funds even charge carry if the underlying income is ordinary income/dividends and not capital gains?
Do you get carry or co invest in any fund of choice? Or just the credit funds? I heard you get to choose any fund to invest at BX (not sure about co invest). And also heard some capital markets folks that exited from PC get to choose what funds they get carry on.
Curious about the same. Would be pretty clutch if you could invest in like special sits as like a senior credit analyst.
Carry is tied to the strategy you are working for (in Credit it is usually spread over more funds vs PE as you tend to have multiple pockets of capital). For co-invest, it is true that at some of the diversified MFs you can indeed allocate capital across strategies.
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