Fam Office Compensation?

Investment Analyst in RE - Comm

Looking for advice from others that have worked in a family office environment. Have any of you been able to negotiate some sort of carry in your comp plan? I'm currently paid a pretty reasonable base and target bonus but I am starting to originate transactions and have positioned myself as an expert in a niche product type the family is making a big push into (I recently prevented the family from stepping on a $30mm landmine on a potential acquisition). The acquisitions team here is very small (<5). There is no formal criteria or process, just a thumbs up thumbs down from the family who are looking to be less involved in the day to day. What structures have you seen at family offices? What is a reasonable ask for somebody executing Director/VP level duties? Am I being unreasonable when I am irked at the lack of profit sharing on deals when I am a major contributor and the equity checks being written are 8 figures? I'm starting to think I will always be looked at as the help here.

Comments (15)

Feb 4, 2020

As an analyst, yes - that's a big ask. There's a difference between "performing director level tasks" and actually being a director.

Regardless, you can't have both - base and bonus are going to plummet. You also want to invest somewhere you like/trust. Doesn't sound like you like the family all that much, and if an analyst is catching the $30mm landmines it might be hard to trust that current levels of activity will continue. A lot of acq guys on the structure you want are instead complaining about deal flow. Catch 22.

Most Helpful
Feb 5, 2020

Everyone thinks they are "performing VP level tasks" the amount of 2nd year analysts who say that on this board after reading one PSA redline is staggering.

When it comes to family offices there is no general answer. For example in my family office 40 years ago senior level employees could buy a few bricks in deals, top guys got some type of carry. Today no one gets equity in anything other than the family.

Every equity analyst anywhere is here to act as owner. Finding mistakes and reasons not to do a deal whether its 30MM or 300MM is just your job, as it is mine. As you've said you're just "starting to originate transactions," equity carry is for invaluable people with responsibly for strategic decisions to an organization, not associates with a couple years of origination duties, your bonus is there to compensate you for that type work.

I'm sorry for the tongue lashing but the tone of your posts just irks me.

"I am starting to originate transactions" - So you're new to your responsibilities

"I recently prevented the family from stepping on a $30mm landmine on a potential acquisition" - Congrats? I expect this of my my analysts, for a matter of fact I expect anyone who puts eyes on a deal from any department to look for potential landmines, that's kind of everyone's job.

"Am I being unreasonable when I am irked at the lack of profit sharing on deals" - Are other shops offering you carry? If not why be upset that you're not getting what anyone else hasn't offered

"I am a major contributor" - Starting to originate...major contributor, uhg

"the equity checks being written are 8 figures" - Its commercial real estate, 10MM equity is pretty much the bare minimum. I've originated transactions that have 9 figure equity checks, does that make me inherently more valuable? No, I just work for a more wealthy family. Congrats to me I guess?

"I'm starting to think I will always be looked at as the help here" - It sounds like you received a modicum of responsibility and you've whipped yourself up into thinking you're some type of muckity muck.

This post could have easily been "Is it common for a professiona who has X years of acquisition experience and Y total experience to receive carry in deals" and you would have gotten plenty of pleasant responses but your post comes off as some type of back slapping opportunity so you can list the ways you are under appreciated.

Edit: oof maybe this was a bit too much, I'm going to keep it up regardless.

One thing I'm going to add which OP and I discussed deeper in this thread: If you are responsible for sourcing capital related events (acquisitions, financing, even in house leasing) you should definitely have some type of calculable, non discretionary, bonus. Just keep in mind that rarely comes in form of traditional carry for most people.

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Feb 5, 2020

I disagree with your view that one who has been elevated within an organization to assess and take risk (ie; select investments) doesn't necessarily deserve carry/points in their deals.

Regardless of track record sourcing and executing deals, those in charge are putting a serious level of trust in someone responsible for making investments on behalf of the organization. Wouldn't you want someone investing your dollars to be appropriately aligned? Frankly, I can't begin to understand why a deal lead would not have carry either at the deal or portfolio level. At the end of the day, if the investments selected are strong, he/she should be adequately compensated for a job well done (and no I don't mean the standard 25% bonus which doesn't even begin to cover the sleepless nights/extreme stress). Lord knows that if it is a job NOT well done, then you're on the chopping block.

In short, risk/reward should to be balanced at the personnel level as well as the company level. This balance is less about compensating the acq guy fairly and more about aligning one's interests to the firm. Team mentality.

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Feb 5, 2020

I agree, in a way, with your assessment. There are gradations to this argument, as with all things. But without getting into the weeds I will highlight that there is a big difference though between someone who is tasked to source and underwrite deals for approval those with approval authority or strategic input.

In an ideal world carry is a great way to align incentives of acquisition people and their equity. In reality it comes at a real cost to those with equity in a deal and is that cost worth it to compensate an employee whose job it is to follow direction but not make the final decision? Most acquisition people (who are not the "head" of acquisitions) are told "bring me deals that fit in X box" its senior managements decision on what that box looks like. The market, in terms of carry, has decided it is those who decide what the box is who gets carry, not the ones stuffing the box with product.

There are always better ways to do things, I'm just saying how its currently being done. But I've seen on this board examples of more junior acq people getting carry as well so it happens, just not often.

Edit: Just to comment on one specific thing you mentioned "and no I don't mean the standard 25% bonus" I dont think there are any people who legitimately source deals getting 25% of salary bonuses. Most of the time its a percentage of equity put out or some other type of activity based calculation, its is rarely discretionary and more often calculable.

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  • Investment Analyst in RE - Comm
Feb 5, 2020

Although I do think your response was a bit much I was looking for some perspective so I am not taking offense. I'm looking for a reality check here.

A little more detail, my title is not analyst and I was not an analyst in my previous role. Titles here are a bit of a joke, in fact it feels a bit intentional as a way to try and limit poaching. There are people here with 15+ years of experience being called analyst. I am not new to originations. My previous role involved originating transactions, negotiating deal points, coming up with solutions to problems (not just pointing them out), full ownership of DD, presenting and defending my deals at Investment committee etc. If a deal didn't close or we lost it to a competitor it was 100% on me and reflected in my bonus. The new firm is making a strategic push into the asset class that I have dedicated my career to becoming an expert in. Nobody else at the company has any experience in the asset class. It's why I wanted to come here and it's why I was told I was hired.

I'm going to be confident enough to ask for participation next go round of comp negotiations, I'm more curious as to what structures people have seen in family offices as I know there are factors in play that aren't a concern with a fund.

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Feb 5, 2020

The one thing I can think of to consider most regards to carry in a family office (as opposed to funds) is that your big paydays are likely not going to be sales but refinancing events. Keep that in mind when trying to size your carry (how often to they cash out in refi's or do they just refi existing balances)

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Feb 5, 2020

You deserve equity. I don't care what kind of shop you are at.

Feb 5, 2020

I work in a very similar environment, with the only difference being that most of my day-to-day is public equity analysis. But at least 30% of my job is privatedeal analysis and execution, and its a family office with a very small staff. So overall quite similar.

Bottom line is, no matter how nice the family, they know how badly people want to be on the precious buy side and they won't hesitate to take advantage. They fully expect to be compensated (in the form of getting your work at a discount) in exchange for bestowing upon you the once-in-a-lifetime opportunity they think they're giving you.

The way they look at it, one of their ancestors (dad, grandad, great grandad etc) started with nothing and busted his tail to make the family rich, and now you're some guy who gets to inhabit their rarefied world without pouring in the blood sweat and tears that grandpa did.

Rant over, just wanted to remind you of the attitude we're dealing with.

Personally I get a very small carry on the public pool of capital that I manage, and I get small equity pieces in the deals I work on. "Very small" in the sense that I'm not going to get rich off these pieces even if the deals do well. The real upside in my case is that if either the public fund or a couple deals do well, I will have leverage going forward because I am most of the thinking behind the fund/deals. The fund is all my own research and the deals at least 50% me in terms of sourcing and execution. So if things go well I'll be in a position to say pay me X bonus or Y equity if you want this party to continue.

I think most families are reasonable enough to listen to more traditional arguments like "for my experience level and background, typical jobs are X and typical comp is Y and I should be paid in that range or an equitable equivalent." That's the traditional way of doing things.

I explained my situation above because I view it as an alternative to the traditional comparables-based negotiation. I needed an alternative because I'm a little older so its harder for me to point to a clear comp set. I came from a VP role in i-banking, I can't just point to VP salaries because they'll say the lifestyle is different and what % of VPs are still at the bank 3 years later? So my approach is, fine, y'all don't want to give a lot of credit when I haven't proven myself yet . . cool, just make sure I have the opportunity to prove myself (i.e. I insist on being most of the manpower on deals I work on) and I know you'll throw money at me later after I perform.

And I stick to that approach. They tried to loop me in on something where I was like 10% of the effort, and I politicked my way out of it over time because I only want exposure to stuff where success will be unquestionably attributable to me.

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  • Investment Analyst in RE - Comm
Feb 6, 2020
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