Typical coinvestment expectations/terms for VP?
Hi,
Former PE associate here interviewing for PE VP roles in an off-cycle process. I recently received an offer from a middle market Midwest-based PE firm, and upon receiving an offer letter, realized I am not up to speed on typical (fund level) coinvestment opportunities. My prior employer offered these (of course) and expected post-MBA members of the investment team to invest in the fund, but not associates – so I am getting up to speed now. Note that these questions refer to coinvestments only, not carry.
I was wondering if you all could help me understand typical/market terms for fund-level coinvesting. I understand this varies by firm, but a few questions (sorry if these are basic):
- I have been offered 1:1 leverage with my new employer on any coinvestment. This is a no brainer, right? 3-ish percent interest on the drawn amount.
- Is it typical for there to be no vesting/immediate vesting on distributions from coinvestments? Say we sell a portfolio company in the fund – does the pro rata payout for that deal typically accelerate/vest immediately and is it paid to the investor upon the fund’s receipt of proceeds?
- Say I leave the firm while partially invested (i.e., have contributed $50K of my $100K pledged investment, for example). A) do I lose the $50K I already put in? B) would I have an opportunity to invest the remaining $50K? C) would I have to repay any distributions already received on my coinvestment? (I don’t want to ask these questions to the partners)
- What do I need to know about fees? The opportunity was verbally described to me as "fee free" - as opposed to fees on gross vs. net carry? How does this work? (really unfamiliar with fund level fees and how they affect returns...)
- How much do you guys have invested in your funds? Fund size?
- Anything else I should keep in mind or expect to negotiate?
Thanks all!
See below in bold:
Agree with the above. Only thing I’d add is that at our fund, upon separation you retain your investments but lose the opportunity to invest in future platforms. However you have the opportunity to invest in add-ons for platforms you are invested in, if they require additional equity.
Same set up at a former employer.
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