Title says it all. Curious how much you guys are investing in your fund and if on deal-by-deal vs fund basis, also if any leverage.
I committed $100k and it’s at the fund level with no leverage.
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Assoc at a $3-5B fund. No coinvest unfortunately
Deal-by-deal basis, $15k check per deal (+$15k leverage), invest in every deal at my end (comes out to ~4-5 deals a year).
What happens if/when you leave? Do they buy you out at cost or NAV?
No you’ll have to wait for exits. Surprised by how much some people put in
What else would you do with your money at that age?
They buy you out at a discount to NAV after a certain time generally
I have fee-free coinvest but no leverage. Haven't invested in a single deal. I dislike illiquidity and the potnetial headache of dealing with it when I leave. Returns I've gotten from being in public markets (almost entirely due to luck) have dwarfed what I'd get even if each deal got top quartile returns.
Second this, If you’re gonna be illiquid you gotta make a fuck ton to justify. Otherwise just go into high moat low leverage growth tech stocks and wait. Much better than a shitco w adjusted EBITDA and almost no real barriers at 2x leverage
I wish I invested significantly less than I did in my associate years. Now looking at buying a home and wish I had more liquidity. I invested a few hundred thousand and it’s probably worth a lot less than if I had just put it in the S&P.
Kind of silly to pay teens EBITDA multiples for random mid-market businesses when you can buy stocks like a Microsoft for the same multiple. Large cap stocks today are incredible businesses and outpacing their returns by enough to warrant the illiquidity is likely to be very rare.
Wouldn’t LPs share this same perspective then?
They have diversification mandates
A few hundred K is a substantial amount for an associate with presumably ~$100-300K saved up at that point. Was that common in your view among friends/colleagues at the associate level?
3-yr program and invested more than average person
Same here. It’s not worth investing as an Associate as liquidity is a lot more important earlier in life. Having K-1s are also a significant pain for tax purposes. Much better to just to ETFs
Ignore title as I have been in PE for 5+ years now.
As junior associate, I thought of co-invest as an easy opportunity to let my bonus compound and also ensure financial discipline as you don’t have access to the investment. As a result, committed ~$450k for the Fund planning that the next four associate bonuses will fund the co-invest. If everything goes well and the fund makes 2.0-2.5x, I would get back >$800k in my early 30s which would quite dramatically change my future trajectory even if I were to leave Finance and settle for a Corporate role. We did not get leverage other than a bridge to the next bonus payment.
Since I got allocated carry, I think about the co-invest quite differently as I would need to take on massive leverage so that it makes a difference. Basically my associate savings are >70% in the illiquid fund at work already so would need to fund the co-invest from leverage, which does not seem like a good risk-return at the moment given >8% all-in interest rates being offered. At the same time, the carry already provides the upside while incremental co-invest would increase the risk by betting all on my GP as opposed to diversifying with public markets and real estate.
Assoc at MF. committed $700k+ to fund. Levered
Fund level commit, .25x DPI in 2 years via large div recaps and SoTP exits.
Fund targeting 3x+, I am budgeting for 2.0x which is a great outcome for me personally.
I disagree with above re: not committing. If you have confidence in the managers at your fund / strategy, this might be your only chance in near future to get access to direct PE, especially if you’re going to leave industry. Everyone always talks about allocating to publics — I’ve not met a PE professional who actually takes pub market risk/volatility, most just sit on cash/house/spend irresponsibly.
As with all things, be thoughtful about your specific situation and don’t take broad stroke advice from ppl who aren’t in your specific situation.
How much leverage did you take on
I commented below on how i maxed my PE coinvest at the associate level, and one of your statements resonated with me. My portfolio looks like a barbell - I put a ton in my fund's investments, and the rest (high six-figures) is essentially in cash earning roughly ~4.5% today. I simply don't have time to pay attention to public market risk or manage an investment portfolio.
I even have my CFA. It's completely inefficient, it kills me. But fuck man, I have a family now and limited time and attention. I'd rather invest in myself (my firm) where i've seen investments perform well and know we have some control over, and since those investments are super illiquid, I'd rather keep the rest highly liquid.
Curious how you think about investing / saving outside of coinvest with respect to things like maxing out 401K, backdoor Roth IRA, HSA, and if you’re taking advantage of those vs optimizing for liquidity to put into coinvest
Max 401k and HSA, and now contribute a little to a 529 for my kids. I don't bother with the backdoor Roth.
Senior Associate / junior VP, putting in about 30% of my net bonus. I view it as diversification away from public markets. Thankfully at a multi-product platform where I can invest in products not correlated to my carry / career trajectory. Not sure I’d triple down (career outcome, carry payouts, co-invest) purely on our fund - just from a risk concentration perspective.
I have like a quarter mil in coinvest and I kinda regret it tbh. Unless your strategy is super differentiated/unique this vintage is just gonna suck ass. Also I don't know the rates people are getting on their leverage but if it's even close to the prime rate it's kind of a bad deal
Is the quarter mil with leverage or without
Without leverage. I think it only makes sense to take leverage if you a) need liquidity or b) think you can far outperform the rate on leverage (reminder the interest rate is non-deductible but your gains on investments are taxes at 20% at least)
Associate 1 at a co-invest fund. We do a lot in the LMM and the fund was already well deployed before the final close and marked at a ~1.25x.
I have a decent amount of confidence in our strategy and viewed it as a good way to diversify away from public markets. I’m thinking a mid teens IRR is probably reasonable for our fund.
I committed $40k at the final close. That’s $40k out of a $250k current net worth and by the time that’s all called it’ll be maybe $40k out of a $300-350k net worth.
Every dollar i could - we were capped at $250k commitment to the fund, of which ~80% ends up getting invested, and spread over 5 year investment horizon. Really about $40-$50k / year. This was matched 1:1 with a loan.
Starting to get into exits now - couple so far and I've essentially earned my entire investment back (with 10+ more invested). These are levered investments getting 3x+, so you're clearing 5x+ after loan repayment on a fee-free basis.
Literally the best investment option you have access to, assuming you have any confidence in your fund - and if you don't, why are you working there?
LOL congrats on the returns but realistically how many funds will make a 3x in their current vintage? I think people need to be eyes wide open about the realistic returns on coinvest in this industry
again - why would you choose to work in an industry that you don't believe will perform well? just wasting your career.
lol - people at MFs think 2-3x is likely in this environment.
MF, committed ~$60-100k (depending on in-year deployment), levered 3x
Per above comments and portfolio theory, wouldn't allocate all of your investable capital into your fund no matter how much you believe in it, particularly because of the illiquidity. Need to think about your personal WACC ;)
LMM, deal-by-deal, $50k total across two investments, no leverage, pari passu
I am fortunate to have enough personal liquidity to invest these amounts without worry. While I see the attractiveness of liquidity/public markets, at the end of the day, I think equity is the entire point of PE and I'd rather put my money there. Plus, I spend my days working with these companies and I believe in the strategies.
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