Maximize cash comp vs. more stable platform?
(Ignore title - associate in PE).
Curious to hear how others would think about this. Fortunate to be in a position between choosing between two buyside offers (same sector coverage etc.), and would love to hear how would you think about the two firms:
Firm A: MM fund that has been around for some time and is in the market for a c. 1-1.5bn raise. Previous raises were not always super successful and targets not met. Returns have apparently also been a bit all over the place - BUT the new fund has a clearer defined strategy. Promotion path in the short term is clear (VP/Principal in 1 year), but very uncertain above VP. Cash comp is 20% higher than Firm B, and a significant bump expected at VP. 100% bonus target, and carry possible at sr associate (certainly at VP).
Firm B: UMM fund that has also been around for some time with multiple strategies / funds. Targeting 2bn raise for this particular strategy. Firm has a strong reputation within the industry and delivered strong returns. Overall firm AUM is c. 5x Firm A, and promotion path is more linear / clear with room to grow (partner achievable in 8 years). Cash comp is c. 20% lower than firm A, and promotion to VP/Principal longer (c. 2 years), with carry only at VP. Bonus target 80-100%. However, Firm B is arguably more stable, better brand and more avenues to grow.
If you had to pick, which one and why? Generally speaking, how do you think about risk and maximising comp early in career vs. picking a more established platform? Assume culture at both places is good.
Thanks!
I'm particularly risk-averse in this stage of my life so I'm going firm B all day. More AUM, bigger fund size, better brand name, longevity/consistency in the market, path to partner. Typing it out, I honestly see zero reason to pick firm A unless the people there are amazing and the people at B are total assholes. A couple of extra bucks in the first few years is nothing in the long run of your career and life.
I assume based on your background you are looking for a career-track spot - the type of place you have a shot at being partner and stacking carry across multiple fund. Sounds like Firm B on the surface checks way more boxes. Cash comp is a nice lifestyle boost, but people in this industry make big bucks through carry.
Would also suggest you think about headcount and path to partner as well. Does Firm B have a bunch of really young VPs that will all be vying for a principal spot on your timeline? If everyone above you hits their promotion timeline, what does that look like for you post-VP? Sounds like Firm A has more space in between the VP and Partner ranks - is there a track record of Principals being promoted up?
Thanks for this - that's exactly right. I want to stick at a place now and try to make partner, and stack carry across multiple funds. As you say, the cash comp is less important - I feel I am indexing heavily on it though as I have a family to support as well.
You are correct that firm B has a higher headcount and quite a few junior people vying to move up - however, in the particular fund/strategy I would be joining, this is less so the case (raising the second fund, headcount remains low, team is fairly lean and dispersed geographically) - compared to the flagship strategy which is raising 5bn+ funds and has far more bloat at the mid-level.
Firm A theoretically has more space, but historically it looks very difficult to make partner - an MD left after over 15 years there for example. I think this is a function of the economics being controlled largely by the founder/CEO and so functioning almost like a family office.
Another good point to firm B I feel is the fact that you get exposure to carry outside your fund/strategy; a portion of your carry is "house" carry which is from a blended pool of all other funds firmwide (i think most large players do this). I think this is great for risk, and also means that any exit globally should see you getting a dividend - but curious to hear what others think.
Firm B is a slam dunk on a relative basis IMO
Go with B, especially with what you said about relatively clear path in your sub-fund/strategy (less bloat). Easier to move downstream if needed in ~2-5yrs and like others mentioned, the outsized pay in PE comes from carry over time, so think of the 20% cash comp discount you're taking as an insurance policy by being at a stronger fund with better brand AND as an investment that is likely to pay off in ~5-10yrs (even when discounted back with a high WACC :-)
Good luck and congrats!
Patrick
Wow the man himself - thank you for the advice Patrick! I fully agree with your (and everyone else's) sentiment here. Thank you!
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