Is this MF PE Partner Carry Estimate Reasonable?
Here's an estimate I have for the "average" megafund partner carry. It is reasonable? If not, where did I go wrong?
($10 billion fund)(2x ROIC)(20%) = $2 billion profit for firm
($2 billion)(60% for general partners) = $1.2 billion for general partners
($1.2 billion) / (30 general partners) = $40,000,000 per GP
I recommend you graduate high school first.
You're a sophomore in HS though so you might want to practice what you preach
You're forgetting the amount that must be paid in reparations to blacks.
Just remember these numbers are per fund, not annual. Easy to look at this and think that PE guys are making $40m/a year, but if the life of the fund is ~7 years that number becomes ~5M which is a lot more inline with other finance jobs (like a big IB MD).
Partners have carry in multiple funds and also get A fat paycheck
You should read about carry dollars at work which is a more accurate representation of multiple funds paying out.
estimate derived where?
You are missing Dyal / Petershill / public markets investors for a 10b fund who need to be fed as well.
Also 30 general partners is extremely high for a 10b fund. Take a look at staffing for CD & R.
Carry isn't split evenly among partners. Managing partner / founders / IC chair likely has as much as 10x the amount of carry a regular partner has.
https://www.heidrick.com/Knowledge-Center/Publication/North-American-Pr…
I don't think most 10bn funds have 30 partners. More like 10 - 15. So they're likely getting more. I just googled LGP and Vista as two random PE funds who over 10bn in their current funds and LGP has 12 partners and Vista has 3 SMDs and 7 MDs in their flagship fund (obviously Robert Smith and Brian Sheth are getting a big piece).
Also you're assuming there's a GP catch-up after the 7-8% hurdle is achieved. There may be funds where GPs only receive 20% of profits after the hurdle is achieved. To be clear this isn't customary, but I believe it's trend that's catching on.
LGP has two different types of funds - the smaller of the two (still a $5bn fund) is called Jade (focused on smaller deals) and is managed by 3-4 separate partners. Flagship was close to $10bn.
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