Publicly Listed PE Firms (EQT, BX, KKR) Comp
Do publicly listed PE firms have a different comp structure than their private counterparts? Do professionals get stocks as part of their compensation?
If a fund is giving up a portion of its management fees and performance fees to its shareholders, wouldn't the pie be smaller for the professionals actually working at those firms?
Fair question - speaking from the junior level, I don’t think so. Most major PE firms have gone public and they all pay about the same for new associates.
I was given my exact comp figure (including bonuses) in my offer conversation and it is all-cash comp. Also just from the night they took us out after we got offers and speaking with the associates, it feels like they are much looser with spending policies than banking (e.g. buying crazy dinners, lunch is comped, you can Uber to/from the office without restriction, etc.). So feels very different than working at a publically traded bank.
Perhaps it's not very different at the junior levels since juniors are so cheap (vs. the senior folks).
The pie allocated to investment professionals is not necessarily smaller for public MFs. Don’t forget that managing partners (founders) generally keep 60-75%+ of the carry pool at private funds.
The unit economics of the carry pool are essentially halved by being publicly listed… but that need not apply to base+bonus which is entirely opex line item and is supported by the massive scale/mgmt fees these platforms are spinning off. Mgmt fees are split with shareholders AFTER opex/comp expense is paid out.
The dilution to AUM wealth creation for the investment staff really sits in the carry economics split with shareholders. In that case, you’re 100% correct. A $20bn fund at Blackstone/Apollo/KKR effectively has 50 cents on the dollar of Carry Dollars At Work vs. a Bain Capital or CD&R or Veritas.
I would note that many of the private firms have sold GP stakes to the likes of GS, BX and Dyal etc… so you also have some of that effect there as well, but not quite 50%-ish. For senior folks, their comp model is typically Base+Bonus+Carry+Stock. You can look up how much SBC a public PE player has, then take their investment staff FTE, assume only 20-30% of that is senior enough to get stock, and see what that shakes out to in terms of effective SBC per year. It’s probably $3-5m per person per year on average…. On top of $1-2m base, $1-3m bonus, $3-5m carry. So kind of doubles the carry piece, making up for the lost economics ceded to public shareholders.
Thank you. This is super helpful!
Can’t you say basically the same thing at any private firm as well? Ie Orlando bravo is taking a massive chunk of the TB carry pool and obviously the founding partners at Bain are taking more carry then the MD who just got promoted.
So I’d argue at any firm ownership structure, you’re still losing economics to someone and it doesn’t really matter if that’s a public shareholder vs the managing partner / founders / etc
Yes but there are a few funds where the founders have left (e.g. Warburg) and the firm is still privately held, and you'd guess that remaining partners are more equal without a founder being there.
Dolores nostrum deleniti voluptate maiores aut molestiae. Ut architecto et qui ex magni. Maiores at voluptatem fugit tenetur beatae voluptatem. Corporis in quia at dolores. Voluptatibus omnis sapiente ipsa est.
Quia numquam repellat reiciendis laboriosam nobis adipisci non. Omnis eveniet et ut. Laborum ut iure consequatur illo quia rerum quo.
Ullam facere similique libero quis consequuntur. Cupiditate dolor in doloremque aut aut sequi nihil. Distinctio sunt ab sit quod. Voluptas veniam beatae cum dolorem non enim veritatis.
Et voluptas beatae quis. Numquam et id modi vel. Non praesentium architecto consequatur sed. Qui quisquam aut debitis et. Debitis impedit eum sint voluptas nemo reprehenderit. Ipsam omnis animi dolorem debitis iure adipisci.
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...