Senior Pay Progression
I understand that unlike junior comp (which is standardized), senior pay schedules differ dramatically across firms and within the same firm. But still curious about the following, if there are any general guidelines across the industry. TIA.
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The cash comp increments between AN/ASO/VP years are not very significant (hence many ppl wanting to go HF, where comp can scale more quickly). However, is the comp jump from MD/principal/director/etc to "Partner" more significant? In law firms, my understanding is that comp from last year Associate to "Partner" is much more pronounced than any of the previous steps. Curious whether PE is the same way.
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Generally, if a firm above market / below market for the junior / mid levels, does it follow that they'll do the same for the more senior ranks? Ie all the firms that ppl reference as being above-market for associates (apollo / H&F / centerbridge / etc), do the seniors at those firms make more as well? Or are there firms where the BP is to underpay juniors and when they get to a certain level, pay will jump to/above market?
Interested as well. But I doubt the average non-founding partner at One Rock is making more than the average non-founding partner at KKR/BX, despite One Rock paying more than KKR & BX for ASO1 (according to the other recent thread). Someone please correct me if I'm wrong.
This is actually false. It’s very difficult to compare carry pools across the industry as performance of the fund has an oversized impact on compensation at senior levels. Consequently, fund returns performance tends to be inversely correlated with fund size. For example, say you have a $2B fund that returns 3x over 5 years spread across 8 Partners vs. a $15B that returns 1.75x over 7 years across 25 Partners, you have $100M / Partner in the MM fund vs. $90M / Partner in the MF (assuming 20% carry). This is obviously a hypothetical scenario, but the shortened deployment / harvest period for the MM fund also allows their investment professionals to stack carry across multiple funds if they are successful raising every 3-5 years vs. the MF that raises every 5-7 years (see GTCR). All in all, it all depends.
+1. Outside of some top VC funds during this past bull cycle, which $2B+ MM PE funds have returned 3x though?
It was a hypothetical answer to his hypothetical question. At the end, it’s so firm dependent and even most industry insiders don’t have any logic into exact compensation schemes across firms (much less their own). Everything is anecdotal and there are nuances like at public megafunds, a lot of your compensation is also tied in stock options whereas in some private firms, you might also own a piece of the management company along with carry by fund. All I’m saying is that total compensation can be generalized at the junior levels (usually larger firms pay more), but at the senior levels, too many nuances muddy the comparisons and I would bet the average tenured Partner at a successful MM fund may do just as well, if not better, than the average tenured Partner at one of the large cap funds.
Veritas, GTCR, TA
As an aside, the law example isn't actually correct (at least from what I've been told). I have a several friends that are parters and their comp didn't get a massive bump the first year or two or being a partner, in some instances its actually flat to down - especially for the equity partners that have to buy in. That said, the nice thing is you're on a relatively safe path at that point that has a good trajectory upward trajectory the more time you're a partner.
The associate to partner comp is somewhat true. A lot of law firms have introduced non-share partners, which is another term for senior associate. That jump isn't as huge (probably 400k to 600k). But the jump to equity partner definitely is true, especially the first few years (personally know someone who went from 600-700k their last year as a non-share partner to 3.5m as an equity partner in 3-4 years. That just doesn't happen in finance typically
The "they make less because they have to buy in" is just not an argument. They're getting paid in shares of a business rather than cash the first year or two
Yea, talking cash comp. Also, as an aside, 3.5mm after a few years is probably extremely rare, I'd guess like top 1% of top law firm partners for that partner year. Good for your friend, he/she must be a rainmaker. I have friends at top 5 ranked per profit firms that range from 3-6 years in as partners and are not in the stratosphere of 3.5mm.
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