Private Credit Endgame
We all know that preeminent reason each of us opts to join "high finance" is it provides a path of lesser resistance (thinking versus entrepreneurship or becoming a C-suite at a F500) to living an upper middle class / upper class lifestyle (if you end up doing really well for yourself and are able to ride out the highs and lows). At the same time, we're looking to maximize income while minimizing workload. I'm no different. Currently, working in private credit at a larger shop (think credit arm of a typical MF like KKR, Bain, Ares, Blackstone, Apollo, etc.) that invests across the capital structure. However, I'd also like to consider what the potential outlook would be if I were to make MD/Partner at said firm. Questions:
-
Does anybody know the math on what a MD/Partner could make with carry? Does this carry typically get paid out yearly? What would the annualized income look like including carry + cash base + cash bonus + stock (work for a public company)? Please note, when I say Partner, I'm not referring to a founding partner or a head of the division or region, just a partner that's risen up the ranks.
-
Does this vary significantly between firms? For example, does Apollo still pay lights out on the credit side versus other firms (as is the general consensus for Apollo's comp on the equity side)? Does Bain also doing distressed work mean they get a larger carry pool (don't have anything to verify this but heard Bain has a generalist program at the junior levels - dk if that changes as you move up)? Does any company allow you to share in the carry pool on the equity side? Just random thoughts but wanted to determine whether one firm is comp'ing significantly more than its peers and why.
-
Are the hours significantly better on the credit vs equity side as an MD/Partner? And I understand that the difference won't be night and day but when you have a family, even an extra 10-15 hours per week is huge (that may be an additional 2-3 hours you could dedicate every day to family which is an important priority for me)
To sum, I'd like to lead a certain lifestyle when I have a family and do plan to be the major breadwinner. Would love some help in understanding whether continuing to work in private credit can help me achieve those financial goals without a side income. And yes, I understand that there is no guarantee that I'll be able to move up the chain or ever make partner/MD. But I do see it as an achievable goal.
Thank you!
it's going to be different at every fund and a lot of your income is based on the deals that you bring in as you get more senior. Don't waste your time trying to find the future value of earned dollars in FY26 so that your house payment in FY34 is covered... its a stupid waste of time.
Based on deals worked on, rough carry estimates / all in come...
ASO (1-4 years): $300-450
VP: $500-$1mm
Principal: $750 - $1mm+
Partner: $1mm+
If you think about a credit fund MoiC (1.2-1.5x) and fund size you want,you can roughly estimate the total carry pool.
$1bn fund finishes at 1.4x MoiC (good outcome) = $400mm profit. Less ~$80-100mm in fund paying back management fees and expenses. total profit = $300mm. Carry= 20%, so $60mm total carry pool over the life of a $1bn fund (5-10 years for last payout). Partners get fixed % of that pool.
Although helpful - my question was more regards to some of the larger players that raise funds typically in the 10s of billions or atleast high single digits. I'm assuming that $500K to $1MM is probably an adequate estimate for VP comp (probably ~$600Kish on the cash comp side (200 + 400 split) and then additional carry. However, Principal and Partner is where carry really kicks in as a meaningful % of total comp. I'm assuming that a Partner at a $10B fund doesn't make 10x as much as a Partner at a $1B fund, probably due to less % carry allocation. But how much less? What's the DAW over the life of the fund?
My rough math:
$10B fund. Assuming a 1.5x MOIC given the fund dabbles in a lot of junior pieces (mezz, pref) which return 12-13%. $5B profit. Less ~$500MM paying back fees and expenses. Total profit = $4.5B. Carry = 15% (assuming lower than PE). $675MM carry pool. Partner gets 150 bps means $10.1MM DAW. Spread across 7 year life of a fund (on average), that's ~$1.5MM on an annualized basis just from carry. I'm assuming cash comp for these partners would be at least ~$1MM, likely higher. That's roughly around ~$2.5 - $3MM of annualized comp.
^ That seems to make more sense to me. Especially as I see some of the senior partners in the firm who, quite frankly, are loaded (like literally have their names published in architectural digest because of their vacation homes kinda loaded).