Pay at super tiny PE?
Does anyone knows how the pay looks like for a fresh grad at a firm like this: 30MM PE funds which has 3 partners and each contributes 10MM? They are quite conservative in term of leverage and they target at 10-15% IRR only. Only one partner is actively managing money, source deals and execute deals. There is one senior Associate and that's all.
Thanks
Doubt anyone here will be able to tell you and even if they did work at a similarly sized shop, pay is probably highly variable.
If I read this correctly, as in this is a wholly employee owned fund with no outside money and three partners each kicking in $10MM: Do the math bro -- the partners make 1-1.5mm each, BEFORE overhead. Overhead and legal can probably chop off at least another $150k each, and then on top of that, they need to make a decent return on their own investment (which seems unlikely at those levels). I'd be surprised if they pay you $100k all in.
That's quite disappointed :( I am from a non-target and I have not succeed at SA recruitment for IB. I didnt think I would have a shot at FT recruitment and thought about switching to accounting, and this opportunity just came up a couple of days ago.
I worked for them from February to April (unpaid internship) and I have maintained a very good relationship with the partner. He called me and asked me if I would be interested in this position and he hinted that base is mid 50k plus bonus at year end. I expected all-in would be 100k but apparently it is not likely hey?
I interned at something similar (~500 mm in dry powder) as an intern. This is going to work 2 fold.
1) How nascent are they? If they have not monetized many any) investments yet, I wouldn't expect more than 50-60 base, 5 - 10 bonus if you're lucky.
2) If they have been around for 5+ years, they are going to start monetizing few of their original investments (if they haven't already), you can expect bonus from 5 - 20 now. Variable range but once again not much.
If this is regional, they can get away with paying you less.
If you have to think about this in terms of performance and fees.
300 mm AUM, 2/20 structure (unlikely at small firms, lower fees usually). Let's assume 15% return YoY (this is generous).
Management Fee - 6 mm Performance - 9 mm (it actually is lower, it depends on the invested capital not the total AUM but I don't have numbers for that).
15 mm Rev.
60% payout for payroll/bonus
Thats 9 mill to bankroll all the employees.
I am not sure about your treatment of performance fees here. They are treated strictly as carried interests so it is completely apart from base compensation/bonus. If the fund does poorly it will pay out no carried interests but it still needs to pay employee salaries. Also carried interests is only paid out after the firm cashes out of an investment/fund winds down, which only happen at least a few years down the road meanwhile employees still need to get paid monthly/yearly.
So management fee is the only interesting part as far as base compensation goes. For a $300mm fund at 2% management fees you get 6mm/year to spend on offices, business expenses and payroll/bonus. Assuming each associate makes 120k/year base, that is only 2% of its total management fees which seems very reasonable. On the other hand, if the fund only manages $30mm then its management fee is a meager $600k/year. Even if there are only 2 associates (including the OP) they still won't get paid anywhere close to 120k. 50k-60k does sounds more reasonable in that case and that is probably all in comp.
Lifestyle wise, yes the hours are probably much better than at larger funds but the downside is that, even disregarding differences in compensations, you just don't get to see nearly as much deal flow which does not reflect well on your resume or help with career advancement. Furthermore, there is also the very real chance that a fund that small may have trouble surviving in the long run. Given the current fundraising environment, a firm that small may never attract institutional interest and may fizzle out after winding down this one $30mm fund.
So in summary I think that a firm like that would be a good entry point to get your foot in the door. Then you can use it as a springboard to reach out to bigger, more established shops, depending on your actual deal flow experience and how well you can spin your story based on that. But you probably won't want to stay too long at this shop (say more than 2-3 years) and you certainly won't want to be left hanging by the time the firm shuts down after it winds down the only $30 mm fund it manages.
Just think economically, as everyone has done above. Even if it was raised with outside money, the fund would only generate $600k a year in revenue, depending upon fund structure. This pays for everything, health plans, rent, travel, any marketing materials, cost of conferences, office assistant, legal work, etc. After that, they still need to pay themselves, I'm sure they're independently wealthy, but they still need to get paid. I think all in comp of $60-65k is generous.
The other side of the coin is that you will get strong, tangible deal experience which you can talk about if you were to lateral to another position. Furthermore, the benefit of this position is significant. At this fund, you will get to work on many aspects of the fund: fundraising, deal execution, deal origination, etc.. After a while, you will make yourself an integral and necessary member of the team. You can leverage this to get some carry in the fund, but that is a few years down the road.
Wish I had a SB to throw your way. OP, if monetary benefit is your top priority, this is probably not the job for you.
But, I think it will position you quite well since you will gain experience throughout the spectrum of responsibilities at PE funds.
Honestly, $50k-$65k here makes sense. While for PE that is really weak, given the AUM, I don't imagine deal flow to be grueling. In fact, it could be a nice job, since you can work decent hours and still be in PE.
As already stated, pay is extremely variable. However, I once was looking for roommates and found an analyst from a small PE shop in NYC and he couldn't meet the minimum salary to rent the place (apparently he made around 40k a year). And this was in NYC! I really couldn't believe it.
60k all-in sounds right
Thanks guy. I went for a coffee with the partner today. We did not talk much about the job and I was afraid to ask him for more about salary and bonus. I am interning at an AM and I will return to school in September, so he said that he would post the job on the school career portal and arrange an interview spot for me. I guess he sensed that I would definitely not take the offer.
Even though the number seems quite low but above posts are totally true. I will for sure learn much more given that I will be involving in most of the tasks at the firm. Moreover, I do not stand a chance for IB FT recruitment and all I can do is a Big4 job which pays only 40k for first year in my city. Unless the AM offers me to come back for FT, I will most likely go for the PE (even though now I have to compete with other kids but I already have more experience than most of my class so I think it will be fine.)
If it's that few people, it's not a structured program and you feel like comp. is the issue you could try to negotiate for phantom equity which some larger funds give their pre-MBA associates. You basically get a % of the carried interest returns without being an equity partner / effectively get paid for what you deliver on the returns side vs. pure work product. Just a thought.
honestly if your recruiting situation is as dire as you make it out to be, this sounds like a great place.
It will be a phenomenol learning opportunity IMO. and the way PE is moving, the era of megafunds on top is coming to an end and smaller firms will be an exciting area.
Can you elaborate this? From what I have been seeing with the current fundraising environment, it seems that the opposite is true. LPs are all crowding to the same few blue chip megafunds while many smaller MM PE firms, even ones who have had decent track record are struggling to get significant allocations.
This issue is becoming very evident now as many PE funds that started in 07/08 to take advantage of market unravelings then have reached the end of their investment periods and now rushing to raise new vehicles.
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