Nobody principal and below has made any money in this industry
If you look at funds above 1.5bn, PE only, US/Europe only, DPI >0.4x, and IRR >12% (because if your DPI and IRR are below that then you likely won’t distribute carry even in American waterfalls to avoid clawbacks later but this can vary). and look at funds raised from 2018 to today.
It narrows the list to maybe 30 funds across maybe 20-25 firms. Unless you joined one of those you made no cash carry.
Secondly even if you joined those only 10 have DPI above 1x and not a single fund has 2x DPI which is what you need to get the carry you’re quoted. Don’t get me wrong some funds are marked at 2,3, even 4x but nobody has actually distributed the cash in the pocket.
This ignores any mandatory co invest etc.
Has anyone here who got carry in a fund 2018 or later and is a vp/principal today gotten actual sizable distributions ?
You are playing a long game. You have to be lucky from vintage and performance standpoint to get big distributions in the first seven years. If you believe in the firm’s strategy, put your head down and write a post in ‘30 about your new carry funded beach house. If you don’t, go do something you believe in. Either way, nobody is empathetic to you complaining about not recieving your carry yet
Yeah not sure why anyone would expect a ton of carry already. The investment period on those funds just ended not too long ago...
If you extend it to 2014 only 8 funds have a DPI of 2x or higher out of ~500
So only 8 funds would have distributed the promised amount to people. Everyone else would have received a significant discount to what they were promised (which is achieved at 2x DPI)
Most people received 10-40 cents on the dollar or nothing. Imagine waiting 11 years to get 40 cents on the dollars
Totally. I’d argue 2030 is not the long game. You have to look through vintages across a 10-20 year career.
OP would have made the same post in 2010 about all the principals etc who were in the 2005-2007 era funds. Where are those people now? They’re swimming the breast stroke in a swimming pool full of cash.
If you were a Principal at Apollo or Warburg or whatever else in 2009, your carry was worthless. Even once those vintages fully recovered, was very mediocre. But those Principals were promoted to partner 3-5 years after GFC and have now been clipping partner-level carry checks for over a decade.
This is the real point. People joining PE now will have to wait 10-15 years to get significant carry allocated to them, and then another 5-10 to actually realize it, while also achieving more carry in the meantime. Sure firms aren't raising funds nearly as fast as they used to, but in 5-15 years? Maybe
Im in a fund from around that time and still in the hole on coinvest. When they give you the carry number NPV it for 10 years and the number is way less impressive
Exactly I think kids don’t realize it’s a 10 (or longer) NPV. Look at pitch book funds from 2014 have barely hit 1x DPI
Datapoint of 1, but yes. My fund is from within that window and been receiving sporadic carry checks for last 4 years.
For an American waterfall (i.e., not European), the GP can pay carry at their discretion when investments are exited / carry is realized (while indeed giving credence to clawback risk but typically examining the portfolio marks as a whole in their consideration).
Yea that’s why I tried to metricize it. It’s not likely that a fund under .4x DPI and 12% IRR is giving out American waterfall distributions or any distributions. Are you guys an exception to what I described ?
I received carry when the fund was below these thresholds, but again, it was at our partners' discretion to pay versus hold back.
I'll agree with your generalization / filtering.
I received a couple sizeable carry payouts in the hubbub of 2021 and early 2022 as we had some v successful exits... been little spurts here and there since. I doubt I get payouts that big for a long time as tech (esp software) has moderated a lot.
How sizable are the ones from 2021 if you don't mind sharing? Are we thinking about 7 digits?
Not 7 figures, chunky 6 figures. I’ve heard of vp and principals receiving 7 figure carry payouts but it’s exceedingly rare (ie thoma flipping Ellie Mae).
I feel like this is why so many PE fresh VPs left for product and ops at stripe a few years ago.
Stripe was handing out BAGS, my old coworker who was a VP at a BB got $1mm TC with stock included and…got laid off a couple of months ago.
They’re culling that group of hirings now, unfortunately.
Mid-level here. Agree, havent made any real money yet. The benefit of PE is (i) sticking it out long term or (ii) if you leave, you have arguably the best "business skillsets" anyone could possibly accumulate. You are an Apex predator. You are likely more useful than a banker, lawyer, hedge fund manager if you want to lateral or start a business. PE gives you a mix of all relevant business skills, and does so in a pressurized, accountable environment. That's what sold me.
It doesn't, unfortunately. Owning a business and running a business are two different sports.
Sports that LMM PE is increasingly playing to get the returns needed. Agree, to a limit. Nothing will perfectly prepare you, but PE is pretty good overall.
No mid-level PE fool is an “APEX Predator” lmao that’s so hardo
I think he meant Sphincter predator. Why do you think those PE associates be walking so gingerly coming out of their Principle’s office late at night?
A little over the top, but he’s not wrong. I went from PE to corp dev to business unit CFO of a public company in 3.5 years. And honestly I’m a little salty it didn’t happen faster. People in corporate aren’t trained to think the same way or to be as outcomes oriented as PE guys are. They also bluntly don’t have the same ability to present well in front of seniors. PE guys also run laps around ex bankers and ex MBB when it comes to execution skills and second order thinking on strategy and analysis (mbb and ib are not complex project management with multiple work streams and parties jobs). When you go to corporate, you should stay ambitious because you’re def in the running to be a top performer / future leader with the background you bring to the table if you’re willing to learn the nuances of a corporate environment (ie: you have to be likable and can’t be a ruthless dickhead) and put in the effort to actually network internally and build relationships. PE background + some amount of EQ + some amount of charisma + being an empathetic people leader who is good at teaching others and bringing them along for the ride = fast track.
Are you open to PM'ing me about your transition to CFO (or sharing on this thread)? I've become more interested in that path lately.
The only part here you’re missing is, so many people in PE lack EQ and “charisma”. I meet way more personality duds on the buyside than I do bankers… but yeah I get your point, PE guys on average are sharper
thats public company, if you work in private especially pre-series C everyone is equally or not better than ex-PE guys, you think the MIT/Stanford/Princeton undergrad kid doesn't have the same skill sets? they do, and 100% more technical so they actually innovate.
Apex predator? Lmao
Hey Apex Predator,
Care to shed a little bit more light on this skillset you’re referencing?
Modelling? Decks? Attention to detail? People in PE are project management pyschos so I’m not quite following your logic.
Apex Predator here...
Private equity midlevel's aren't special because they make nice slides and understand capital structures – they're valuable because they see the full business cycle, actually drive results, and are accountable for the whole thing along the way.
While consultants and bankers theorize, PE professionals do. They identify value, implement fixes, and scale businesses that actually make money. They often have to step in on important day-to-day decisions. They often have to go deep in very different domains (legal vs. market mapping vs. GAAP minutea vs. compensation negotiations) with time pressure and high stakes. The skillset transfers because it's broad, practical business building, with pressure, not just academic finance.
But sure, good job nitpicking my hyperbolic metaphor instead of engaging with the actual point at hand. A point that stands - other than entrepreneurship itself, there is no better training ground than PE..
Look, the last 10 years were the absolute bullrun of bull runs in PE. Simple as. And even in that environment, as you rightly point out, few people are making significant carry until 15 years down the line.
Now enter 2025. PE funds are raising every 5-6 years instead of every 1-2 years like the last 10 years, fund performance has gone down substantially, competition has gone up significantly and returns are coming down every single day. This situation is only getting worse, not better. The smartest guys in this game already know this, read “sea change” by marks or any of the recent investor presentations by Marc Rowan at Apollo.
Most mid levels underwrote their PE career to having carry in multiple funds, returning 2x+ across 10 years. That just isn’t (anywhere near) the reality anymore. It’s even worse in Europe where most funds have a euro waterfall and require 1x+8% preferred before seeing a $ of carry. I reckon fewer than 3 funds will meet that in the foreseeable future.
People find it hard to accept this because they workedtheir ass off during Associate years and don’t want to accept the truth, classic sunk cost fallacy. Your expected returns from a PE career are 20-30% of what they were even 7-8 years ago. And the grind is harder - with fewer fundraises this means fewer partner spots, simple math.
Now if you’re in PE because it’s well paid and you enjoy it then that’s all good but don’t turn away from the reality because it suits your narrative.
PE people diligence the f out of every business till 3am but when it comes to the business itself they look the other way when the commercial diligence and regulatory diligence come back negative
Damn, shots fired with the last sentence there but spitting facts
So where do we go from here
The reality is you can understand if a deal is good or not on the back of a cocktail napkin. And anyone with some experience and common sense should be able to tell you what the right profit margin is for a given business.
The super detailed DD work is to make sure you’re not missing something, not to discover some hidden value gem.
the big alure is i) stability (esp compared to startup / HF world) ii) prestige for those who seek external validation (i mean we all seek this to some extent) and iii) ability to earn a good living and definitely more than majority of the population.
thats my view at least. ppl dont go into PE to realize big dreams or personal aspirations. it's all the same stuff. reading CIMs on repeat until retirement and back solving a model to 3x MOIC
banking is most def not, how many layoffs in banking have there been vs PE firms in the last 2 years? IB hires based on whether they have clients which is very volatile while PE firms lock up capital for years to come. I definitely dont agree there
In terms of prestige ofc its all relative to one's industry. thats the point. no one if fashion or medicine or engineering (pick your industry outside of finance) will really get it and vice versa
most ppl dont see the carry promised bc the industry is most definitely not what it used to be
After accounting for living in a very high COL city and the taxes that come with that, it’s hard to make real money in normal PE.
I don’t think returns are going to be what they were going fwd. Simply TONS of competition driving down returns.
Even making $1m a year in cash if you’re in NYC is really not much after you account for taxes and insane cost of living…
Different if you are least getting taxed on carry of course but even high base pay and you’re kinda fucked lol.
Don’t get me wrong…$1m is a lot of money but realistically if you have 2 kids and are in a HCOL city…it is literally like making $300k in LCOL.
Except you have to work like 10x more lol
if you don't make partner, do you get kicked out? How many on-partners make 1mm+ and why - you are not sourcing, its mostly bank CIMs. And the principal can run DD so why pay an older guy 1mm
All true. It just depends on what you want to solve for -
PE will give you a solid 'lower-upper' middle class life - a decent ~$2-3M main house, ~$1M vacation house, two kids - assuming your spouse also works. You'll put away a decent chunk of money so that after ~10-years as a VP / principal you CAN walk away and take a more lifestyle oriented job if you choose to do so.
Highly unlikely to seriously accumulate more than ~$10-20M within a reasonable time-frame and far from guaranteed.
So yeah - if your reference point is "I want to be RICH" (UHNW) - this is increasingly unlikely to get you there. If your reference point is more or less any other W-2 job, it's not bad. What it comes down to is if you fundamnetally like the job and the people you work with.
No way that's the definition of "lower-upper" middle class life.
$2-3 million main house is what teachers/firefighters have in the suburbs with all the home appreciation. in NY anyone who bought a house in manhattan or brooklyn in the 80s have $5 million or higher houses despite working middle class jobs. would actually call that solid middle class in NY or SF
Connor: You can't do anything with five, Greg. Five's a nightmare.
Greg: Is it?
Connor: Oh, yeah. Can't retire. Not worth it to work. Oh, yes, five will drive you un poco loco, my fine feathered friend.
Tom: The poorest rich person in America. The world's tallest dwarf.
999.747 is considered top 1% salary in NY. How is that middle class. You are delusional if you think that doesn’t give you an upper middle class to upper class lifestyle
What if you just want an upper-class lifestyle, $1-2M house, two kids, and no second home? Honestly some of this spending is excessive. I don't see how anyone can justify a vacation home unless they're a partner. If you turn 40 and take your money, and move anywhere outside of NYC and the Bay Area you'll be upper class.
If you have 2 kids and 2 mortgages on $4m of homes, you cannot walk away, your expenses are too high.
The amount of delusion in this thread is unprecedented.
Based on the numbers I’ve seen on WSO a mid-level PE professional is usually making minimum $400-$550k+ cash comp per year… tuck a good chunk of that away and with compounding you’re retiring very comfortably. Sure, you may not be worth $10-$20m but you’re making a fuck ton more than the average American doing what I’m sure most of you find to be an interesting fulfilling job. Now if you’re stressed up to your eyeballs and working like crazy… yeah maybe the lower odds of getting that multi-million dollar carry check probably stings a little more… but none of you are poor by any means…..
I think it all depends on your expectations and ambitions.
On one hand you will be working a lot and taking career risk on investments as you move up to partner, and you will never make as much as the founders / managing partners.. but may work more than them as you grind your way up.
On the other hand, you didn't take the entrepreneurial risks that the founders did to get to where they are, so you don't deserve the level of rewards that they have. Ending up at $50M in NW after 25 years in PE is not a bad outcome for not taking startup risk and always having a steady salary. Just don't get mad when the founders / senior partners are buying sports teams with their next level wealth...
Comparison is the thief of joy my brother
Honestly, banking seems amazing looking back. Easier job and progression, no PPT after Associate years and all relationship based plus stock vests quickly.
Can't help but wonder if we'll see a mass exodus over the next 5-10 years of talent from UMM/MFs once the VP/Principals of this cycle get fat 0s for the carry checks they've slaved away for.
Exodus to what?
Maybe exxoduspoint
Had a longer post typed out but didn’t want to risk it. This is already happening at funds. It’s hard to tell because there’s always some lateral willing to come join the “brand name” PE firm. I’ve had some candid chats with other mid-levels as I’m going to start a business.. I expect many to leave soon given outlook on carry pay out; why wait 5-10 more years to see if you’re wrong about low / no carry estimate? You already know the IC won’t change next fund. The top talent was the first to leave, mix of entrepreneurial pursuits and poached (excluding myself from this statement). Top senior associates politely side-stepped VP offers to pursue other roles. Think LMM or MF is the move. Tough for many in UMM/MM. Great experience but just like IRR, I can’t eat it.
Agree on this front. Top talent is doing a lot of the following:
1) the less risk averse and hungriest are taking risk to get the biscuit — starting businesses or going to startup world
2) among the people who always thought they’d be a normal rich finance guy, they are starting to lose confidence in the big firms as the best deal out there in terms of comp / wlb — if PE is a slog until your 40s now, for less money, that is a different offer than when we did IB interviews with the dream in mind. So a lot of them are just doing other things on the buy side that are a better deal rn
We’ve seen this and a ton of vps got let go last year. Before that, a bunch saw the math on the wall and left for places like stripe.
The zeitgeist keeps rolling tho
The carried interest was the friends we made along the way
The carry monkeys weep at this realization lmao
Yeah, $1M/year in NYC is basically poverty wages, equivalent to $20k in Dallas. That's why the food banks in Manhattan are constantly overrun by hedge fund managers in Armani suits, just weeping because they could only afford the domestic caviar.
PE is more about stability than hockey stick growth in net worth (lower risk and lower reward for sure when compared to going down the HF / founder route)
Except it is not stable and a ton of firms are laying off a big chunk of their investment team.
which ones?
del
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