Carried interest for Associates / Senior Associates?
What is the typical carried interest % that people at the Associate / Senior Associate / AVP level get?
Trying to negotiate for my upcoming performance appraisal. Thank you.
Trending Content
Career Resources
Instead you get carried, as in "carried across the finish line."
Well judging by their recent performance, there is zero chance it will carry me into retirement. But figured I should still negotiate hard.
Zero, or something very close to it. Associate/Snr Associate aren't generally viewed as long term employees, so giving them long term incentives is problematic.
This person gets 1.5%?
https://www.wallstreetoasis.com/forums/lmm-pe-compensation-is-this-comp…
That's a pretty small fund, to be fair. Given the AUM, they probably need to offer to carry to be competitive.
Case by case basis. The lower you go in the MM the more common it gets, as those funds aren't on a "two and out", and associates are viewed more strategically.
Carry is usually granted at the inception of a new fund, unless you know of a pot that has been set aside for new hires. Especially once the exits have started in a fund, rarely is carry distributed.
Of course it would be better to have carry than not to have it, but if you are an associate receiving carry in a new fund, the time between now and it paying out will probably be longer than your career has been to this point. Even if the fund views you as strategic, you may not stick around for the vesting, exits, and hurdle achievement.
Thanks I understand where you are coming from but is there a typical range you observe in the MM market?
City, industry, fund size, investment strategy, and many more variables make it impossible to make a general assumption. Go look at the H&S comp report, that is where my more general information would come from.
Focus on cash bonus unless you're looking at minimum ~5-8 years at this place.
Usually 0, or close to 0. Had 1 offer in hand for a MM PE firm that gave 0.1% to associates.
Would you mind sharing the AUM range of this MM? Thanks.
Latest fund size ~$1.5B.
Usually zero. Some firms will offer opportunity to co-invest at the fund level, or have a small “carry pool” for non-carry employees that pays out a small amount upon investment exits
I was allocated 1% of carry as an associate but this is for a 1st time fund ($200mm-$250mm fund) in the LMM.
Edit: I know some other associates at a different firm (fund sizes are $1B+) who were also allocated carry but I think it was somewhere in the neighborhood of 7.5 - 10 bps.
And would you mind sharing what the vesting schedule was like? Thank you.
Both of ours is straight line vest, mine is 5 years, the other guy I know is 7 years
Associate at a 200-300M growth fund. I get 0.1%, straight-line vesting over 5 years. Also get fee-free coinvest on most of our deals, exceptions usually being if we do the deal with another fund / partner
Appreciate the data point. Thanks for sharing. Will update this thread post my negotiation. I am a new joiner so have no data points at the moment to share.
I think the general consensus is that if you're at any established fund (~$1B+ AUM) you're probably not getting much. Definitely not at the Associate level and at the Senior Associate level, I think a range ~0.1% - 0.5% would be fair. It would really be more of a gesture by the firm at that point rather and at that size of fund, it's likely it would take time for you to ever see any monetary gain from that money.
At smaller funds, I think it's definitely on the table to ask for carry as a Senior Associate. I think the general idea is that the fund is unproven and the cash comp won't be as high, so they should make up for it by giving away some carry. At the Associate level, I still haven't seen many firms give carry. Who knows if you're going to work out as an Associate and it's honestly not even worth the hassle/legal to grant carry and have someone leave after a short period of time.
If you get hired as a Senior Associate or promoted into the role after ~2 years, I think you could reasonable get anywhere from ~0.2% - 2%.
I put ~ in front of everything because it's super tough to nail down a range and depends on a lot of things, fund size, your experience, partner preference, etc. If you came in as a fairly Senior Associate, let's say ~4 years of PE experience, and fit the niche of the fund well, you might be able to push for a 1%+ stake with the argument that you're a mid-level PE professional and you're looking to move into a VP role in a year. You could also be much more junior, a senior associate in Title, but only with ~2 years of PE experience and no experience leading a deal. At that point, the fund might want to vet you a little more before committing to any carry stake, beyond some token carry.
In general, if you do get carry I would focus on the vesting schedule/payout terms of how the carry works. Just because you have equity doesn't mean you'd get to keep it in the event that you leave and depending on how the carry is structured and the hurdles that fund has to hit before distributing, it might be a long time before you ever see any of that money (if ever). Unless you see a 5-10 year path at the fund, the carry might be a phantom incentive.
Thanks for the sage advice. The last sentence is so damn true. Sometimes I wonder whether it is even worth the effort / political cost to negotiate aggressively. Just doing it so that I don't feel I left anything on the table. Will see how it goes. Thanks mate!
Some comments get to the main point that carry grants at the junior level are highly variable across the industry. There is some consistency when you segment by fund size but even then I think it will depend on the firm culture, number of employees and life cycle (i.e., is it the first fund of the fifth). If you join earlier in the firms life cycle, you are taking on more risk and there are fewer mouths to feed so more likely you can get an allocation. The point that is missed here but probably referenced elsewhere on this site is that you should really be focused on carry dollars at work as opposed to a percentage. Sure 0.1% of the carry pool in a fund does not seem like a lot but for a billion dollar fund your carry dollars at work would be $200K ($1bn * 20% * 0.1%). Not life altering but you should get more dollars at play as you progress and as the firm raises additional funds. Focus on carry dollars at work because it is a comparable metric whereas percentage points are not created equal.
The reason why it is more common for junior folks to get carry at smaller funds is typically because the cash comp is lower. I'll give you my own situation as a data point but it may not be representative. I am a senior associate and for the fund we are closing on I will have $2mm of carry dollars at work (calculated using the same formula as above). You can divide that by 5 or 10 to amortize the dollars over the fund life. I prefer to think about it over 5 years since, depending on the fund structure (deal based or fund based), you can reasonably expect the first carry check to be distributed by then. Plus, if the firm is successful, you start raising a new fund 2-3 years after closing the last one, depending on how quickly you put money to work. So add between $200k and $400k to your annual comp. My cash comp however, is in the $250-$300k range, below comp for UMM and MF. The carry allocation gets your overall compensation more in line with (or above) other industry participants. Personally, I prefer the carry allocation to the cash comp for a few reasons, namely tax efficiency, motivation and alignment, but I've heard others argue for the cash comp. Ultimately that depends on personal risk tolerance and conviction in the funds ex-ante performance.
Wow.... 2 million .... that's sick! Congrats landing yourself in such a good spot :)
Was the 2 million an interest free loan from your firm?
Edit: Not sure why I got hit by monkey shit. I honestly wanted to know whether he funded the carried interest himself or did the firm extend a loan to him. Because in my current situation, I don't have money to pay for the carried interest even if I did get it so wondering if it is common to get a loan from the fund.
Piggybacking with a related question - also going into performance reviews soon. Do most MM/UMM firms increase base & bonus from Associate Yr 1 to Yr 2 or is it "market" to only have change in base with a promotion to Sr Associate?
EU MM firm: we have straight-line increases based on performance up to 15-20% (incl. inflation). This does not tie back to title at all. In practice it does match the Y1-3 Associate, Y1-3 VP, etc. The bonus is fairly static and also based on performance.
Neither is tied to deal closing, until more senior levels - but rather your work ethic, performance on transactions, etc.
Honestly I think you're better off being focused on your cash bonus at that level. Too many variables as to whether or not you'll actually see any payout from the carry at that level. By the time you hit VP you've hopefully found a place you don't mind staying that long and you also have significantly more influence over what deals you do and do not do.
MM fund, 2bn AUM - 750m latest fund, Europe.
Carry in reality starts at VP here (analyst, associate, VP, director, partner, managing partner) - so about 5-6 years experience usually.
Allocation is roughly 500k on the most recent fund. Carry at work is roughly 0.33%. This goes to roughly 1.5% at director, and toward 5-7% at partner level keeping managing partn aside. Also get fee-free access to friends & family capital.
Amortisation is old school (unfavourable leaver clauses, i.e. tough to leave without losing upside), and we run longer funds so broadly 75k top-up comp per year.
Iste aut autem voluptatem. Voluptatem provident dicta culpa nesciunt dolores. Voluptatem quae recusandae voluptatem blanditiis quia autem. Temporibus laudantium laborum impedit dolores qui et. Debitis tempora voluptatibus magni at. Quia provident id est consequatur aut modi ut.
Fuga tempora deleniti a et iusto nemo pariatur. Est doloremque aut non voluptates error. Dicta doloremque amet neque est magni. Et qui vel pariatur ullam et ut qui. Consequatur dolor officia voluptatibus tempora veritatis et. Iste sunt nisi et omnis non quia.
Repudiandae occaecati consequatur assumenda sed saepe animi. Provident non quia quisquam quos voluptatem sed. Nisi quidem accusantium ipsum non.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Tempora corporis et corrupti. Dolorem animi hic consectetur laudantium et omnis. Impedit ut in sed sit vero. Eos minima et temporibus at. Alias qui accusantium nemo expedita. Saepe eius et est provident ut voluptas maxime vel.
Veritatis fugit laborum necessitatibus sunt modi beatae sunt fugiat. Molestiae dolorum earum repudiandae et dolores possimus. Non blanditiis voluptates quia odit iste veniam consequatur dignissimos. Dolor blanditiis est reprehenderit non aut. Earum aut neque non magnam sapiente sed delectus. Illo nobis ullam maiores et. Quisquam sit ex dignissimos sed quod quo ipsam quas.
Eum modi accusantium expedita dolore voluptas autem. In rerum doloribus molestiae quidem nemo optio animi in.
Nam consequatur aperiam qui quibusdam neque. Autem qui quia tenetur aliquam.