Negotiating Carry on the LP Side

I work for a $3 - $5B AUM opportunistic LP in Los Angeles. I was hired about a year and a half ago as an Associate and was promoted a year ago to Associate Director. Current comp is $150k base and discretionary bonus at 75% minimum salary (I am assuming ~$150k approx. bonus for 2021). I have been told in very direct terms that I have been a high performer and the partners are looking at me as a core part of the "next generation" within the firm. I am expecting to have a conversation about carry being added to my comp package as part of my 2021 review.

I am assuming based on conversations that we have a typical 20% carry over an 8% pref and that the partners carve out some percentage of this for the current 3-4 employees at the VP / MD level. Our typical gross deal size is in the $40 M - $80 M range.

I'm assuming between 1% to 3% of the total promote realized by the firm is a reasonable range, but I also think that based on the culture of the firm and my perceived value to the partners that coming out of the gates a bit aggressively on the ask wouldn't be look down upon. What other structural point(s) should I be thinking about/negotiating (ie, vesting)? Thanks.

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Comments (15)

Nov 24, 2021 - 7:37pm

Would it be 3% of the total fund or just the deals you work on?

Also is it promote where you do not need to co-invest?

You will definitely want to structure the co-invest where it vest as quickly as possible without having a component being when the fund closes.

Also depending on when you joined maybe ask for a smaller sliver of old funds especially if you help out on dispositions,

I have seen it range from 1%-5% depending on what level but also how big of a fund.

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Nov 25, 2021 - 8:27am

Is the AUM number GAV or NAV?

If GAV, then assuming 70% leverage, your NAV is about 1bn. High teens return target leaves the promote somewhere around 15-20mm/year. Assuming a 7 year fund, total promote should be 75mm to 100mm (accounts for ramp and disposition during since your capital isn't out and making $ day 1). Asking for 50-100bps as a Sr. Associate would probably be in the ballpark as that would be about 100k/year in carry. Usual is something like 15-20% vest over 4 or 5 years with residual being paid at fund close.

Nov 25, 2021 - 12:58pm

mrcheese321

Is the AUM number GAV or NAV?

If GAV, then assuming 70% leverage, your NAV is about 1bn. High teens return target leaves the promote somewhere around 15-20mm/year. Assuming a 7 year fund, total promote should be 75mm to 100mm (accounts for ramp and disposition during since your capital isn't out and making $ day 1). Asking for 50-100bps as a Sr. Associate would probably be in the ballpark as that would be about 100k/year in carry. Usual is something like 15-20% vest over 4 or 5 years with residual being paid at fund close.

This is good info, thanks. Our NAV is about $1.5 billion. Just to clarify, I'm at the Associate Director / AVP level. Next title promotion would be Vice President. Based on other comments, I was targeting 1%-3% for carry, but closer to 2% than 1%.

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Nov 25, 2021 - 5:22pm

Do you mind sharing how many years you are out of school? Just wondering how long it can take for an LP investor to reach $300k comp

  • Associate 1 in PE - LBOs
Nov 25, 2021 - 11:49pm

I don't mean to hijack your thread but my brother currently works for Bx in multifamily REPE and wants to get out and do something that still pays well but isn't as much of a grind as REPE can be (he also does not enjoy the people that he reports to directly). Would the LP side be a good fit for him, given that limited background I provided?

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Nov 26, 2021 - 3:02pm

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Total Avg Compensation

November 2021 Investment Banking

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