LMM PE Compensation: Is This Compensation Package Market?
Hello everyone,
I am a senior associate (3rd year associate, pre-MBA) at a LMM PE fund in NYC with aum of around $300mm. The compensation package that was offered was $200K all-in cash and 1.5% of carry . Curious to hear if the community thinks that this package is market given the smaller size or if you think I should negotiate upwards on either cash or carry. Lifestyle at the firm is good. Thanks for all the help and insights!
When I do conservative carry math, I get 300mm * 1x MOIC (profit after returning capital to LPs) x 17.5% (some LPs get discounted fees) x 1.50% (your allocation) = ~$800k. Carry goes up to $900k if you assume 20% performance fees. I guess my answer depends on your carry vesting schedule - how many years is the schedule, is there a cliff period of non-vesting?
Fund size isn't $300mm, that is AUM. The fund size is actually $150mm, so it is closer to $450K of DAW. The vesting schedule is 7 years, with the caveat that if you are at the firm when a portco is exited you are 100% vested in the carry for that deal (carry paid out on a deal by deal basis).
Hmm that’s weird. No minimum hurdle for the fund for fund withholding or naw
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This sounds like market to me. How far into the fund are they? Will your carry increase if you are promoted to VP in 1-2 years or do you wait until the next fund is raised?
You can negotiate if you have a strong BATNA (a competing offer or a path to promotion at your current firm).
Thanks for the reply. The fund is about 1/3 invested. We did not discuss if carry will increase once promoted to VP, but I would push for it of course and would be very disappointed if it didn't.
dude u really bringing in the b school language huh
With the fund size being $150M, this is actually somewhat above market
Just from reading the industry comp numbers and being on this site I’d echo. If a 3rd year senior associate, should be VP / AVP / promote soon. What’s that level looking like? Huge jump or what? That’s a big deal too
That feels pretty much market to me if anything getting a 2 in front of your comp at such a small fund is pretty good. The big comp jump usually comes at VP.
Regarding carry, that's pretty solid. The question will be if you ever actually receive any of that carry given vesting, timing, etc, but to have ~800k in carry is pretty good. If you annualize that and add it on top of your salary, that's a good comp package, especially if you have a pretty solid lifestyle. With the exception of the MF guys/gals, there's a lot of MM/UMM PE that are in the $250-350k range for way more work and probably a worse experience.
The only thing I'd learn more about is vesting schedule on the carry any potentials hurdles the fund has to hit before it distributes, etc.
Edit: Saw the post above, so you have ~$500k in DAW. Roughly annualized that's another ~50-60k per year. I guess the questions would be, how long are you thinking of staying and are there are potentially big exits coming up in the short term that are worth waiting for? My package was similar to yours in the full-payout type of model if you're around for an exit. If you get lucky on timing you could potentially receive a lot of that carry up front if it's concentrated in one/two deals right?
I don't think you can really ask for too much more at such a small fund. You're going to have a tradeoff between comp and lifestyle/partner track path. I doubt they can give you much more and if you were really focused on short-term comp, it probably makes more sense to jump funds.
if you get laid off do you lose all the carry?
Depends on the fund, there's actually a thread going on about this right now which has more detail in it.
I feel like generally firms let you keep the carry that you've vested. So usually there's a multi-year vesting schedule for carry and each year that you stay you unlock more, similar to equity options for startups.
With that being said, it's firm/level dependent. I've known that good leavers at some places will get their carry accelerated upon departure. I've also heard of people forfeiting large amounts of carry or having various clawback type of provisions which restricts them even more.
What are the hurdles tied to that particular fund?
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