Hi,
Interesting in learning how a funds carry is split between different PE employees.
Is there a typical % of carry that is allocated to associates? How does this differ between different firms and how does this % change between different levels of seniority ?
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Typically none. In some LMM funds there may be a small amount allocated, or some phantom carry, but you should never *expect* carry as an Associate. As a Senior Associate you can ~usually expect something, but it's small/not groundbreaking or life-changing. VP and up is where carry really begins to make a noticeable difference in your comp. There's also sometimes phantom carry for associates, but I don't really understand the mechanics behind that so I'll let someone more intelligent pontificate.
Do you have any info on how carry gets allocated across different seniority levels? % of carry allocated to non-partners?
And also is it typical for PE firm to provide leverage for co-investments?
Goose egg
Most top funds offer phantom carry, leveraged co-invest or both. While not life changing amounts of money, on an after tax basis, these programs should be meaningful (~10-20 percent of overall comp). Real carry usually kicks in as part of VP comp and usually represents roughly 1/2 of total comp.
What is phantom carry? I would have expected carry to represent more than 1/2 of total comp at VP level?
https://bfy.tw/Sxch
More important than the amount of carry % you get are the vesting terms.
I'd rather get 1% carry with a 2 year vest then 5% carry with a 7 year vest
And leave 1.5% on the table? I think what you’re trying to say is that you’d rather have some that you have in the bank account quickly, rather than more later. Unfortunate truth is that vesting and timing of cash distributions are different and have no direct relation
I mean to be fair the original context of the question is regarding prospective associates thinking about PE. There’s a very real reality of doing a few years before deciding on a different career, moving to a fund in a smaller city / closer to home, business school, etc.
I don’t think it’s just time value of money or whatever, but there’s a bit of an expected value equation when given a real chance you walk away early.
This is absurdly stupid. The entire point of PE is you're in it for long-haul because that is how you maximize carry. You take as much as you can possibly get and dig yourself into a firm with scale like a tick. The carry won't be realized until the fund is done with its lifecycle regardless so unless you plan on leaving before that I can't imagine what would possess you to think taking less carry over a shorter vest is the smart option.
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