GP / Operating partner - Carry / additional remuneration
Hi everyone,
Trying to understand remuneration at Operating Partners:
Looking at the job market, I came across several firms marketing themselves as "Boutique", "REPE firm", "Operating partner", "Investment firm"... These are GPs deploying capital (generally from huge institutional players, Oaktree, Blackstone, Quadreal, Macquarie, GS, Ares...) + are operating the assets (usually pursuing a single strategy "BTR Development", "Value-add Industrials UK+Spain", "Co-living & PBSA Europe", "Last-mile logistic UK").
1. Most if not all of them work on a deal per deal basis even when the capital partner publicly quotes a £Xm commitment "Blackstone in a JV with X acquired the asset/portfolio for £250m and is planning to deploy an additional £500m with X" (ie: each and single deal go through the LP's IC)
2. It looks like the most successful ones (deal-flow + capital partners + aum) propose very nice remuneration package for London (Call it ~£100k + 50/100% bonus for associates) with apparently 9am-5/6pm daily (Don't get me wrong it's not top REPE comps but not miles away)
3. Acting as GPs with promote / waterfall on top of acquisition / dev / am fees but without a fund, how does the revenue distribution work? These firms tend to be really small from a headcount perspective, is it easy as CEO / founder decides to give you x% at exit on deal A x% on deal B etc...? How would it work from a vesting perspective? Someone I know (analyst) mentioned they had carry from VP level at his firm but they don't have funds nor discretionary capital hence sounding a bit weird to me.
How do they attract / retain senior profiles without carry? I've seen very strong profiles at these firms at the VP / Director level (out of REPE funds)
Thanks in advance for your return!
Based on the most helpful WSO content, here's what you need to know about remuneration and carry for Operating Partners at boutique REPE firms:
Deal-by-Deal Basis:
Remuneration Packages:
Revenue Distribution and Carry:
Attracting and Retaining Senior Profiles:
For more detailed insights, you might want to explore specific threads and discussions on Wall Street Oasis related to carry and remuneration in boutique REPE firms.
Sources: PERE comp table, Confused about carry at PE Fund, No country for old I-bankers (starting a mid-career thread for finance professionals), PE long-term attractivity: Is the trodden path "broken"? Quo vadis gen Y?, First timer introduced to Co-invest + Carry: How to navigate?
bump
I am at an operating partner (developer) in London that focuses on a specific sub sector. It sounds like you might be referring to more investment focused partners rather than developers but I will share what I can below.
1. Yes even if you see a big news article about a capital commitment, ultimately ever deal is approved separately - it's not discretionary capital. The nice point though is you will already have a JV agreement and an ADMA done that covers the total commitment. Normally these are done fresh on every deal, which is hugely time consuming and costly for the operating partners (each party carries their own legal cost). BUT the downside is that a captal commitment likely implies the promotes are crossed!
2. Those figures are high but if you manage to find a operating partner that pays that well done! In my sub sector, associates would be making £80 - £90 base with a 20% bonus and some promote - even the successful ones.
3. Most operating partners are not set up as funds so promote is paid deal by deal. The way most work is that you are allocated discretionary deal by deal promote at the end of each year. This normally vests based on project milestones - say 30% acquisition, 30% PC and 30% exit. Given my point above about lower bases and bonuses, it's normal to have promote an associate level. Also super important to think about - because promote is paid as a fee to most operating partners, this will get ultimately paid to employees as income rather than capital gains (not that it matters much with labour in now!)
Thanks so much that’s really helpful.
I was indeed talking about shops doing a mix of acquisitions and developments.
1. could you please give some color on promote amount at associate level? How much should one expect on the different milestones?
I’m basically trying to figure out where a total remuneration package at an investment partner / operator would sit vs. classic repe / large instit investor / reit / etc…
I also work at an operating company and want to build on this. A lot of what they said is similar to my set up. I work at a niche operating partner with a MF. They own 70% of the business as well being the LP so they get money through our acquisitions and a portion of the company promote. Differences are:
1. Our remuneration is standard for repe in London, only people who pay higher are MFs. Associate pay would be £80-120k with bonus at 50%-120% (all numbers I have confirmed within the business)
2. Since the LP provides 100% of our capital, the company makes their money through Acquisition fee, AMA, DMA and promote on the value-add fund (we work across three funds). The AMA and DMA are fund level agreements so we do not have to negotiate every deal.
3. Everyone gets promote to incentivise long term employees. Promote is paid out on a 2yr basis on anything crystallised for the value-add fund in that period. The VA fund is a 5 yr hold so we are looking at a 2+2+1 payout on only our stock.
3. Hours are usually 9-7 with late nights during busy period (have hit 80hr weeks multiple times). So you work for it.
The firm works on Acquisitions, AM, and IR for our sector. Only downside is going to parentco’s IC which can be tough since we have no visibility on the other deals we compete with.
Incredible, thanks! Now I know what I'm targeting!
check the other thread we have on this right now which has tons of examples
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