How much am I underpaid (mezzanine fund)?

I'm a VP at a mezzanine fund based in a metro area similar to Minneapolis / Denver / Milwaukee / St. Louis. I have 6 years of corporate banking and debt capital markets experience, 2 years in investor relations at a $2.5B PE fund, and 2 years experience in mezzanine funds. I make a salary of $150,000 / year, no bonus, full benefits, and have 2.0% carried interest in a $250 - $300MM fund size.

Comments (14)

 
Most Helpful
Jul 21, 2018 - 4:12pm

Our fund charges a 2% management fee and a 20% carried interest. Carried interest of 20% means that we split the fund profits 80 / 20. 80% of the profit goes to the LPs and 20% goes to individuals who were allocated carried interest. My share is 2% of the 20% carry, or 0.4% of the total fund profits. For example, if our fund earns $100,000,000 in net profits, my share is about $400,000.

 
Jul 20, 2018 - 2:05pm

OP, is it safe to assume your all in comp is around $250K? If it is, I think that's within the range for a fund of that size at the VP 1 / 2 level in a non-NY, LA, SF etc city. In general, mezz makes less than PE, and I know PE VPs at funds that small in tier 2 or 3 cities are probably taking home around $300K ish cash.

 
Jul 21, 2018 - 5:28pm

Yes, you're underpaid on an absolute basis. How much do you expect to earn in yrs. 5 through 8 from just your carry? You discount those cash flows now to arrive at what you're really earning.

$150K is low; your cost of living is likely reasonble as well as your hours, I assume? Is there an ability to getting greater % or the carry in a few years (if so, that could be worth more $ in the long-run).

A VP at a $1B+ fund should be making $350K all-in cash.

 
Jul 21, 2018 - 7:02pm

You are underpaid by about 50-100%.

If I'm reading this correctly, you have 10 years total experience: 6 in banking, 2 in IR/BD, and 2 in mezzanine.

You are competitive for Director or Principal roles, you have a fairly 360* profile in terms of experience in the critical aspects of the investment management business. You know how to evaluate and conduct transactions, how to manage relationships with capital sources, and how to source and/or manage deals relevant to your specific fund strategy.

You would be looking at a $250k base if you were in a major market (NYC, LA, SF, Chicago) along with a cash bonus anywhere from 0.25-0.75x base.

I get the regional discount, but I don't understand how a VP gets less than $250k all-in ex-carry.

I am permanently behind on PMs, it's not personal.

  • 1
 
Aug 1, 2018 - 6:03pm

You are reading correctly w/ respect to my experience. However, I got promoted to VP pretty early, so I wouldn't say that I'm competitive for a Director role just yet. I am very strong on evaluating deals, portfolio management, and relationships with capital sources.

To be truly competitive with a Director role, I need more experience in the legal / documentation side and more track record as a rain maker sourcing / originating new deals. So given my lack of experience in those two areas, I'm getting dinged a bit by the SMD I work for an the head of the firm.

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