Comp Breakdown for MF PE Partner?

Assume partner at publicly traded MF PE shop (BX, APO, KKR, OAK).  Also assume been at same shop since associate level.

Cash comp: $1-2m?

Board Seats: maybe 4-5 seats, $50k each?

Carry: carry in a bunch of funds I'm sure. Let's say 2 $15bn funds, 75 bps each (maybe 50bps in one and 100bps in another) so basically call it 75bps across $30bn. 1.5-2x return is $10-20m per fund so $20-40m for both, so call it $2.75-6m a year for 7 years. That figure is annualized and obviously won't be paid out like this; carry will be paid out towards end of fund. I'm also confused by this because $20-40m in carry seems a bit low for a partner at a big fund, considering how the giant PE comp report says partners have $50-60m in carry dollars at work.

Co-Invest: if this partner had $10-15m in carry from their principal days, and it actually paid out, and they put all of this towards co-invest + lever up (do big MFs allow leverage? If they do, maybe you lever up 2-3x?), assuming 1.5-2x return that's ~ $2-6m a year for 7 years. Again, this is an annualized figure so same thing for carry also applies here

RSUs: I have no idea. Since these shops are publicly traded, half the carry walks out the door, so I would assume a lot of that or a good amount is made back from RSUs. 

Total: $5m on the low end ($1.75m of which is straight cash, the rest is illiquid), and $14m on the high end ($2.5m of which is liquid, rest is illiquid until funds pays out obviously). But this is kind of a dumb and irrelevant number because carry/co-invest, the bulk of the comp, isn't paid out every year. For example, if this is during like a fund's second year, obviously there won't be any carry/co-invest checks, so the partner will take home cash comp/board seat comp, unless there's overlapping from older funds. This kind of makes sense I guess because I've heard some partners at APO are pulling down $20m (that Athene got fired I think), and $5m seems in-line with MDs at BBs. Thoughts?

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Comments (18)

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  • Principal in PE - LBOs
Apr 15, 2021 - 4:13pm

So I know you put a lot of work into this and were thoughtful with your inputs etc. but this is just an incredibly useless exercise. If you're a partner at any legitimate private equity firm you'll be doing fine. 

  • Analyst 1 in AM - Equities
Apr 15, 2021 - 4:52pm

it's stupid AF to think in terms like that because 99% of people are either laid off, or burnout before reaching partner at MF PE. It's only a worthwhile excercise if you are at the Principal level and are considering exitting. 

Just read all the posts about AN1's quitting IB.. Those are (mostly) incredibly smart, hard-working people who couldn't even get to MF PE. So to think you will be the total outliar is just naive and idiotic

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Apr 15, 2021 - 5:41pm

Oh man. Not this again. Dude, do you really not get tired of doing this same thing over and over again? Not going to comment on whether the math is right or wrong. Like principal in private equity said, ,it's a fruitless exercise. But if you really want to get down to it, I would suggest you to look into the 10k filings of the publicly traded megafunds. Focus on their compensation philosophy and how they distribute carry. You'll realize that unlike privately owned funds publicly traded megafunds don't just allocate specific percentage of carry to partners which then scales with the size of the funds and that percentages for specific partners can vary from year to year based on their individual performances and how much of an impact they're having on portfolio company value creation which clearly indicates flaws in your calculations

  • Principal in PE - LBOs
Apr 15, 2021 - 9:53pm

So I can't speak to the publicly traded mega funds but this is pretty accurate, minus the board comp. You don't get compensated for serving on boards in PE. $20-40mm is about right for dollars at work in a fund for non-managing partners, but just remember that's 8-10 years after making partner, so you've been in PE for 20 years at that point. It's a marathon.

  • Intern in Non-profit
Apr 16, 2021 - 1:57am

whats the point of working after you pull down 30 mil? at that point retire, move to like fucking pennsylvania or ohio and run for state senate and become a politician or something

  • Principal in PE - LBOs
Apr 16, 2021 - 8:52am

The people who make it to partner in PE aren't necessarily doing it for the money at that point. You have to actually enjoy it, otherwise you won't make it.

Apr 17, 2021 - 6:57pm

Gotcha. I was a bit confused abt board comp, because board comp is public info-- if you search "company xyz board of directors compensation", there are a few sites with data. If you look for the PE principal/partner's name that has the board seat, it always says like $50-80k next to/under the name. The one observation is that the non-PE board ppl get paid a little more than the PE board guys-- like $200k vs $50-80k. Is this wrong? 

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  • Principal in PE - LBOs
Apr 19, 2021 - 10:50pm

I'd say PE partner at MF with $250bn AUM, assume fund does 3x MOIC that's $100bn in carry. Partner gets 1.5% of that, made $1.5bn... and that's just from the carry. Then fund is making 2% mgmt fee on $250bn, another $5bn a year, partner gets 10bps of that, $5mm a year to partner across a 20 year career = $100mm. Total comp so far $1.6bn. Now let's assume partner also got gp stock. 1m shares at $11 a share, had 5x increased, that's another $55mm. Stock had a 4% dividend yield a dosa those 20 years, so 4% on avg of $11m and $55mm times 20 years = another $26mm. He had three daughters, they each got athletic scholarships to ug. Middle daughter became a pro golfer. Made $66mm in prize money and $38mm in endorsements. Not fair to allocate all of that to her dad, but he paid for her golf lessons out of his cash PE comp, so 20% of that earnings is another $21mm.... oldest daughter married the grandson of a Greek shipping magnate... similar math, but handy capped for a divorce, just to be conservative - want to be realistic here. Son in laws net worth is $1.5bn, daughter gets $750mm in divorce, 20% allocable to dads museum board connections setting up the initial blind date.... that's another $150mm... what are we upto so far?

I mean and that doesn't even include compounding...

What do you guys think?  Agree with my math?

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