I do not receive carry yet but can’t help wondering how much carry you get on deals at each level.
Say your GP or LP firm buys a $1B value add with a 5 yr hold shooting for ~20% IRR/2x Moic, what are you getting as carry at the Senior Associate, VP, Principle/Partner levels.
Ah, the elusive pot of gold at the end of the private equity rainbow – carry! Let's break it down based on the WSO threads and what the finance primates have been chattering about:
Senior Associate Level: Carry at this level can vary widely, but it's not uncommon for Senior Associates to have a small percentage of the carry pool. Based on the WSO content, a Senior Associate might have around $2 million of carry dollars at work, which could translate to an additional $200k to $400k to their annual compensation over the life of the fund.
VP Level: VPs can expect a bit more carry as they're more senior and have more responsibility. The carry compensation can be quite variable, but if we're talking about a fund aiming for a 2x MOIC and ~20% IRR, a VP might see carry in the range of a few hundred thousand dollars, potentially reaching into the low millions over the life of the fund. However, it's crucial to remember that this is highly dependent on the fund's performance and the specific terms of the carry agreement.
Principal/Partner Level: Now we're swinging through the trees! Principals and Partners typically receive a more significant portion of the carry. For a $1B fund, a Partner's carry could be substantial, potentially reaching into the tens of millions over the life of the fund, especially if the fund performs well and hits that 2x MOIC target.
Remember, these are just bananas in the jungle – actual amounts can vary based on fund size, structure, and performance. And don't forget, carry is usually subject to a vesting schedule and can be back-weighted, meaning the longer you stay, the more you stand to gain. So, if you're looking to get your paws on some carry, make sure to check the legal docs and understand the vesting terms. Keep swinging high, and maybe one day you'll be the king of the carry jungle!
Sources: Carried interest for Associates / Senior Associates?, Data: Average Private Equity Compensation and Carry from Associate to Managing Partner, Data: Average Private Equity Compensation and Carry from Associate to Managing Partner, Actually Realizing Carry, Private Credit Endgame
As much as it takes to convince you to take a lower salary + bonus
What do you think is an appropriate balance between carry and salary/bonus? Tough question to answer with specifics, but any general thoughts? I'm probably 1.5-2 years from entering the entry-level carry pool (I don't think it's a standard share at my company - it's what you can negotiate). But I have the opportunity to ask for better incentives now given my performance. Do I ask for higher base/bonus now and wait till I get access to carry in 2 years (and miss out on the potential upside from our investments), or do I ask for junior-level carry (probably slightly less) now and renegotiate for higher when I would have officially gotten carry?
Bump
24 months ago my carry was valued at $2mm. Now it is valued at 0.
OH well, maybe next fund.
If I were I betting man I'd say we found the office guy.
hahaha I know office is the ugly stepsister right now to every other asset class, but if someone were to offer me a decent spot on an office acq/dev team I'd take it in a heartbeat. Mixed use projects are still the sexiest, most complex, and interesting to me. Obviously, that would never happen since every office shop is on Ozempic shedding weight right now unfortunately.
Every sector…. 23 dispos still had ‘20 or earlier cost bases that worked. ‘21 bases are screwed.
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