PE Comp and Carry - Heidrick & Struggles 2021
Hi, I have no background in finance and am trying to understand the comp structure in PE. I read in Heidrick & Struggles NorthAm PE comp report 2021 (page 36) that VPs get a carry of over $4M at funds with AUM of $40B or more. My question is:
1. Do VPs make $4M+ in carry every year?
2. If not, is it vested over the years?
3. If we consider funds with AUM ~$150B such as Bain Capital, what would be the annual carry received by the VPs over there?
Per fund, not per year
Thanks. If I understand correctly, the carry would have a vesting schedule over the holding period of the fund, isn't it?
4-6 years vesting is standard, often with some portion that’s held back until exit (in other words, if you’re there for 10 years but leave in Year 10 and they sell in Year 11 you might only get 90%). Even after vesting, it doesn’t get paid out until there’s a sufficient liquidity event, so you might be fully vested in Year 5 but not paid until Year 10
Big funds with $100B+ AUM typically have many different strategies, each with many different fund vehicles. You usually only get carry in the fund you specifically invest for, and even then sometimes only in the deals you personally work on. For example, it might be a $150B AUM asset manager, you work for a $20B fund of theirs, and you get 10 bps carry in that fund ($4M DAW).
Or, they might have 5 VPs in that fund and plan to do 20 deals with $1B equity checks each, so each VP is expected to do +/- 4 deals over a fund ($4B of equity each) and gets 50 bps in their specific deals ($4M expected DAW). Less common to do VPs like this since they have less control over finding and closing deals, but much more common for principals and partners
Thanks for the detailed explanation! What is the average % of carry allotted to VPs in big funds ($100B+ AUM)?
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