It's unlikely that you'll see any carry payout before age 30. Some firms will only give you carry in the latest fund once you've joined (i.e. you may not get a grant until a year or two in) and in general firms are holding assets longer these days. Add the time it takes to hit the fund hurdle rate -- unless you have an American waterfall which is an edge case -- and it's probably 5-8 years from grant => cash in the bank, assuming the fund even performs well enough. 

 

At 30 I was a first-year Senior Associate at a ~$500mm - $1.5B fund. ~$140K salary, another ~$150K bonus.

Second-year SA, received 0.4% carry. Did a lot of deals with variable bonus, made ~$500K.

 
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Carry vests mostly over 4 years but there is a small tail through 7. 

For coinvest, I have a commitment for each fund which is significant relative to cash comp. I think this is a pretty underdiscussed part of PE generally. That commitment was ~$500-700k for the first fund and ~3x that now (I am now in the next role post VP at my firm). I borrow a portion of that via our fund's coinvest line, but that is ~7-8% paper these days so doesn't feel amazing to do that.

The coinvest is "fee free", but it of course operates on the same timeline as individual fund investments which means ~4-5 years on average (and longer right now). Keep in mind that if you keep progressing at a firm, your coinvest commitment will keep growing. 

Net of all this is that today despite making ~$1m in cash comp, my post-tax / post co-invest take home looks more like someone who makes a lot less than that. On paper have pretty big sums of carry dollars, but it is a common theme among my colleagues to feel cash constrained (and this dynamic is especially challenging right now given the lack of exits). 

 

That $300k per year is just based on 1 fund and the gains are taxed at capital gains tax rate instead of ordinary income, making it the equivalent of a much higher number if it were to come in the form of a bonus. Over the course of 10 years you could get an allocation of carry across 3+ funds, with subsequent allocations increasing very significantly.

When I was 26yo I received what would ultimately be an allocation worth close to $6 million vesting over 7 years, I just didn’t know the fund would perform so well at the time. I left for business school but those who stuck around got additional, larger allocations a few years later when the next fund was raised. The key to PE compensation is not a single fund … it’s the fact that you’re raising funds every 3-5 years — hence deployment pace can have a big impact on compensation.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

You left $6M on the table for an MBA?! Did the MBA help increase your earnings potential much more than $6M?

 

Less than you would make in IB. If you start off as an analyst and make MD in your early 30s, you’re making multiple $mm’s. PE people catch up at ~40 and the comp differential widens 

 

Not really a fair comparison. You’re using an investment banker who gets promoted essentially every 2-3 years:   22yo (Ana) >> 24 (Asc) >> 26 (VP)  >> 28 (D) >> 30 (MD) and is immediately generating significant revenue for the firm to warrant multi-million dollar paychecks. Then you’re comparing this to a run-of-the-mill PE person.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

26 yrs old and still an associate at a MM firm with base comp at ~$300k and carry allocation of ~$800k. Assuming we raise another fund in the next 4 years and I make VP promote, I’ll likely have at least $1-2M on top of that before 30. I try basically think of it as nonexistent and live below my means of my cash comp but it’s nice to dream lol. Definitely don’t say save as much as I used to or should but also not anywhere close to starting a family or kids so I’ve got flexibility. My firm is probably lighter on cash comp for my level but generous carry across the team. 

 

Age 30 varies but let's just assume P1 for simplicity which is a nice career median (so post-promote)

There can be fluctuations but P1 at APO can sometimes be flat with AS4 (SrAs2 at other firms) pay. I think a good range to expect for HVF/PE is roughly 700-900k combined cash/stock. ~75-100k discount in other groups. DAW and points very group dependent 

In general would expect APO to pay 100-200k better at jr/mid-level vs UMM at all levels. But that very delta is effectively in stock so it's not as large as it seems especially if you intend to be a career mover & not able to realize those economics 

 

Congrats! What's the latest fund size, and how many funds do you have carry in?

 

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