Much has been said about the typical Comp and Comp Progression at traditional Buyout PE shops. The Heidrick & Struggles report documents what PE professionals make at each step in their career. Generally, above a certain fund size (including carry) it is something like Associate ($400K), VP ($1M), Dir ($3M), MD ($9M), then sky is the limit for the senior MD's.
Growth Equity is much more opaque. There is some good information on WSO about analyst/associate compensation at the top firms, with associates making perhaps $200-$300K with additional upside on sourcing. And some have stated that MF Growth associates make equal compensation to their traditional buyout peers. What I would like to know is, how does this income scale over time, throughout the VP/Dir & MD levels? There is no "Heidrick & Struggles" Growth private equity report for earnings at more senior levels.
M&I states:
"In other words, expect 60-70-hour workweeks and compensation in the $200K – $300K range for Associates, eventually rising to the high-six-figure to low-seven-figure level at the top "
This smells like BS to me. MD's at traditional buyout make $9M+ and MD's at Growth Equity make $800K - $1200K ish? No way.
Can anyone please help provide clarity on the compensation along the growth equity career path?
Also wondering!
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Agreed
I thought he worked at UBS LA for a few years?
Bump - would love to know as well
Not sure where you're getting the idea that MDs are making 9m+. The heidricks and struggles compensation report shows MDs at funds that have 10 bn+ in aum are getting 23 million dollars in carry. If you try converting it into a dollarized figure, it gives you 4.6 million dollars in carry. Add in 1 million dollar in salary and bonus and you're at 5.6 million dollars
Yeah, you only really “earn” your carry over the vesting period which is usually 4-6 years.
So you “earn” a total of base, bonus and unrealised carry (/vesting period) per year - once the vesting is over you’re not “earning” carry you’re just waiting for it to pay out; though typically you’ll receive a new carry grant before your old grant fully vests due to new funds being raised so you’re likely always “earning” carry. You then only receive the carry about 3-5 years into the fund’s life.
All said, an MF PE Partner would be “earning” a base of about $500k, bonus of about $500k-1.5m and unrealised yearly carry of about $4-6m for a total of $5-7m a year - w/ ~80% of that not being realised as cash flow until a few years later.
You thus have 2 values for income: target total comp for current year (base, bonus, unrealised carry) and realised cash flow for current year (current year base, current year bonus, realised carry from prior years, realised deferred comp - if applicable - from prior years).
Hey, my apologies if i've misinterpreted the report. I looked at the 2020 NA PE Compensation Survey. From 4B AUM --> $40B+ AUM, there is an average of $35M in Carry for MD's. That's $7M a year when divided by 5. Then there is around $500K base salary and $1M in bonus, so pretty close to $9M.
Whatever the compensation for traditional PE MD's is ($5 or $9M, etc) I am more concerned around the compensation at higher levels of the Growth PE career.
Not entirely accurate but you can run the basic math yourself. Assume a $1Bn fund (not AUM) that nets 1.25x. Means that you have 250MM of carry in that fund to distribue. Assume it gets split between 9 equally paid entites (probably 6 GPs and the equivalent of 3 given to others on the team). Assuming 7 years for life of the fund gives you 250 / (9 * 7) = ~4MM. GPs are probably on 2 to 3 funds at the same time meaning at decent funds you could easily be clearing 10MM a year.
Once you make MD, your comp is going to be largely based on carry. Well carry scales with AUM, and most LBO funds are larger than most growth equity funds. But of course there are very large growth equity firms. An MD at Insight which just raised a $10B+ probably has a lot more carry than an MD at a $3B LBO shop. And then of course, the returns have been stronger in growth equity over the last several years, although it's unclear whether or not that will continue.
At the end of the day, the only ceiling to your earning potential in any investment firm is your ability to generate returns.
This forum got a little sidetracked from GE.
Can anyone comment on the pay progression in GE? There is a lot of transparency in that pay will be around $200k as an AS1 (varies on the firm obviously), but how does that scale? I understand carry comes into play but am more curious about salary/bonus structure.
Additionally, has anyone seen pay bumps at their firm following the banking bumps/
Also interested in the comp progression. Current AS1 in GE, and total comp is supposed to be 300-325 (bonus dependent).
Just take your data for traditional PE and generally apply a 15% discount.
And of course when you get to MD level all bets are off.
Which MFs pay equally between their GE and buyout groups? Would be good to know for those of us researching GE vs buyout for on-cycle recruitment
Have heard anecdotally that TPG is in that bucket
Believe KKR is similar between the two, at least for A1
At senior levels, GE/VC it's all over the place depending on the shop and performance, both at the fund level and individually (many firms give bonus carry on individual deals). Comp at senior levels is also very lumpy because they're mostly based on carry distributions, which depend on when portfolio companies exit. As a general rule of thumb, a GE/VC partner at a decent shop is probably making at least $5-10M annualized, and likely much more if they're senior and/or markets are good like now. When I was an associate almost 10 years ago, senior partners at my shop were easily making $20-30M annualized. Probably doing much better today.
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