Negotiating Additional Carry/Etiquette at Senior Levels of PE

I work in growth equity and am in the fortunate position where several of the investments I sourced are tracking really nicely. They're outperforming our internal benchmarks and I have clear attribution to these successes, and combined are likely to be an outsized source of returns.

I'm at a mid-size firm in SF/NYC and have a decent basis (mid-six figures) in carry (calculated as fund-size * carry pool [20%] * carry %], but my guess is it's a much smaller percentage than other partners and I'd like to negotiate a higher percentage. 

This maybe a dumb question, but how the hell is this done at a senior-ish, but not partner level? Do I have to wait for the next fund to get additional carry allocation? I think my partners would be receptive given the performance but frankly, I also have no idea what etiquette here looks like. Do I wait until these deals actually return cash in 3-4 years and negotiate then?

There's several good benchmarks on carry for PE firms but less so for growth equity, so I'm curious how other folks have dealt with this. 

My plan is to catch our GP on a good day and ask for a higher number, ideally showing some benchmarks.

I don't want to come across as greedy or ungrateful, but honestly, I just. want to see how my partners deal with the conversation. If we're unlikely to see eye to eye or have an open discussion, I'm likely to want to raise my own fund/lateral in 3-5 years vs. grinding to make partner here ASAP.

Comments (4)

 
Feb 22, 2021 - 8:00am

Yeah - this, the concept of an unallocated portion of the carry pool would be helpful. Usually set aside for potential new hires, etc, and if it isn't used, then distributed pro-rata amongst the existing carry recipients once the investment period is over or a new fund is raised. Do you know if this exists? Would be helpful to your cause.

But otherwise, I think it would be a difficult conversation. You're essentially asking your partners to give you their carry... I think generally an increase in carry % would occur at the next fund, or at least they'd be more receptive to having the conversation. I would think that based on your comments and having sourced a few nice deals, you could push for a promotion, more carry, as they'd want to keep you around.

 

 
Feb 22, 2021 - 9:47am

I'm in a similar boat... there are some industry survey detailing the "carry at work" based on positions and fund sizes. It doesn't hurt to ask in my opinion but be prepared that they will give you all sorts of bullshits before they give up even 50 bps.... my sense is you have to look at "total comps + total carry at work/vesting years" to make it apples to apples comparison. If they bullshit you saying there is little carry left, you could ask for small carry with no or few vesting year to increase that number.

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