Private equity carry allocation structure for a newly launched PE house
If you are about to close the very first blind fund at $ 1B, what would be the ideal carry allocation for partners, MD, VP, associate and analyst? Considering to attract talents, paying out competitive carry pool would be needed. I think giving loose vesting period like 3 years would be a good incentive too. Any thought?
Partners, assuming 2: 35% * 2
MD: 10%-15%
VP: 2%
Associate 50 bps
Analyst: zero
Thanks for your input. Any advice on vesting period?
For non partners, length of investment period + 1 year
That’s a pretty nuts allocation he has given. No way youll deploy $1bn with 5-6 ppl
My total doesn't add to 100% - I am assuming you add more staff.
The director should get a lot less. Like half of what you’ve put down. The VP and associate should get more. The partners should also get less and you should have way more in reserve
As an associate or VP, what would be attractive allocation if you were to join this new firm from the big house? Of course, you would be given increased salary.
Think the VP level is broadly accurate.
$1bn fund means the founder partners are probably from UMM/MF backgrounds and they'll typically want to poach senior associates/VPs from similar backgrounds as well. Assuming a UMM/MF VP gets anywhere from $2-6m DAW (2.0x MOIC).
I probably wouldn't leave for a new fund unless its on the higher range of the carry pool given i) uncertainty ii) lower cash pay (9/10 times expect a c.30% cash decrease) so I'd be looking for c.250-300bps.
Market +30-50% to compensate you for the risk. There should be plenty of benchmarks of established shops in that fund size range
Vesting 4-5 year straight line
1bn first time fund with you putting no equity in isn't exactly "risky" unless you feel they can't raise anything.
Way riskier than a vanilla MM that has been around for ages. If the money is fully raised it’s less risky but it’s still pretty risky. No trackrecord for a follow-up fund if the first one fails. Who knows how the team pans out and if they can actually work together. No reputable name if it fails and you want to leave. Etc. You’d be crazy to take a normal carry cut on this structure in my opinion
You hiring? Looking to lateral to a new fund
Fuga sunt non fuga impedit natus reprehenderit quis beatae. Tenetur et alias ut repudiandae aut libero. Et deleniti voluptatibus inventore. Consequatur nam qui repudiandae odit. Enim repudiandae ut perferendis illo qui.
Magni molestiae veritatis est praesentium repellat et dicta voluptatem. Quae iusto hic voluptatem aliquam id. Possimus magni et tempora. Dolorem quam enim dolorum dicta doloribus voluptas distinctio. Est saepe architecto quaerat et nemo enim quidem.
Et tempore eaque aperiam officia optio similique. Rerum nihil numquam tempora facilis consequatur. Ut amet quisquam repudiandae sit natus.
Quod libero quae tempora omnis rerum natus nulla. Non fugiat est sit error sunt. Eos laboriosam dignissimos delectus saepe.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...