Advice on Negotiating Compensation at New Investments Role

Based on the most helpful WSO content, here’s a breakdown of how to approach negotiating compensation for a VP-level role in investments, particularly in real estate private equity (REPE) or similar fields:

1. Cash Compensation

• Base/Bonus Split: For VP roles, base salaries typically range from $200k-$300k in HCOL areas, with bonuses often adding another 50%-100% of the base. At larger firms, bonuses may be tied to fund performance or team budgets, while smaller firms might have more discretionary or opaque bonus structures.
• Key Questions to Ask:
  • Is the bonus tied to individual/team performance or fund performance?
  • Is there a cap on bonuses, or is it open-ended based on results?
  • How transparent is the bonus calculation process?

2. Carry/Promote/Equity

• Reasonable Expectations: At the VP level, carry participation is common, especially at smaller firms or those building out new platforms. For example:
  • At a $1B fund, VPs might expect 1%-1.5% carry participation, which could annualize to $600k+ over a 5-year hold period (depending on fund performance).
  • Smaller firms may offer higher carry percentages but with more risk tied to fund success.
• Negotiation Tips:
  • Frame your ask around fund size and expected returns. For instance, inquire about the total carry pool and what percentage is allocated to your level.
  • Ask about vesting schedules and whether carry is tied to specific funds or the firm overall.

3. Co-Investments

• Standard Practice: Many firms offer co-investment opportunities, especially at the VP level and above. This can be a significant wealth-building tool.
• Key Points to Negotiate:
  • Ensure you have the right to co-invest in deals.
  • Ask if co-investments are offered on a levered basis or if the firm provides loans to facilitate participation.

4. Buyout of Existing Unvested Carry

• Uncommon but Not Insane: While it’s a bold ask, some firms may consider buying out unvested carry, especially if they’re eager to secure your expertise. This is more likely at larger, well-capitalized firms.
• How to Approach: Frame it as a discussion point rather than a demand. Highlight the value you bring and the opportunity cost of leaving your current role.

5. Path to Promotion

• Critical to Discuss: It’s entirely reasonable to ask about the promotion trajectory, especially if you’re moving to a smaller firm where upward mobility might be less structured.
• Questions to Ask:
  • What is the typical timeline for promotion from VP to Principal/Director?
  • What metrics or milestones are used to evaluate readiness for promotion?

6. Other Considerations

• Relocation/Cost of Living Adjustments: If moving to a new city, ensure the compensation reflects the HCOL environment.
• Perks and Benefits: Don’t overlook items like 401(k) matching, healthcare, and other benefits that can add significant value.

Final Thoughts:

For the larger alts manager, expect more structured compensation and benefits but potentially less flexibility in negotiations. For the smaller PE firm, you might have more room to negotiate carry, co-investments, and even buyout terms, as they’re likely looking to attract top talent to build their platform.

Good luck, and remember: always anchor high but remain reasonable based on market norms!

Sources: Vice President Fund Carry/Equity, https://www.wallstreetoasis.com/forum/consulting/just-got-promoted-how-to-negotiate-salary?customgpt=1, No VP Promote from Sr. Associate - Seeking Advice, Is this associate compensation competitive?, Carry in REPE