PE compensation - Fund

Those numbers don't seem particularly high, especially when you consider this is a one-time payout for five years of returns. Of course, there are plenty of overhead expenses that need to be accounted for as well - generally speaking, even at a small fund there is likely an admin / deal team ratio of around 2 to 1.

Fees can be higher than this as well though. Most funds will charge an additional 2% of invested equity to their portfolio companies in the form of management expenses (this is separate from the 2% charged to LPs). This is generally considered compensation for a financial sponsor's corporate governance.

And regarding the breakdown of the carried interest, does it seem right as well? Thanks

For the most part, yes. Although in practice, principals usually receive a bit more (and partners receive a bit less) carried interest.

Also, the actual calculation for carry can vary for a given fund, but for the most part the 20% is calculated off of net carry (which would be net of the 2% management fee on invested capital and the 2% base fee on equity committed). Actual distributions to the group would also have to cover all OH costs (including comp for partners, principals, associates and support admin), which have a relatively larger impact on a PE firm with a single fund under management.

Some funds have hurdle rates for carry as well, so 20% over 8% hurdle isn't uncommon. Usually the fees charged to the deals/portfolio companies will first go to offset the standard 2% management fee and then will be shared with LPs, albeit at a favorable rate to the GP, after that amount is covered.

This is true, but the GP only effectively "pays back" the carry portion of management fees charged to portfolio companies (i.e., 20% of the 2% ).

If your fund will return at a rate that clears the hurdle, there is (often) the catch-up to make the GP "whole," so to speak. The amount "lost" in the 8% preferred return (hurdle) gets returned preferentially to the GP during the catch-up period.

If your fund will return at a rate that clears the hurdle, there is (often) the catch-up to make the GP "whole," so to speak. The amount "lost" in the 8% preferred return (hurdle) gets returned preferentially to the GP during the catch-up period.

I'd say most good funds get made whole. Rare to see above 20% for a larger fund, BTW. I know a couple of very strong middle-market funds that get higher than 20 but no big ones.

20% is industry standard and anything higher generally makes LPs uncomfortable.

That said, Bain Capital takes 30% on its carry.

There are some who ask for more carry. Golden Gate, a middle market fund that has Bain roots, asks for the same. Does it happen? Yes. Is it rare? Yes. What do Bstone, KKR, TPG. Carlyle, Tommy Lee, etc. get?

Wasn't trying to start an argument here, just making the point that not all large-cap funds stick with a 2/20 structure.

I haven't seen a prospectus so I can't tell you the exact number but it's generally well known in the PE community that Bain has the best IRR's of any of the large-caps.

I remember in early '06 when Bain Capital's LPs were getting really frustrated with the higher carry fee structure - although their anger was justified at the time considering Bain Cap was doing all sorts of club deals.

I can also confirm that Bain Cap has significantly higher IRR than any of the large cap funds, even after fees. Heard from an LP at a bunch of funds.