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.
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What does a 2% carried interest mean?
More specifically, it means 2.0% of the carried interest in the fund. While we're not exactly 2 / 20 in our fees (slightly lower due to special economics to large LPs), my share of the ~20% carried interest is 2.0%.
Can you put this in layman's terms lol
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.
i think you're beyond 'layman' if you think that wasn't already in layman's terms
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.
Unfortunately no. I receive no bonus as part of my comp. Just salary of $150,000.
If including carried interest as part of the "all-in" comp it would still be $180,000 / yr. But the carried interest doesn't start getting distributed until about years 5-8, so it's all on the come. For this year, and each year after for 4 more years all I'll get is my salary.
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.
Thanks, very helpful. The DCF on my carry does bump me up a bit, but still below $200,000 / yr. Since posting this I've learned the head of my firm usually likes to make guys "prove themselves" a bit and then in between year 3 - 4 bumps your annual salary to $215,000 / yr. So that made me feel better.
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.
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.
bump
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