Comp at PE Firms

I was wondering about this too. Let's say we know knothing about the comp ranges, but wanted to estimate how much compensation would be based on what we know about funds and how investment firms operate.

Specifically, let's look at the mega-fund firms. They have 20b to invest in their top funds. With 2/20 (assuming no sliding scale on fee% and no switch from committed to invested capital), the MGMT fee is 400 mm per year.

On average, it seems that half of revenue goes to compensation. So 200 mm per year in compensation.

I will assume that 3/4 of the compensation expense goes to investment professionals in cash, the rest pays for overhead / departmental / assistants / benefits expenses.

Let's say that this firm has 100 investment professionals. There are 30 pre-MBAs 30 post-MBA associates 30 VPs/MDs/Principals 10 Senior Partners

To divide the pool, I will assume that the avg post-MBA make 2x as much as the avg pre-MBA, the avg principal makes 4x the avg post-MBA, and the avg senior partner makes twice as much at the avg principal.

With a little math, the compensation pool divides into Pre-MBAs: 306,122 Post-MBA associates: 612,245 VPs/MDs/Principals: 2,448,980 Senior Partners: 4,897,959

This is cash comp before any carry.

Who has 20 b funds? Blackstone, Goldman.

can anyone say if these comp numbers are accurate for these two firms? We can look at the numbers for the pre-MBAs, who have no carried interest, if none of the carry earned by the GP is used to pay their comp expense.

i think this estimate is close to what cash comp looks like nowadays for the pre-mba associate level.

the range is typically $250-300K for cash comp (for megafunds), but i can't speak for post-mba levels of compensation.

not sure why, but you also assumed there's no carried interest for pre-mbas, which isn't the case. phantom equity and co-invest exist for pre-mba's and are usually the elements that allow for "1 in 2"

TheGreatOne -- what do you mean by the analyst level? Straight out of undergrad?

yes, however the 250-300k was based on older funds.. correct? The funds are smaller, and the no of ivestment professionals have not changed as dramatically as the size. So should the comp go up? I said no carried interest to create a base cash comp. The phantom equity and co-invest would be on top anyway depending on your terms.
These terms are ONLY for the MGMT fee portion.

I assumed that "analyst level" = pre-MBA associate level.

PE pay is the same as IBanking. Its much higher only at the MD or Partner level.

PE pay is the same as IBanking. Its much higher only at the MD or Partner level.

I meant about the same across the board excluding MD or Partners. If u compare TPG/KKR/BX/Bain(the best) then I would still say its the same as being in the top groups at MS/GS(the best)...

not sure if we're not on the same page here, but just for clarification... i'm comparing a 3rd year analyst (GS/MS) vs. a 1st year pre-mba associate (KKR/TPG/BX/BainCap) and a 1st year banking associate (GS/MS) vs. a 2nd year pre-mba associate (KKR/TPG/BX/BainCap)--assuming direct promote in banking

i could even make the argument that a 1st year pre-mba PE associate at KKR/TPG/BX/BainCap makes more than a 1st year post-mba banking associate at GS TMT/MS M&A because frankly, i don't know many banking associates making $300-400K/yr

In that case, its alot more at the PE firms. Out of curiosity, what do post-mba people make at PE firms excluding the top level people.

I really appreciate the activity and insight.

To clarify I was referring to comp out of UG.

Luckily I just got an offer so I can provide some insight into such level. My offer from a low key mega-fund was pretty typical to banking: 60k salary, 10 signing, and upwards of up to 80k for bonus. My friend who is an analyst at BX says this is the same comp he has (they however just raised his salary 5,000). The main difference in our offers is this though: I get to co- invest on deals that I work extensively on while he doesn't till he completes his third year.

From what I gather at my firm and from APAX, is that Pre-Mba get around 220-300k (with bonus and those are these years numbers).

i don't know very many banking associates and the first years can pull in 300K, but that seems closer to an upper bound in a good year. this seems like a lower bound for a 2nd year pre-mba associate (trying to keep this apples to apples)

just curious, do you think 1st yr associates are going to be making that much this year?

https://www.glocap.com/publications.jsp?_page=detail&itemcode=2008PECR

Interesting couple of pages on COMP.

Comp at most banks isn't nearly that high this year so PE firms dont have a lot to compete with. Also, most PE firms aren't really doing LBOs and instead focusing on their turnarounds which doesn't involve as much time for analysts, and as such, high comp isn't necessary. Furthermore, comp at PE firms also depends on what your firm focuses on: distressed, sector focused, etc as well as its size...BX paid a lot last year to analysts because they were working on many deals at once and were regularly working extreme sweat shop hours. Also my friend at BX said current pay for analysts is expected to be the same as any other top bank. However be reminded he didn't work that many hours. In fact, he regularly calls me when hes off work around 8 at night! I believe this is because there isn't that much deal activity (that apparently changed a few weeks ago though)...

Also, according to my MD comp is not really restricted, it comes down to how valuable they think you are, and pay is not restricted on your title but more so on your merit. He pointed to an associate who gets paid more then some of the VPs...

So does anyone else have any #s to post??

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Assuming the below mix is the right total comp number: Pre-MBAs: 306,122 Post-MBA associates: 612,245 VPs/MDs/Principals: 2,448,980 Senior Partners: 4,897,959

I think it'll be more like: Pre-MBAs: 200,000 Post-MBA associates: 350,000 VPs: 700,000 MDs: 1,500,000 Senior Partners: 8,000,000