Is it common to wait for new fund to receive carry?
Partners have indicated that I will be entitled to carry with next fund which will have a new management company to manage the fund and receive carry. Current fund invested for c. 50%. Expect that we will invest remaining 50% in next 1.5-2.0 years and raise next fund in the meantime. This will however mean that I'll be working on portfolio companies acquired with the current fund for another 5-7 years, while I have 0 carry incentive. Is that common?
Differs from fund to fund and depends on your seniority/title. I know certain funds in LA that do not hand out carry until the VP level.
I'm entitled to carry in 1 year from now, but the partners says they don't want to break up the current structure then and that I have to wait for the new fund that will be raised in 1.5-2.0 years from now.
For new fund I'll receive carried interst, but that means that I'll be working on new investements for which I'm not incentivised for the foresable future (5+ years) first. New fund will be invested in 2-5 years from now... When I started I assumed I would be sharing in carry on all capital employed after 1 year.
Are you VP or above? If so, they should at least offer you carry on the amount of capital deployed while you're there.
So how would that work for existing fund? They sell part of their stake in management company to me? Or give it to me for 0?
They would dilute everyone pro-rata for your portion of the carry entity if they were to offer you retroactive carry. It also depends on their carry structure, whether it's on a deal-by-deal with catch-up at the end, or if carry is paid out at the very end. It can vary significantly between firms and funds
Varies a ton fund to fund. Just spent a lot of time diving it it with my lawyers on how to structure it for some employees we have. Please keep in mind breaking off what's done as standard practice can incur huge legal fees for your employer.
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