Special sits PE comp?

Hey monkeys, wanted to learn more about what comp looks like over the long term (10+ years) for a special sits PE (Apollo HV/Ares SOF/Oaktree global opps/Sixth Street) seat. I assume carry in a special sits PE seat will be less than buyout PE due to lower IRR?

Any insight will be appreciated, thanks

 

I believe Sixth Street Associate 1 is ~300k (excluding relocation)

H1B data seems to be pointing at associates at 150 base & assuming 100% bonus. 

 
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The problem may fix itself if you look past the groups with call of duty style acronyms attached to their names.

All the groups you mentioned make minority/largely credit oriented investments. I believe the earnings potential difference is mitigated if you look to control oriented funds/groups at the same firms with largely similar target investment profiles (APO Buyout/Ares ACOF/ Oaktree SSG). The mandate for these groups includes distress-for-control as well as leveraged, low-multiple, value added buyouts. I believe there is a greater opportunity set here for interesting, year round investing with a similar earnings potential to vanilla PE funds such as H&F and KKR that famously pay near the top of the band. Especially at junior levels.

Downside stems for low portfolio diversification (in smaller funds) and high risk investments that may lead to poor fund level performance as we have seen with Ares/Oak. But keep in mind that this style of investing has been out of vogue for a long time now. And large recent vintages still imply continued LP support. From a lifestyle perspective, you’ll sweat. That’s unavoidable.

Some more MM oriented names include: KPS (personal favorite), Clearlake, Searchlight, Centerbridge etc. more names are listed out in other threads so won’t repeat here.

If you want control and special sits both, you’re likely investing in MM companies regardless because of larger opportunity set there. So being under the MF umbrella like Ares/Oak/Sixth doesn’t quite matter in the long run. At junior levels, you may have some pay difference due to differences in the size of vintages and subsequent management fees which most ASO-Level pay comes out of but it’s marginal. I’ve seen differences as large as 50K for Associate 1 at most.

APO is either an extreme, outlier, or exception to most of my points above - but then again, of course it is.

Lastly, it doesn’t make sense to compare earnings between this strategy and vanilla or growth PE at any given point in time. If you compare Centerbridge to Insight Venture Partners at the peak of a bull run and tech bubble, then yeah Insight would pay more. But if you compare across market cycles, then I think the conversation becomes much more interesting.

 

I mean no disrespect when I say this, but I can hardly understand what "Analyst 1 in IB" is trying to say.

I work on one of the teams mentioned in OP's post. Our cash comp is at a slight discount to PE comp (think ~10% lower). Our carry allocation is based on a 1.8x MOIC, whereas PE is based on a 2.0x MOIC. However, the carry allocation we receive per fund (in dollar terms) has turned out to be very similar as PE's, despite the lower MOIC threshold, because we have better AUM per FTE metrics.

Then, there are two MASSIVE considerations that typically get overlooked, both of which make special sits more interesting:

  1. Special sits deals typically have a cash-pay component, which means carry dollars are being distributed to the investment team almost every quarter (assuming American carry waterfall). This is drastically different than PE, whose carry payouts are very episodic and typically back-end weighted.
  2. For our group, deployment velocity has been much faster than expected. We are raising new funds every 2-3 years, whereas the PE team is raising every 4-5 years. This results in carry allocations stacking on top of each other faster in special sits. Over a 10+ year period, I expect to receive more carry grants and realize those grants much sooner than my peers in PE. I'm sure this won't last forever, but I'm hoping to ride it as long as I can.
 

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