Promote Question

not these days, in the past yes. The multiple would actually be higher for our CEO who takes most of the promote because we raise money for a large portion of the GP and pay them the same as the LP. It is fine though because the CEO takes recourse risk/development risk, it is pretty generous of him to give us any promote with that in mind.

The GP has the same returns as the LP, the promote is separate. We raise our GP separate from employees after employees invest all they want in coinvest/all that our LP requires. Coinvest and promote are different.

i mean you didn't answer the question tho

Gentleman and Scholar:

REstudent92:

if the fund is raised from a pool of outsid investors (GP) and partners with an institution (LP) where does the promote paid to employees of the firm (who don't have money in the GP or LP position) come from

That promote comes from 1 or 2 places.

1st place: GP partners with LP; deal has some form of promote based on the success of a project (a waterfall); that project generates a promote to the GP; GP shares promote with employees in some way shape or form (basis points, flat $ amount, etc.). I call this the Project Level Promote.

2nd place: The GP is promoting the GP investors (ig. the GP has a GP Fund). After a successful project exit, the GP runs an independent waterfall from the LP waterfall. The LP investors (normally) have no idea what this waterfall is, because that's the business of the GP and the GP investors. I call this the GP Fund Level Promote.

It's common for the GP investors to be double promoted, one at the Project Level with the LP, and then another at their fund level as being an investor in the GP. Sometimes the GP offsets this double promote by sharing some of the Project Level Promote at the project level.

Cool, thanks

Ozymandia:

REstudent92:

my question wasn't how GP/LP splits work, my question was how employees get promote

for example, if the fund is raised from a pool of outsid investors (GP) and partners with an institution (LP) where does the promote paid to employees of the firm (who don't have money in the GP or LP position) come from

I'm sure the answer is very simple I'm just not getting it

So lets get back to basics. If you are an employee, the likelihood is that you get paid something called a salary. You see, you trade your labor and skills and time for a fixed sum of money. You get paid this money by your employer. For most of us, this check comes every two weeks, or twice a month. That is called a pay period. Now, I know this is complex stuff, so feel free to read back through that a few times before we go on.

A promote, as REPESailor2020 has mentioned, is what a GP gets for successfully executing their business plan. The LP pays this by taking a lesser portion of the cash flow over certain hurdles, as a way to incentivize the GP to do their job well. Guess what word we haven't seen yet? That's right, employee. Because guess what? This isn't your local grocery co-op. The partners in the GP are taking on all the risk of the deal, while still committing to paying the employees at their company. Thus, the employees get their contractual wages. Maybe even a bonus, which is a reward for doing an exceptional job. Since the employees are guaranteed pay and take no risk, they don't get a promote, except what the partners may choose to allocate. Say it with me: employees aren't entitled to a promote. A good maxim to keep in mind is that the people taking the risk, get the reward. The higher the risk, the higher the corresponding reward should be. Apply that to most things in your professional life and compensation structures will make more sense.

TL;DR - you won't learn a damn thing in school if you come on here demanding answers to simple questions and then accusing the person giving you that answer of not answering the question to your rather poorly phrased and imbecilic inquiry. You got an answer; if you don't think it answers the question, then you've asked the wrong question or fundamentally don't understand the subject matter. Incredibly, almost uniquely, I'd say, you've managed both of those things.

dude slow down i have an offer and they said i'd also be paid a % of promote i'm just trying to understand where it comes from

idk why you are explaining salary and GP/LP promote instead of just answering the question

thanks for typing like 5,000 words tho... sorry you don't get any promote =(

Ozymandia:

REstudent92:

my question wasn't how GP/LP splits work, my question was how employees get promote

for example, if the fund is raised from a pool of outsid investors (GP) and partners with an institution (LP) where does the promote paid to employees of the firm (who don't have money in the GP or LP position) come from

I'm sure the answer is very simple I'm just not getting it

So lets get back to basics. If you are an employee, the likelihood is that you get paid something called a salary. You see, you trade your labor and skills and time for a fixed sum of money. You get paid this money by your employer. For most of us, this check comes every two weeks, or twice a month. That is called a pay period. Now, I know this is complex stuff, so feel free to read back through that a few times before we go on.

A promote, as REPESailor2020 has mentioned, is what a GP gets for successfully executing their business plan. The LP pays this by taking a lesser portion of the cash flow over certain hurdles, as a way to incentivize the GP to do their job well. Guess what word we haven't seen yet? That's right, employee. Because guess what? This isn't your local grocery co-op. The partners in the GP are taking on all the risk of the deal, while still committing to paying the employees at their company. Thus, the employees get their contractual wages. Maybe even a bonus, which is a reward for doing an exceptional job. Since the employees are guaranteed pay and take no risk, they don't get a promote, except what the partners may choose to allocate. Say it with me: employees aren't entitled to a promote. A good maxim to keep in mind is that the people taking the risk, get the reward. The higher the risk, the higher the corresponding reward should be. Apply that to most things in your professional life and compensation structures will make more sense.

TL;DR - you won't learn a damn thing in school if you come on here demanding answers to simple questions and then accusing the person giving you that answer of not answering the question to your rather poorly phrased and imbecilic inquiry. You got an answer; if you don't think it answers the question, then you've asked the wrong question or fundamentally don't understand the subject matter. Incredibly, almost uniquely, I'd say, you've managed both of those things.

this seems unnecessary

and if you had even a sliver of the understanding you said you had with "I get how GP/LP promote works" then you would not have the question "how the firm earns promote when all or nearly all their money is from a raised fund"

• REPE fund raises fund with a promised 6% hurdle rate and waterfall there after
• REPE fund invests in a development, the sponsor is the GP and the deal has an 8% hurdle rate, the REPE fund is the LP
• Developmer sells development after 3 years, REPE LP promotes the GP developer through a waterfall
• REPE fund returns funds to investors with an IRR over their hurdle rate, the investors promote the REPE fund with a waterfall

Developer and REPE fund both receive a promote ... now go away ... you didn't have the understanding you said you had, and you asked the wrong questions.

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