PE Megafund Partner Net Worth

mjbanker's picture
Rank: Orangutan | 364

Everyone claims that a successful partner at a megafund/UMM will make more than a successful managing director at a BB/EB. But how much more do they actually make? What is the difference in net worth when all is said and done?

Comments (11)

  • VP in VC
Mar 23, 2020

Google the Heidrick and Struggles PE compensation report, find a similar compensation report for IB, and then compare.

    • 1
Mar 23, 2020
VP in VC:

Google the Heidrick and Struggles PE compensation report, find a similar compensation report for IB, and then compare.

This is good, but I'm looking for MF/UMM data only. This data is from all fund sizes across all cities, and it's not a large data sample.

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  • VP in VC
Mar 23, 2020

That report has it broken down by fund size. You're not going to find better data

    • 1
Mar 26, 2020

The two things everybody misses are taxes and Co-invest. A PE partner gets the majority of his comp in carry and only pays ~20% taxes on those dollars. He or she can then reinvest them fee free and carry free in the fund. If the fund performs well, he makes an above market returns on the dollars. To illustrate the point, if you make a 1 dollar, pay taxes, net $0.80 and then invest it at 15% for 10 years you have 3.25. If you make a dollar, net $0.55 and invest it at 10% for ten years you have $1.42.

    • 1
Mar 26, 2020

Yes, too few seem to realize that's where the money is. The ability to access high quality funds without the usual cheque size is an incredible opportunity.

Most Helpful
Mar 26, 2020

Really hard to answer this question because SO much depends on the performance of the funds as well as the structure of the PE firm. Also, a founding Partner is going to have significantly better economics than a Partner who was promoted up the ladder. Similarly, a relatively new partner is going to make less than a seasoned one. Put this together with the fact that there is no good way to calculate compensation as it is so lumpy. In 2019 I made more than 4x what I've made in my 2nd best year of my career, while this year I'm going to make at most 1/3 of what I did last year -- because that's just how the carried interest happens to get distributed.

All of this considered, I think the best way to evaluate compensation is on a "lifetime earnings" basis. Essentially, how much after-tax earnings does an individual stand to make in various different career paths. My estimate, and this is completely made up and could be way off, is that a Partner at a MF is likely to bring in about $100M lifetime earnings over their entire career.

Carried interest taxation plays an important role for sure. But do realize that in addition to the 20% long term capital gains rate, we also need to pay 3.8% Affordable Care Act plus state and local taxes, which can be 5 - 10%+ on top of the 23.8%. So while I wish it were 20%, the effective rate tends to be closer to 30%. Still way better than taxation on ordinary income, just not as awesome as 20% would be!

    • 5
Mar 26, 2020

I've heard that same $100MM number thrown around from multiple sources.

My sense is that $100MM is in the ballpark for a 50 year old existing partner that has had that seat for 10 or so years already. So by no means representative of what that seat could be worth now considering most of these firms are public so right off the bat 50% or more of the carry pie goes out the door, more mouths to feed, returns compressing, and that even if you get a partner track seat, making partner is by no means guaranteed, nor is the duration of that partner seat to get to $100MM lifetime earnings.

For whatever reason, I've been seeing elevated turnover at the partner level at MFs and one doesn't usually give that seat up voluntarily.

    • 2
Mar 26, 2020

@Marcus_Halberstram From what you've seen, has the turnover been more heavily weighted towards partners leaving to start their own fund or towards joining a smaller fund where they might get better economics?

  • Analyst 3+ in HF - Other
Mar 26, 2020

Your post seems to assume the are leaving voluntarily

Mar 27, 2020

Like I said (implied) in my original post, they are likely NOT leaving voluntarily.

Generally when you get pushed out of a place you don't trade up for better economics.

They usually either lateral to a similar post elsewhere, which is rare because so few seats up for grabs. Or they trade down a bit to a slightly smaller shop, or sector focused firm.

Mar 27, 2020
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