Let’s keep this short and to the point: is the grass really greener on the other side? “Greener” purely from a comp perspective. There are a lot of posts about work life balance, but no real details into how much comp can fluctuate between the different funds. I have a few friends that have moved but it seems they all talk about moving at a discount, reinvesting their bonus in the fund, and then getting the carry back which is supposedly quite high. But how big can this actually be? It is not clear how significant the carry becomes (from Associate level) and after how long you can cash in.
Is it that much more than you would get in an IB (assuming an 80-100% bonus every year)?
PS: I know this is also very fund dependent, but keen to understand the ranges, especially as it comes to large cap vs mid cap vs small cap
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Some large-cap US funds are paying $330k (first year Assoc) to $550k (third year Assoc) after 2 years of banking. This is cash comp (fixed + bonus) and excludes things like carry or co-invest.
which fund is paying Associates 550k? that would imply a jump of 200k in 3 years
Some US Megafunds are. Mind you it's in USD. Can't share the name of my fund for obvious reasons, but think SLP, Apollo, Thoma, H&F, WP.
Anecdotally I don't think other US funds like BX, KKR, Bain... or European funds like CVC, EQT... pay at these levels, so it's definitely not market standard.
No body thinks about bonus as a % of base other than 1st year analysts and corporate bureaucrats.
Your base salary could be between $150-350k but bonus may be $500-1,000+… so bonus as a % of base kind of silly metric.
My crude framing of IB vs PE comp is that in IB a standout senior banker will make $2m+, vs in PE that’s standard fare for a senior investment professional (and much more steady). The cash comp is probably comparable, slight premium in PE. The big delta is the carry, which ends up being the largest component of your comp over time … that component on the IB side is zero.
So imagine you’re a banker making $1-2m+ a year living off that and a saving some part of it. So 2m total comp, 1m after tax. save 500k.
Or you’re in PE making $1.5-2.5m a year. 750-1250 after tax. Saving 500-750 a year. Then you have your carry adding an additional (tax-advantaged) $1-3m+ a year to your networth.
Thats why your run of the mill PE partner retires with a $25-50m+ net worth vs run of the mill banker lives not unlike any high earning professional (eg well paid Dr).
The outcomes become very different at the tails. If you’re a top top banker, you could be pulling 5-10m+ a year. Sure a big chunk is in stock, but it’s still real money.
Slightly misleading as the carry is drought for years and then suddenly all the money comes in. It’s way less steady than just cash bonuses and kind of frustrating until you’ve had your first material cheque
1-3m a year?? For what level of seniority? What fund size? What bps carry allocation? Share of total carry pool vs deal by deal? Maybe for MDs at sizeable, solid performing funds but even then 3m is definitely an optimistic upper bound. Curious to hear about your thought process.
Misleading for a number of reasons 1) carry isn’t guaranteed. It’s not unheard of for someone to slave away for 5-7 years and get a doughnut if the fund doesn’t meet the hurdle rate (8% - let’s see what happens as interest rates stay high and there’s a record amount of PE competition), so you need to discount carry. 2) it’s likely harder to get into PE and rise to the top than make MD in banking (both are hard). So you can’t compare the average MD and average MF partner (a <$1 billion fund will have way worse number than this).
Also worth mentioning is that the time frame is likely to differ significantly. You can make MD in 10 years or so, but I am yet to see a PE partner who is in his early 30s.
Judging from many of the responses, most of you don’t have to worry about either of the above scenarios. Don’t worry the world needs FP&A managers at regional furniture distributors.
Yeah, no shit it depends on if you’re good at your job and if your firm is good at what they do. That’s some real intellectual horsepower you’re putting to work with those deductions.
Classic arrogant PE professional, shitting on FP&A while you’ve been riding 0% interest rates thinking you’re a genius. Let’s see what happens when you need a new job because PE fund sizes are declining and dumb luck disappears in this new high rate environment.
Outcome different at the tails? Yes but no. Yeah top bankers get paid real well, but similarly long-tailed guys in PE are getting exponentially more too.
I sure don't have any hard data to back this up, but I don't know of any investment bankers who made it to $100M+ in the bank just from their investment banking careers, let alone to $1B+. Only way to get there as an investment banker is to leave investment banking. Very different story in the PE world.
Wow - seems to be a couple of small egos fighting with eachother here!
MF - £160k base, 50% contractual bonus (£80k), $225k carry and $25k stock options.
Carry vest over 5 years, and each year you get a top up (likely 1.5-2.0x last year's amount, based on performance). All vested carry is expected to be paid out in 5-6yrs from now (assuming we hit our hurdle obv)
What level?
Associate 2
Sorry if I misunderstand it but does the 5-year vesting mean that each year you're gonna receive $225k / 5 = $45k?
Yes, on the original piece, but you get topups each year, which increase based on performance (being conservative with 1.5x per year)
So as illustration (rounding for ease): year 1 = $225k / year 2 = $340k / year 3 = $500k / year 4 = $750k / year 5 = $1,100k
Assuming you hit the hurdle MOIC and the carry is paid out in year 6, which is my team's assumption and is 5 years after you get your first carry allocation (this would be by the time you are VP). The pay-out looks like the below:
Year 1 carry - will be fully vested: $225k
Year 2 carry - will have 4 vested years: $272k
Year 3 carry - will have 3 vested years: $300k
Year 4 carry - will have 2 vested years: $300k
Year 5 carry - will have 1 vested year: $220k
Total payout by end of year 6 of $1,317k
(You'd expect to be paid out every 2/3years, assuming you raise a new fund every 2/3 years)
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ASO 2 at UMM fund, >$5bn AuM:
Base GBP 115k + 100-120% Bonus + Carry
How much carry?
Aso 2 in UMM fund, £145 k base, 50-150% bonus, c. $1mn carry allocation vesting equally over 10 years
Pretty bizarre bonus gap. What’s the distribution and average?
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