Moving from LP PE to GP operator
Currently working in acquisitions (5 yr experience, 2 yrs at current firm) in HCOL city on east coast for a private equity / investment manager with $8B AUM, primarily doing a lot of JV equity type deals across multiple asset classes. Currently considering an opportunity with a local / regional GP operator with multiple capital relationships that is strictly focused on industrial. Obviously not looking for a pay cut and would like to try to obtain better all in comp (base + ye bonus) and some type of Carried interest. It seems that at my current firm, carry in the funds really only gets obtained at the MD level, which is prob 12+ years out and the funds take 3 years to invest and 4-5 years harvest so this is also a big reason I’d potentially exit. Curious to hear your thoughts on how to weigh my options and the type of carry structure you would propose?
Thanks!
Someone correct me, but I think you’ll take a bit of a cut by moving from LP to GP. Unless this is a super active GP, they don’t have the same fee income stream as an LP does to pay bonuses. The real paydays come every couple of years when you exit and hit your promotes.
So maybe when you negotiate, focus on keeping the base high (so you can pay bills) and negotiate a bigger piece of the promote.
I personally didn't have to take a paycut to jump from LP to small GP, but that was probably because I was getting less than market at my old firm. I think your compensation mindset needs to change - LP is more consistent compensation, GP is lumpier. Some people can't handle the compensation swings.
They do have a management company that brings in a strong flow of fee income, but your point still holds…thank you. Is there a specific structure you would go for on the promote. 3 years - 4 years vesting period 2%~4% of carry or something entirely different? Trying to figure out what would be a reasonable ask without looking foolish.
Bump
Yeah you’re going to take a huge pay cut moving from LP to GP; the carry can come sooner but this isn’t a move I’d recommend if you want to make more in short term. I’d suggest staying at LP until you have carry vested then going to GP; it’s the move I would make if I could switch things up going back.
I got a 10% bump moving from LP to GP. The 10% was on total comp. On my base I went up about 25%. You don’t always take a photo decrease to make the move. It just depends on which GP you move to. Most GPs, you will take the pay cut as there just aren’t as many fee dollars to go around.
Keep in mind, the GPs which can pay the most are generally going to be commercial property GPs - office, retail, and industrial. More specifically, office focused GPs who do leasing in house will generally make a lot more money due to the extra commission income they can generate. Also look to see if they have other verticals they charge for above and beyond property management.
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