Promote / Carry
Curious what senior folks think on what market promote / carry should be for a roughly $1B fund? 11 YOE where I run a region for a US based REPE. Cash comp is roughly $650k.
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My initial gut was saying 2% - 2.5%
Are you asking what the fund should charge, or how much of it you should get?
How much promote I should get? Having my review to discuss next fund allocation would be my 4th fund. Last fund I was at 1.5%.
Recruiters generally say 5 years of cash comp. Thanks for showing me how underpaid I am.
Gut was 2-2.5% as well. But would be helpful to know title and how large your region is.
Our titles don’t really mean much but I am a VP. There are 3 deal folks who cover the US with a pool of associates and analyst. We roll up into the head of investment.
I think my gut is pretty close then. Might be a 2.0% and grows 0.5% every year or so until you get closer to 5%. At my old firm, VP/SVP was in that 1-2.5% bucket with one or two very senior SVP's who had been with the company awhile closer to 4%. We didn't really have an MD type role, so I think that was a way of acknowledging they were there without adding the title to it.
Also would find size change that number in your mind?
Sounds pretty similar to my experience and responsibilities. I'm getting 3.0% but on a $500m fund but my cash comp is only $500k (I do have great hours though and don't live in a VHCOL market). I'm also expected to be promoted in the coming months and have no idea how that will change it. I think I should be getting more pre-promotion, but haven't worried too much about negotiating it until I'm promoted given the fund won't pay out for a while anyways.
2.5% of $1B fund sounds pretty solid to me. Guessing that probably comps to $3+ million of promote on a base case outcome.
If your fund today was $1B do you still think you would get 3% or would they size you down? I am curious how people think about it.
They would size me down for sure and I would fight that market should be closer to 2.5% of the $1B. I think I should be closer to 4% of the $500m fund (not only is fund smaller, but team is smaller too so should get a bigger piece of the pie). I say 4% instead of 5% because at the end of the day, our team isn't half the size as it would be if we had a $1B fund.
For context, I am responsible for half of our teams deal flow whereas it sounds like you are responsible for 1/3.
Yeah so you think it’s some combination of solving to a dollar amount based upon fund size. That makes sense. This is just where it is so opaque on what market is.
What’s the $ value of a point in the fund? Rule of thumb is 1/3 of comp comes from each of base, bonus, and average annual carry. However, $ value of a point varies by fund. 1% somewhere could be equivalent to 2% elsewhere
Your cash comp is more inline with an SVP in my experience, unless you’re in NYC
I am not in NY but that’s where it is tough like in your mind what does a SVP do? I feel like titles are so highly dependent on company I think a better way would be to describe the role / responsibilities you have.
Also for the value of the point it depends on what you use as the baseline return but I have it value at 1.5m per 1%
Curious on how you do the math to determine the value per 1%
are you a market lead on acquisitions/investments? curious if your cash is base and 100% bonus to get there.
yeah I run a region as market lead on investment salary is 300 rest bonus and expect it to go up to 750 before stabilizing unless I get higher role
Maybe a dumb question - but with a fund that size are you largely sourcing deals from brokers or from a pool of trusted GPs. Where does the deal flow come from?
We don’t use partner we buy direct and asset manage ourselves so deals come in through brokers or direct from owners
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