PE Funds With the Best Partner Economics
Hello! Curious to understand what’s the best way to assess a fund’s per head economics reflecting fund size, investment professional headcount, hierarchy, non-investment professional headcount, and public ownership vs private. For example, a fund might be >$15B in size but managed by 50+ partners and 100+ directors / principals and need to share economics with the public shareholders, resulting smaller carry split / head, while a $5B fund might only have 5 partners, 5 principals, and is privately owned. What’s the best way to assess the economic potential of a VP+ seat of a given fund?
Thanks
Ur in luck. There is this little tool called google where u can search up a fund’s latest size AND how many partners there are (may need to navigate to the funds website and click on “peoples”).
This is actually a terrible and unnecessarily snarky answer because so many factors play into partner economics. Whether the fund is public or private plays a role, sometimes economics are tied up with founders or chairmans, other times it’s just completely flat.
Google wouldn’t be able to get you this answer just by counting people on a team page, you’d need to know way more about the carry structure from within the fund
Norwest is probably up there
What makes you say so?
Very hard to tell. How much the founder/CEO takes is a significant factor and that is challenging to DD from the outside. If it's a smaller firm, I'd look at (i) number of senior IP's (VP+), (ii) fund size / activity / returns (if available) and (iii) how long the partners have been together.
People get fixated on huge $bn funds but there are many $500-$750m funds that only need a handful of people to operate. It can be very lucrative to get into one of those seats.
CVC does deal by deal carry. Heard some associates making millions from it
Like a comment above, there are an incredible amount of factors that go into play:
Public vs Private: Blackstone, KKR, APO - half of their carry effectively gets shot out to shareholders, so definitely more carry potential in terms of $ amount at a private firm
Founder presence: Firms like BX and Clearlake for example - still have their Founder, CEO, and President around, which take a large chunk of the carry until they finally step down or into some carry-less advisor role. Schwarzman’s take home pay last year was nearly 1 billion dollars. And I would imagine Feliciano still takes the lion’s share of carry.
Returns: duh
AUM Growth: Thoma Bravo, Vista Equity, Bain Capital, and Warburg Pincus are all privately held. But it’s clear TB/Vista are growing and deploying much quicker than Bain/WP - likely better economics for the partners at the former two
Those are just some of the 999 factors that play a role and can somewhat be quantified … plenty more to go around, and pretty difficult to tell from the outside for any fund. In all likelihood it’s not like anyone can shop around megafund offers at that level.
WP has sold a very small minority to outsiders (one of which is Fimalac, think there is another one)
Heard at HIG the top brass hogs the carry
Heard at HIG the top brass hogs the carry
This is pretty tightly guarded and no way to really find out.
It’s like asking how to find out at an individual banker-level how much people make and in what years.
I seriously doubt the validity of the info from anyone that pipes up here to offer their take.
Get friendly with an LP. They know the carry breakdowns and can give you guidance.
I am not going to give you specific fund names (although I know the details of many), but here is the general concept. There are 2 views of succession: 1. Founding partners cash out via IPO or GP stakes deal or 2. The firm operates like a law firm and with each new fund junior partners own more and senior partners own less. You want to be in latter. Equally important is fundraising momentum and actual performance. There are some UMM funds where partners make way more than any non-founders in MF because of the trifecta of good partner economics, growing AUM, and strong returns.
How do you even find out if your fund (or any fund for that matter) falls in bucket 1 or 2? Just through word of mouth and contacts?
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