Investment Manager 100m Fund Comp - Seeking Opinions
Here’s the situation, my previous MD is looking to start a 100m. He has all the connections, operating partners, and already have real commits from various investors.
He’s more of a relationship guy so he called me up and I’ve been helping him with all the grunt work, for free as of now. So basically all the structuring, term sheets, decks etc.
Fee structure for the fund is 1% management fee, and 20% carry with a hurdle. 1+5 year fund, we hope to return 2x moic to the investors.
Now things are moving forward, and we are starting to get set up the structure and getting the lawyers involved to paper everything.
Now comes the compensation question. How much economics should I ask for with this situation? Was thinking perhaps 1/3 of the carry and a 150k base. Not too sure if this is too high or low here.
We are envisioning to run this super lean with low over heads, maybe just an accounting personnel.
Based on the most helpful WSO content, here are some insights and considerations for your compensation in this scenario:
Compensation Structure:
Base Salary:
Carry Participation:
Key Considerations:
Fund Size and Performance:
Lean Operations:
Example Calculation:
Carry Pool:
Annualized Carry:
Final Thoughts:
Negotiation:
Market Comparisons:
By structuring your compensation with a solid base and a significant portion of the carry, you align your incentives with the fund's performance, which is crucial for both you and the investors.
Sources: What is your compensation in Real Estate Finance?, What is your compensation in Real Estate Finance?, Do you think it's justifiable to ask for 25% of the GP for being the fund raiser for the projects?, Data: Average Private Equity Compensation and Carry from Associate to Managing Partner, Carry in REPE
No chance is he giving up 1/3 of the carry to an analyst/associate level even if it is a tiny fund and you're the first employee. Maybe you can make a case for 10%, but I know 50+ recent grads with 2 years IB experience that would do it for no carry.
Op here, Ignore my title but I’ll be VP level at my current shop, and of course jumping would prob ask for a title bump. The investment team will be literally 2 people, me and him. So I carry is definitely not out of the question.
1% mgmt fee seems quite low for a 100M fund, no?
Planning to do this with low overheads and investors are all close clients from the chairman so will probably make it work. Probably just have a shared office and maybe an accounts person I reckon.
IMO, you should be pushing for the title Partner and Partner compensation, because effectively you will be joining as one.
Yeah that’s hopefully the plan! Nice title bump but with some added risk.
Lol you aren't a partner unless you're supporting yourself/not taking a salary and putting up equity. You don't have the work experience to expect partner.
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