Question about carry
For any of you VP and up crew that have been awarded carry. How does your team award carry to you? Do you get it annually, or is it allocated at the beginning of a new fundraise closing?
I’m joining a team as a senior member of that team and being told that all the carry for the current fund is already allocated (1- year left of the investment period). But I feel the position justifies carry. Ive been told I’ll get meaningful carry in the next fund closing in 1 year approx. Would it be normal for a new team member in an existing fund to get carry if closing deals?
Based on the most helpful WSO content, carry allocation practices can vary significantly depending on the firm, fund lifecycle, and individual circumstances. Here are some key insights:
Timing of Carry Allocation:
Carry for New Team Members:
Vesting and Eligibility:
Negotiation Considerations:
In summary, while it’s not standard for new hires to receive carry in an existing fund with an already allocated pool, it’s not impossible if you can demonstrate your value. However, the promise of carry in the next fund is a common and reasonable approach.
Sources: Carry in REPE, Data: Average Private Equity Compensation and Carry from Associate to Managing Partner, Confused about carry at PE Fund, Carried interest for Associates / Senior Associates?, 2023 Comp Thread RE
Typically carry is awarded during fundraise but some funds tie it to promotions or allocate annually. You have a solid case to get carry in the current fund if they expect you to work on new deals or portcos in that fund. It'll likely be a smaller allocation but it's worth advocating for it. Also the "already allocated" line is such BS. Every fund has an "unallocated" bucket for new hires, promotes, etc.
Agree the "already allocated" line is BS. This is conceptually comparable to hiring a new ELT member at a portfolio company; everyone else accepts some modest dilution to allocate units to someone they think will create value. If other employees at your level are getting carry, you should be too. If they somehow bully you into not accepting carry now, you should negotiate significantly above-market carry and 1-year accelerated vesting on the new fund, but even so, there's tons of risk the fundraise doesn't pan out the way they hoped and then you'd be up the creek w/out a paddle.
You could also test them and argue for 'shadow carry' to make you whole and bridge you to the fundraise (which would probably be more work to set-up and less tax advantaged than giving you real carry). They may relent and just give you the real thing instead.
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