How much carry are you getting as an Associate, VP, Director? 1%, 2%, 3%, etc…
Is your carry based on GP promote or total distributions?
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Career Resources
0%. Full cash. I’m an AVP
Associate/Sr Associate level getting 1% promote for each $30k co-invested on a deal-by-deal basis, scaled linearly up or down. I get LP rights + GP promote on my invested capital. We target high teens IRR and 2x multiple.
Next push is for higher cash comp, then I'll shoot for outright carry without the co-invest requirement.
Do you mind explaining what GP promote is?
Also would like to know
Also would like to know
SVP 3.5% of promote with no contributions
What's your fund size?
$75mm. target return 4x
Think it's important to note if you're at a fund or a sponsor/developer and the size of your fund/deals.
I'm VP (9 YOE) for a $500M fund and get 3.0% with no contributions. Ours is treated as a bonus instead of actually being written into the docs, so I'll pay full income tax on it. We do get significant annual cash bonuses as well, just saying that the promote checks are also technically a "bonus"
When you say no contributions, do you mean that you aren't investing in the fund?
Correct. I don't put a single dollar into the company/deals/funds
Why is your company doing you in this manner? I don't have any contributions and I still get my promote points as carried interest.
If their company is anything like mine, it is more tax efficient to pay as ordinary income versus LTCG. Difference of 17% tax rate at the federal level.
EDIT - Realizing that this was written in an unclear manner. It is more tax efficient from the vantage point of the firm, not the employee.
I honestly think it's because it makes it easier for them to not have to pay anything to us if we leave or they fire us before the event. I'm not totally sure how that all works, but that's my hunch is that if it's carried interest that means we have to be written into their documents which makes it more official vs. what we have now is more like a discretionary bonus
I am in a similar situation. My "carry" is paid as ordinary income and therefore taxed heavily versus receiving a carried interest and therefore being taxed at the LTCG rate. Out of curiosity, is there anything you're doing to help lessen the tax burden when yours is paid? I have been looking into deferred compensation plans, etc. but interested in seeing what you're doing.
I think it's more common than people think. I haven't spent time on it - I assumed there's no loophole here
As an Associate/Senior Associate I got 2% on deal-level carry for all the acquisitions I participated in (no contributions required). We're a fund shop but do direct acq/dev deals, at least on my side of the business (we also have allocator funds, i.e. LP equity and pref, mostly for ground-up dev). The direct fund deal do still have an "internal GP waterfall" between our separate entities, but it's fairly light on deal carry vs "market" splits since we have the fund waterfall behind it.
On select instances where acq deals don't fit well into one of our funds, we'll syndicate with long-standing LP's (who are generally also investors in our fund vehicles)...waterfalls for these have splits that are closer to "market". These also generally include an acquisition fee (which I get a cut of, but paid as a traditional bonus).
We bought ~50% of the deals while I was an Associate through a fund and the other half through syndications, so different waterfalls as noted above. With our base case UW would've been worth ~$35-75k per deal and we did ~10 of them. Ran into the inherent risk of carry though...we've watched all of it vanish as this particular market tanked.
Just got the VP nod and while deferred comp splits aren't set yet, I'm guessing VP is 3-4% on deal level but also now get participation in fund carry. I've seen some of the exec splits from a prior role with this firm, so guessing I'll be looking at 75-125 bps of fund-level carry as well. Again with no contributions.
Our most recent fully-realized fund produced ~$120M of carry and the next one is larger, so hoping to be in the $1M - low $2M range between fund and deal-level. This fund is a European waterfall though so won't see a dollar of it for years.
To other's points about tax treatment...I am actually written into the docs and will be taxed at LTCG. Not sure on vesting schedule for fund-level carry (haven't seen the official docs yet), but on deal-level it's 25% at closing, another 25% one year after closing (50% total vested), and remaining 50% on sale of the asset.
How would carry pay at closing? Or is that just a share in acq fees, etc
He's talking about the vesting not the payout
Like broseph said, it's just the vesting schedule
If you get hired after the fundraising closes can you get added to the docs by an amendment? Or to be in the docs do you essentially have to be an employee before the fund is established?
I was added as an amendment for the deal-level ones during my Associate years.
Curious to know if anyone has any datapoints for large-cap funds (BX, BAM, etc)
Anywhere to read up on carry? Seems pretty straight forward but seems to be different structures - for example I always thought having the option to co-invest was what you wanted but it seems not and then outside of that people are getting carry instead of a bonus (without having to invest) and are not getting the benefit of LTCG (which in my mind is what you want to get from RE). So seems carry can just be a bonus and is not guaranteed, plus a lot of structures seem to screw you at the Associate/VP level so you don't even get LTCG and have to pay same as ordinary income.
3bn+ debt fund:
75bps. 75% over 4 years, remaining at dissolution.
We get tax distributions to cover the estimated income yearly.
What's the estimated total promote check on a 3bn debt fund?
~300mm
What’s your years of experience? / what line of business, acquisitions, asset management, etc.?
AM
15+ YOE
What do you mean you get paid for tax distributions? Why are you paying taxes if you haven’t received your carry yet?
Our firm does it too. The IRS still collected taxes on the value of your carry, even if you do not receive it.
$1.75B+ real estate value-add fund
1.5% of the promote with 4 year vesting period. Valued around $3m for our most recent fund that will likely pay out in 5 years. Have two other funds where I just got paid out of the 1st one and value the middle fund at $2m with expectation of getting paid out in 3 years. Expectation is for funds to continue to grow upwards from here.
You hiring?? Ha kidding, kidding......
How long have you been there? Seems that this isn't the norm for carry?
What type of assets do you guys invest in?
Coming up on year 8 roughly 12 YOE.
Hey guys - can someone please explain me in plain terms about carry. I just got into a pool and want to understand what I am being offered. So far I understand that carry is measured in basis points applied to the size of the fund, is that correct? What is DAW? What does “4 years vest” mean? Does it mean you get your carry over next four years? Shouldn’t it be tied to funds exits I.e., why would a fund pay you carry before they realised actual return? Or is it because carry is paid out of guaranteed 2% management fee? Any colour would be super helpful. Thanks!
Surprised you are receiving carry without understanding some of this stuff, but here are some answers:
- Carry is not based on management fees. Management fees pay your salary, not your carry
- Considering vesting to me what you're entitled to. If you are 25% vested and leave the firm, you will still get 25% of the carry once it finally pays out even if you're gone by then. Being vested does not mean you're getting paid. It means if the firm does get paid a promote, that is how much you're entitled to receive of it
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